Sunday, January 20, 2008

Why Obama is Flat Wrong About Ronald Reagan


by Len Hart, The Existentialist Cowboy


Barack Obama's timing could not have been worse. His thinly veiled comparison of himself to Ronald Reagan comes at a time when the US is poised precipitously at the brink of what may be the longest, deepest recession since Reaganomics ushered in a two year long depression back in 1982.
I think Ronald Reagan changed the trajectory of America in a way that Richard Nixon did not and in a way that Bill Clinton did not. He put us on a fundamentally different path because the country was ready for it. I think they felt like with all the excesses of the 1960s and 1970s and government had grown and grown but there wasn't much sense of accountability in terms of how it was operating. I think people, he just tapped into what people were already feeling, which was we want clarity we want optimism, we want a return to that sense of dynamism and entrepreneurship that had been missing. 
--Barack Obama, Washington Post
A Singular Figure???

John Edwards, flat-lined in third place, appears to be the only Democrat in the field who grasped and addressed the fact that U.S. society is endemically unfair and un-equal. The divide is not merely along racial lines though that remains to be sure. American society is one of haves vs have-nots. GOP-types respond with the standard focus group approved epithet: class warfare. My Carville quick response: bring it on!!

Recessions, like the one following Ronald Reagan's improvident tax cut of 1982, harm workers. American recessions, like periods of prosperity, are inequitable in their effects, harming wage earners at the outset and paying off a tiny elite on tax day. The conservative economist Joseph Schumpeter confirmed as much when he compared recessions to a "cleansing douche", a characterization that lifelong goppers must surely apply to everyone but themselves and their country club cronies.
"When you think about what Ronald Reagan did to the American people, to the middle class to the working people," former Sen. John Edwards shot back at an event in Henderson, Nevada.
"He was openly --openly-- intolerant of unions and the right to organize. He openly fought against the union and the organized labor movement in this country...He openly did extraordinary damage to the middle class and working people, created a tax structure that favored the very wealthiest Americans and caused the middle class and working people to struggle every single day. The destruction of the environment, you know, eliminating regulation of companies that were polluting and doing extraordinary damage to the environment."Edwards added, "I can promise you this: this president will never use Ronald Reagan as an example for change."
Washington Post, Obama's Reagan Comparison Sparks Debate
When I think about what Ronald Reagan did to this nation, I think of how he struck at and perhaps killed-off a viable labor movement. I think about how middle class families made homeless lived under bridges and overpasses in boomtown Houston. I think about how Reagan, like Bush, waged a phony war on terrorism during which terrorist attacks increased some three fold. I think about how Ed Meece waged a war on porn even as a gay prostitution ring operated right out of the White House. I think about how Ronald Reagan neutered affirmative action, the fairness doctrine, and the industries that had kept the middle class in the middle class. I remember how Ronald Reagan was worshipped by the gullible who remembered Reagan's reign at the Republican National convention of 1992: "Reagan made us feel good about ourselves", they swooned.

It was not so long ago that Bush played guitar while New Orleans drowned and in doing so, Bush became the symbol of his own failures. Nothing had been learned from the Reagan experience. The intellectually bankrupt GOP can be counted on to repeat failed strategies in the expectation of a different outcome. Bush stays the failed course amid warnings that our nation is falling apart at the seams heading for third world status and catastrophe.

The warnings come amid the valid assessment that Bush's tax cut for the rich failed to make good on two empty promises: it did not trickle down or prime the economic pump and it did not pay for itself as Bush himself had promised it would. Just one year after Congress bowed to Bush and passed the tax cut of 2001, the Brookings Institution would write:
The official federal budget outlook has deteriorated dramatically since early 2001, due to last year's tax cut, the economic slowdown, and the terrorist attacks on September 11, 2001. In addition to the pressures from the long-anticipated increase in entitlement spending as the nation ages, the government now also faces growing spending needs for defense and homeland security. These trends imply that future taxes must rise, future spending outside of defense and the elderly must decline, or obligations to the elderly and to defense be reduced.
—Alan Auerbach, William G. Gale, and Peter R. Orszag, June 2002, The Budget Outlook: Options for Restoring Fiscal Discipline, Brooking Institution
But GOP supply side, trickle down economics also promises more opportunity, a growing economy, more jobs.
Some in Washington say we had to choose between cutting taxes and cutting the deficit….Today’s numbers show that that was a false choice. The economic growth fueled by tax relief has helped send our tax revenues soaring. That’s what has happened.
—George W. Bush
But that's not what happened. Wealth has never trickled down and there is no "higher pie". A Treasury Department analysis refuted Bush directly, confirming in its analysis what many experts and Bush critics had been saying all along: tax cuts do not come remotely close to paying for themselves. [PDF] . In other words, the two promises of "trickle down" theory are dead wrong: wealth does not trickle down and tax revenues do not increase to make up the short fall.
As Dizzy Dean said: it's deja vu all over again!

Why does the GOP insist upon repeating failed strategies. Reaganites promised that the stimulated economy would outgrow the deficit and the budget would be balanced "...within three years, maybe even two." It didn't! Reagan tripled the deficit and, on the way, he doubled the size of the federal bureaucracy. Reagan's tax cuts were followed promptly by the longest and worst recession since Herbert Hoover's Great Depression. As Robert Freeman correctly points out: "...Jimmy Carter's last budget deficit was $77 billion. Reagan's first deficit was $128 billion. His second deficit exploded to $208 billion. By the time the "Reagan Revolution" was over, George H.W. Bush was running an annual deficit of $290 billion per year."

How will Bush compare to Reagan? By the year 2002, Citizens for Tax Justice were already writing:
Over the ten-year period, the richest Americans—the best-off one percent—are slated togwb0602a.gif - 10559 Bytes receive tax cuts totaling almost half a trillion dollars. The $477 billion in tax breaks the Bush administration has targeted to this elite group will average $342,000 each over the decade.
By 2010, when (and if) the Bush tax reductions are fully in place, an astonishing 52 percent of the total tax cuts will go to the richest one percent—whose average 2010 income will be $1.5 million. Their tax-cut windfall in that year alone will average $85,000 each. Put another way, of the estimated $234 billion in tax cuts scheduled for the year 2010, $121 billion will go just 1.4 million taxpayers.
Although the rich have already received a hefty down payment on their Bush tax cuts—averaging just under $12,000 each this year—80 percent of their windfall is scheduled to come from tax changes that won’t take effect until after this year, mostly from items that phase in after 2005.
1968 was the year in which measured postwar income was at its most equal for families. The Gini index for households indicates that there has been growing income inequality over the past quarter-century. Inequality grew slowly in the 1970's and rapidly during the early 1980's. ...Generally, the long-term trend has been toward increasing income inequality. Since 1969, the share of aggregate household income controlled by the lowest income quintile has decreased from 4.1 percent to 3.6 percent in 1997, while the share to the highest quintile increased from 43.0 percent to 49.4 percent. Most noticeably, the share of income controlled by the top 5 percent of households has increased from 16.6 percent to 21.7 percent. Over the same time period, the Gini index rose 17.4 percent to its 1997 level of .459.
Income Inequality, Census Bureau
The trend began then has continued: October 2003 figures from the US Census Bureau make stark reading:
Median household incomes are falling The number of Americans without health insurance rose by 5.7 percent to 43.6 million individuals.
The number of people living below the poverty line ($18,392 for a family of four) climbed to 12.1 percent — 34.6 million people.
Wages make up the majority of income for most American families. As "Downward Mobility," NOW's report on workers and wages illustrates, many American workers are facing corporate efforts to cut pay and benefits, which could lead to more American families struggling to stay out of poverty.
The results in black and white:
  • Twenty percent of the population owns 84% of our private assets, leaving the other 80 percent of the population with 15.6 percent of the assets.
  • In 1960, the wealth gap between the top 20 percent and the bottom 20 percent of Americans was thirty fold. Four decades later it’s more than seventy-five-fold.
  • Either way -- wealth or income – America is more unequal, economists generally agree, than at any time since the start of the Great Depression…
  • And more unequal than any other developed nation today.
The most pernicious effect of GOP economic policy is the effect of declining opportunity, a corollary of declining in wealth among all but the very rich.

It is merely rhetorical to ask: why does the GOP seem to repeat ad nauseum utterly failed strategies that have never been shown to work?The answer is simple: the GOP sales pitch is what David Stockman called a 'Trojan Horse'. The purpose of the tax is not to trickle down. The tax cuts always do precisely what the GOP insiders know they will do: they enrich the GOP base! Here is how someone who lived through the Reagan nightmare remembers it:
I was in the automotive field at the time, and dozens and dozens of established tool manufacturers, unionized shops, producing high quality tools, small companies with deep roots and real a commitment to the towns they were in all across the Midwest and the local communities, went out of business.

Why? Because with deregulation any hustler could get virtually unlimited financing and set up manufacturing plants overseas producing exact copies of American made tools and flood the US market with them with no fear of the Reagan administration enforcing any laws against them. It also became easier, and far less risky, to get financing to set up a thousand junky identical chain outlets than it did for small local businesses to get credit or tax relief - restaurants, auto parts stores, hardware stores, grocery stores, florists - thousands and thousands of small businesses chewed up and destroyed.

We have a younger generation of people who have no personal experience with so many things - local businesses and tight knit communities, affordable, convenient and efficient public transportation, wages that allowed one person in a household enough income to support the family, homes that were homes, not investments, easy access to public recreation, confidence in the safety of food and other consumer items, all regulated and inspected for the public welfare, freedom from the relentless intrusion of corporations into our lives, and on and on and on.

Reagan destroyed the country, and if we try to gloss over that (which at the very least Obama's remarks have done) or if we buy into the dishonest rationales and excuses and obfuscations that the Reagan administration used to disguise their agenda and to sell it to the public, we surrender any chance at real change, we bury the coffin forever into which the right wingers have put the left - and by extension, the majority of the American people, and we condemn ourselves to living in this ongoing nightmare of destruction and human suffering.

It is not time to make nice with the Reagan legacy propagandists, even by implication or omission. It is time to relentlessly and fearlessly point out that the crisis the country is in is best described and analyzed as the chickens coming home to roost from the Reagan era.

It is time to fight. 
It is not time to heal or move on—no matter how attractive and appealing this may be—it is not time to paper over the profound divide in the country, it is not time to accommodate or apologize for
--Found on the Democratic Underground
Paul Krugman can always be depended upon to to put this kind of thing in perspective.
Bill Clinton knew that in 1991, when he began his presidential campaign. “The Reagan-Bush years,” he declared, “have exalted private gain over public obligation, special interests over the common good, wealth and fame over work and family. The 1980s ushered in a Gilded Age of greed and selfishness, of irresponsibility and excess, and of neglect.”
Contrast that with Mr. Obama’s recent statement, in an interview with a Nevada newspaper, that Reagan offered a “sense of dynamism and entrepreneurship that had been missing.”
Maybe Mr. Obama was, as his supporters insist, simply praising Reagan’s political skills. (I think he was trying to curry favor with a conservative editorial board, which did in fact endorse him.) But where in his remarks was the clear declaration that Reaganomics failed?
For it did fail. The Reagan economy was a one-hit wonder. Yes, there was a boom in the mid-1980s, as the economy recovered from a severe recession. But while the rich got much richer, there was little sustained economic improvement for most Americans. By the late 1980s, middle-class incomes were barely higher than they had been a decade before — and the poverty rate had actually risen. 
When the inevitable recession arrived, people felt betrayed — a sense of betrayal that Mr. Clinton was able to ride into the White House. Given that reality, what was Mr. Obama talking about? Some good things did eventually happen to the U.S. economy — but not on Reagan’s watch.
--Paul Krugman, Debunking the Reagan Myth
Reagan/Bush tax cuts are payoffs to the already rich for their support. The GOP prescription is simple: just take another dose of what's making you sick.

That US capitalism is dependent upon never ending growth is problematic when the world has reached the limits to growth. There are limits to the amount of pollutants that we can spew into the air, dump in landfills, and trickle down into the oceans that feed us. There are limits to growth when the burning of fossil fuels is now proven to be slow killing the planet. There are limits to growth when habitats shrink or disappear, when productive acreage is reduced exponentially. But whatever your views on limitless growth, capitalism cannot long survive extended periods in which new jobs are not created. For some time now, the Bush economy has been a train wreck waiting to happen and it waits just 'round the bend.

Bush Sr called Reagan's policies voodoo economics. It was one of only two thing the Senior Bush was right about. Even so, the Senior Bush did not go far enough. He did not tell Americans that "wealth" does not originate with "capital"; it originates with labor. Every major economist since Aristotle, from Adam Smith to Karl Marx, have known this. Nevertheless, there is a caste of people in the US --GOP Brahmans --who leach off the labors of others and dare to call it "free enterprise". The real GOP platform shifts the tax burden to the middle and lower classes. It's a payoff to the filthy rich for their support. The truth of that statement is found in Bush's own words. When he addressed a meeting consisting of some of the "upper one percent" of the population, he smirkingly called them his "base".
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