Reagan’s 100th Birthday: Revisiting the nightmare

They say it’s not good to speak ill of the dead, but I’ll have to violate that stricture and talk about Reagan.  All around the web, people are commemorating his 100th birthday and looking back on his presidency with nostalgia and believing that he presided over “morning in America”, when in fact he was the principal actor in our current trip down the road to the fiscal nightmare that now besets us.  It was the Reagan administration’s implementation of a new economic theory known as supply side economics that put our nation on this path.  Supply side theory was based on the counterintuitive notion that tax cuts actually resulted in the government raising more revenue and was attended by all sorts of additional economic theories, most notably what’s known as the Laffer curve named after economist Arthur Laffer.  Basically, Laffer posited that there was an optimal tax rate at which the government would maximize tax revenues and if rates were too high, tax avoidance activities would lessen the government’s tax collections.  (I should point out here that tax cuts haven’t eliminated tax shelters and offshore tax havens, so the idea that tax cuts would lessen tax avoidance can be dismissed as pure bunk).  I remember all of this all too well as I was in business school when Reagan got elected. This supply side nonsense was all the rage with the economics professors and they force fed us this pabulum to indoctrinate us to this particular view. Apparently, this indoctrination was effective as tax cuts have been a mantra that’s been expressed with near hypnotic frequency by the republican party for every economic ill we face.

In 1981, Reagan and his band of supply siders took over, wrote their tax cuts for the rich and greatly expanded military spending to “defeat” the Soviets. By the end of his two terms he had nearly tripled the national debt to $ 2 trillion.  Basically, what occurred here was a massive wealth transfer to the wealthy fueled by debt.  But that’s not the end of it.   All of this was made much easier by a accommodative money printing policy by the Federal Reserve.  The Fed’s constant creation of inflation effectively reduced the debt in real terms by a constant devaluing of the currency.  That worked just fine until we hit the skids with the current crisis. Reagan started us down this road and rather than being commemorated, he ought to be pilloried.  The main thing he needs to pilloried about are the Big Lies. These are the one’s he told about small government, fiscal restraint and threats to the freedom of Americans.    He talked one game and ran another.

It’s funny how this significant bit of history is absent from the current debate over the debt.  Reagan got elected by claiming alarm over the national debt and it’s interesting how the republicans have reassumed majorities in the house using this same tactic.  How dumbed down can the American public be?  The chart above really ends all debate about who’s responsible for our national debt and provides a context for the current political scene.

The following excerpt sums it up well:

Revisiting the Reagan Nightmare

Friday 04 February 2011

by: Terrance Heath  |  Campaign for America’s Future | News Analysis

“Now that he is safely dead, let us praise him.” poet Carl Wendell Hines wrote of Martin Luther King Jr, after his assassination. Ronald Reagan has been “safely dead” for just under seven years, but the economic impact of his policies remain with us.

In a sense, it’s highly appropriate that the centennial of Reagan’s birth falls upon us in the midst of a economic nightmare from which it is uncertain when — or if — the nation will awaken. Though we will be inevitably awash in conservative praise and hagiography of Reagan, his 100th birthday is also an occasion to remember how America’s long economic nightmare began.

It’s a story told many times, but it bears telling again, and again, as David Johnson did last year as he explained how the “Reagan Revolution” came home to roost. He even told it in charts.

As Dave said in his post. take a look at a chart of almost anything, and you’ll notice that right around 1981, things take a sharp turn in the wrong direction — that is, for just about everyone but the wealthiest 1%.

Conservative policies transformed the United States from the largest creditor nation to the largest debtor nation in just a few years.

And it started with Reagan. Anyone who’s wringing their hands about America’s debt and China’s ownership of it has Reagan to thank, as Reagan’s former budget director David Stockman recently explained to David Corn.

Here’s how Stockman tells the tale. In the ’80s, Reagan and his White House crew were eager to cut income taxes across the board. The aim, he asserts, was to fix the slumping economy, not to starve the beast of big government. Republican leaders on the Hill were initially skeptical—they insisted that the White House pass spending cuts before Congress tackled the tax side. “The honest-to-goodness fact,” Stockman says, “is that in February 1981, there wasn’t close to a Republican majority for tax cuts without any accompanying or coupled spending cuts. The idea of supply-side in its purest form”—that tax cuts fuel economic growth that yields increased tax revenues—”was only embraced by a handful of junior Republicans, plus Jack Kemp.”

The Reagan administration hardly minded proposing massive cuts to both taxes and spending. But then things went haywire, Stockman notes. The tax cut ballooned from $500 billion over five years to $1 trillion after lobbyists added special-interest tax breaks for various industries. And on the spending side, the Reagan administration went hog-wild throwing money at the Pentagon. The inevitable happened: The deficit ballooned.

…The new doctrine got a boost when it turned out you didn’t have to match tax cuts with spending cuts: The Federal Reserve was able to sell the nation’s growing debt to China and others. “It totally anesthetized the political system to the costs of deficit spending,” Stockman says. “Therefore the simplistic and reckless idea that the way to stimulate the economy is to cut taxes anytime, anywhere, for any reason, became embedded [in the GOP]. It has become a religion, it has become a catechism. It’s become a mindless incantation.”

http://www.truth-out.org/revisiting-reagan-nightmare67507

  • Black Diaspora

    Why does this nation’s voters continue to entrust the economic welfare of this nation to these Republican budget busters?

    As it is, they’re doing next to nothing on the job front. For now, they’re twiddling their thumbs with distracting social issues, redefining rape, and pursuing other social hot-button, but non-issues, such as efforts to stop the government from funding abortion (which it’s not doing), and repealing health care reform, which many Americans are beginning to embrace.

    Republicans know, and now newly-elected Tea Party members of congress after their joint retreat, that the surest way to defeat Obama in the next presidential campaign and to win control of both houses, is keep unemployment in this country in the high, double digits.

    Republicans and the Tea Party don’t care enough about the people’s need for employment just yet, just for their need to be elected in sufficient numbers to “take back” the reins of government.

    High unemployment is the sacrifice that the people will just have to make: They shouldn’t have kicked them out in the first place when Republicans owned both the congress and the presidency.

    Where Republicans weren’t willing to cooperate and work with Democrats, they know that Democrats will work with them, and won’t do what they did–obstruct legislation to keep America working, and get Americans working again.

    • http://theafricanamericanclarioncall.com Greg L

      >>>Why does this nation’s voters continue to entrust the economic welfare of this nation to these Republican budget busters?

      As it is, they’re doing next to nothing on the job front. For now, they’re twiddling their thumbs with distracting social issues, redefining rape, and pursuing other social hot-button, but non-issues, such as efforts to stop the government from funding abortion (which it’s not doing), and repealing health care reform, which many Americans are beginning to embrace.<<<

      The republicans are the authors of the Big Lies. They set themselves as being virtuous and the protectors of our morals, while being morally depraved. They set themselves up as being fiscally responsible, yet have created massive debt. They set themselves up as strong on defense, but their only interest is in filling the coffers of the munitions manufacturers. They set themselves up as being straight shooters, but all they do is obfuscate every issue.

      I've really no use for them. But I must be truthful and say that I no longer have faith in nor trust the political system generally. I suspect that many people feel the same way judging by the low approval ratings of congress per a recent Gallup poll. Although it's not yet been recognized, the largest crisis that's looming, even beyond the economic one, is the leadership deficit.

      I feel real leadership teaches and helps to raise the intellect and understanding of the people. A real leader actually appeals to one's intellect and engages one at the level. What we get instead is an level of engagement at the most base level of emotion. For the most part, this is the level where most politicians, and particularly the republican party, wish to engage us. Public policies formed on that basis can't help but to be wanting because the premises they're based on are wanting.

      • http://functionalculture.blogspot.com Constructive_Feedback

        My good friends Greg L and Black Diaspora:

        While this report from “Unite For A Fair Economy” would seem to be right up your alley because it tells of “Black Community Economic Parity THROUGH POLITICS” -……does it bother you that it fails to tell of any ORGANIC DEVELOPMENT of our communities by governance of the key resources that we have within?

        Even in the places where the evil GOP has vacated and your theories STILL don’t produce plenty – does this motivate the progressives to recalibrate their assumptions?

        http://www.faireconomy.org/issues/racial_wealth_divide/state_of_the_dream_reports/state_of_the_dream_2011_executive_summary

        • http://functionalculture.blogspot.com Constructive_Feedback

          Just went to the Zfacts web site.
          QUESTION – With the guy clearly having a problem with “Reagan” – how is it that he assigns BLAME to every penny of the national debt since Reagan was in office to REAGAN and the “Supply Siders”?

          does it bother you that even in the years when the DEMOCRATS HAD CONTROL OVER THE Executive, House and Senate some of you will sell their INFERIORITY at making NON-SUPPLY SIDE policy because by denying their ESTABLISHMENT POWER you can still argue that the BAD GUY’S policies were still in place?

          For some strange reason – Obama – even after 8 years in office won’t every be as POWERFUL as Reagan and his Republican Congress was.

          All the while you “Keep Your Enemies On Trial” you never foment the ORGANIC COMPETENCIES that you need LOCALLY that would allow your people to survive the coming winter.

  • http://functionalculture.blogspot.com Constructive_Feedback

    My good friend Greg L:

    I do realize that in “Progressive Fundamentalist” circles – “Reagan Started Our Down Fall into CRACK, the collapse of the Black family, the rise in Wall Street greed and the nullification of unions”, BUT – the article and your chart prove incredible.

    1) You say that “Reagan” initiated “Supply Side Economics” where Tax Cuts was said to stimulate growth.

    Let me ask you a question – today President Obama sells the BENEFIT OF TAX CUTS ON THE MIDDLE CLASS, which eases their burden. Who does one logically repudiate “tax cuts” as being harmful to the government yet SELL tax cuts on the middle class as being a good thing for the masses because it allows them breathing room?

    CLEARLY this is not about TAXES but about INCOME REDISTRIBUTION.

    Here is what I don’t understand coming from a brother that appears to live in Metro-Newark.
    Why is it that you, BD and other Progressives appear to be contented about TAX POLICY as the gateway toward salvation but you are loathed to talk about how the evisceration of the ECONOMIC PRODUCTIVITY that was responsible for the build up of Newark, Camden, Buffalo, Milwaukee and so many other ‘Mission Accomplished” cities? With smoke now coming from these cities the demands for NATIONAL REDISTRIBUTIVE POLICIES has never been stronger.

    2) In your audio report you talked about Obama’s “Debt Spending” yet you largely blew it off as a necessary transformation to the nation.
    In pure ECONOMIC STIMULATIVE terms – how is Reagans MILITARY spending any less STIMULATIVE than is Obama’s “Green Energy” dream or other policies? Around the airport in Hollywood FL is a string of military contractors with large parking lots full of ENGINEERS and other technologists. There are a number of different MILITARY projects that have produced technology which is in wide use in the civilian realm – GPS, Internet, certain medical techniques.

    It seems to me that you and other progressives merely want YOUR KIND OF spending priorities promoted – while you deemphasize the areas where “YOU”VE WON” but the people actually sustained a LOSS.

    With us in a third straight $1,300+ deficit year it is stunning how the name “Ronald Reagan” is STILL popping up.

    In ONE YEAR there has been more deficit than 8 years of Reagan. Doesn’t this tend to undercut the “shelf life” of your argument?

    • http://theafricanamericanclarioncall.com Greg L

      CF,

      You know I just love a good debate don’t you? I know you know because you like to debate also.

      You’ve thrown out some challenges here that I’m very anxious to respond to , but I unfortunately don’t have the time right now to address all of this adequately and I do like to be thorough. I will be presenting my rebuttal within the next day or so.

      • http://functionalculture.blogspot.com Constructive_Feedback

        Greg L:

        Before you respond do me two favors:

        1) Read the report that I have linked to below from “Fair Economy”

        2) Watch this trailer to “Men Ain’t Boys” http://www.youtube.com/watch?v=VOEAFggm0h0&feature=player_embedded
        (Particularly the 2:45 second spot)

        Is there any surprise that this young Black girl would see that a CONSEQUENCE of marrying her “baby daddy” is that she’d lose her CHILD SUPPORT?
        If the prevailing powers within the Black community have GOVERNMENT PROGRAMS as the central means for our uplift then THEY should be held accountable for the consequences.

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