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One of the biggest elements in Reagan's landslide re-election was the widespread belief that he had brought the U.S. a kind of permanent prosperity. Reaganomics -- which meant cutting taxes and incurring deficits beyond anything John Maynard Keynes ever dreamed -- struck some experts as voodoo economics (as the future Vice President George Bush christened it in 1980), but the boom rolled on. A doubled national debt of more than $2 trillion? Trade deficits of more than $15 billion a month? What did that matter, when inflation had been cut to about 4.5%, unemployment to 5.9%, and the Dow Jones soared well over 2000?
Then came Oct. 19, Black Monday. The Dow Jones passed 2000 in the other direction and went into a free fall, tumbling a record 508 points in one day. In that single trading session, half a trillion dollars of wealth simply disappeared. And the crisis came close to being an even worse disaster. With no buyers at all for a number of major stocks at times during the day, there was serious talk of shutting down the market entirely.
Memories of the great Crash of 1929 prompted considerable anxieties about whether this new bear market would lead once again to a major recession -- or worse. As in 1929, many of the experts declared that the economy was fundamentally strong and predicted better times ahead. But the market recovered only a fraction of its October losses, the record trade deficits continued, and the dollar kept sinking. It was partly a question of public confidence, and the ebullient optimism that had helped to re-elect Reagan now appeared a thing of the past.
The Unstoppable Epidemic
One of the major stories of the year had no identifiable face, no watershed event. Yet the AIDS epidemic was indisputably one of the most important developments of 1987 -- as it was in 1986, as it will be in 1988. Surely Reagan cannot be blamed for this one too?
Not everyone would exonerate him completely. Year after year, he asked for less money to fight AIDS than Congress eventually voted, and not until this year did he devote a single speech exclusively to the disaster. And as Randy Shilts wrote in a widely praised 1987 book, And the Band Played On, governmental indifference and inactivity played a major part in the alarming spread of AIDS. As of mid-December, more than 48,000 Americans had contracted the incurable disease -- an increase of 20,000 for the year -- and more than half of those had died of it.
To deal with the epidemic, Reagan appointed a presidential commission of 13 people, many with dubious qualifications. After three months, the chairman, a doctor, resigned in frustration and was replaced by an admiral. The commission's final recommendations are supposed to appear next summer. Beyond that, the Administration busied itself in imposing compulsory AIDS tests on certain defenseless groups (federal prisoners and would-be immigrants, for instance), a move that compromised civil rights without accomplishing much of anything. Gay rights groups excoriated the Administration for inactivity, and the New York Times concluded that Reagan's lack of a coherent policy on AIDS was "beyond comprehension or excuse."