Earlier on, Reagan had a different viewpoint.
"If you analyze it I believe the very heart and soul of conservatism is libertarianism. I think conservatism is really a misnomer just as liberalism is a misnomer for the liberals–if we were back in the days of the Revolution, so-called conservatives today would be the Liberals and the liberals would be the Tories. The basis of conservatism is a desire for less government interference or less centralized authority or more individual freedom and this is a pretty general description also of what libertarianism is. Now, I can’t say that I will agree with all the things that the present group who call themselves Libertarians in the sense of a party say, because I think that like in any political movement there are shades, and there are libertarians who are almost over at the point of wanting no government at all or anarchy. I believe there are legitimate government functions. There is a legitimate need in an orderly society for some government to maintain freedom or we will have tyranny by individuals. The strongest man on the block will run the neighborhood. We have government to insure that we don’t each one of us have to carry a club to defend ourselves. But again, I stand on my statement that I think that libertarianism and conservatism are travelling the same path."
- Ronald Reagan, 1975 in an interview with Reason Magazine
Every time I get involved in a Ron Paul thread it is virtually guaranteed that some dopey libertarian will recycle that quote and think that it makes him scholarly. What you either don't know, or don't understand is that Reagan made that quote to the entirely libertarian readership of Reason Magazine as he was mounting a primary challenge to an incumbent Republican president (he was looking for votes). You are correct to include the full paragraph from a much longer interview (most libertarians do not), so that we see a more full context. Even in Reason Magazine, it was never Reagan's intention to equate that two political philosophies. He merely observed that they were traveling along the same path. In other words, they both fall under the Republican umbrella, but Reagan wanted to make it very clear, even to this audience, there is quite a bit about libertarianism that he disagreed with. He never expressed another positive public opinion on libertarianism for the remainder of his life. And he proceeded to run his presidency in direct opposition to libertarian principles at every turn. He pretty much invented federal drug enforcement policy as we know it. He engaged in foreign military activity around the globe. He increased military spending. The list goes on. And it is in large part because of these differences in political philosophy that conservatives revere the man (and honest libertarians think somewhat less of him. Ronald Reagan the president is a modern saint in the conservative movement. Not Reagan the Democratic leader of the screen actor's guild, not Reagan the governor who legalized abortion in California, and not Reagan the candidate who refused to disown liberatarianism when it was political expedient that he not do so.