The Abject Failure of Reaganomics 18 Oct 2013

7/27/2019 The Abject Failure of Reaganomics 18 Oct 2013

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The Abject Failure of

Reaganomicshttps://www.commondreams.org/view/2013/10/18-0

Published on Friday, October 18, 2013 byConsortium NewsbyRobert Parry

Even as the Republican Right licks its woundsafter taking a public-opinion beating over itsgovernment shutdown and threatened credit

default, the Tea Partiers keep promoting a falsenarrative on why the U.S. debt has ballooned andwhy the economy struggles, a storyline thatwill surely influence the next phase of thisAmerican political crisis.

If a large segment of the American publiccontinues to buy into the Tea Partys fake reality,then it is likely that both the political damage andthe economic decline will continue apace, withfewer good-paying jobs, a shrinking middle class

and more of the bitter alienation that has fed theTea Partys growth in the first place. In other

words, the United States will remain in a viciouscircle that is also a downward spiral.

The pattern can only be reversed if Americanvoters come to understand how and why theireconomic well-being is getting flushed down thedrain.

The first point to understand is that the current

$16.7 trillion federal debt is about $11 trillionmore than it was when George W. Bush tookoffice. Not only did Bushs tax-cut-and-war-spending policies send the debt soaring over thenext dozen years but it was those policies thateliminated the federal surpluses of Bill Clintonsfinal years and reversed a downward trend in thedebt that had threatened to eliminate the debt

entirely over the ensuing decade.

Amazingly, President Clinton left office inJanuary 2001 with the federal budget in the blackby $236 billion and with a projected 10-yearbudget surplus of $5.6 trillion. The budgetarytrend lines were such that Federal ReserveChairman Alan Greenspan began to fret about thechallenges the Fed might face in influencinginterest rates if the entire U.S. government debt

were paid off, thus leaving no debt obligations tosell.

Thus, Greenspan, an Ayn Rand acolyte who wasfirst appointed by Ronald Reagan, threw hisconsiderable prestige behind George W. Bushs

plan for massive tax cuts that would primarilybenefit the wealthy. In that way, Bush and theRepublicans solved the problem of

completely paying off the federal debt.

When Bush left office in January 2009 amid ameltdown of an under-regulated Wall Street there was no more talk about a debt-freegovernment. Indeed, the debt had soared to$10.6trillion and was trending rapidly higher as thegovernment scrambled to avert a financialcatastrophe that could have brought on anotherGreat Depression.

Reaganomics Failure

But this debt crisis did not originate with GeorgeW. Bush. It can be traced back primarily toPresident Reagan, who arrived in the WhiteHouse in 1981 with fanciful notions aboutrestoring Americas economic vitality through

massive tax cuts for the wealthy, a strategy calledsupply-side by its admirers and trickle-downby its critics.

Reagans tax cuts brought a rapid ballooning ofthe federal debt, which was $934 billion in

January 1981 when Reagan took office. When hedeparted in January 1989, the debt had jumped to$2.7 trillion, a three-fold increase. And theconsequences of Reagans reckless tax-cuttingcontinued to build under his successor, GeorgeH.W. Bush, who left office in January 1993 witha national debt of$4.2 trillion, more than a four-fold increase since the arrival of Republican-dominated governance in 1981.
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During 1993, Clintons first year in office, the

new Democratic administration pushed throughtax increases, partially reversing the massive taxcuts implemented under Reagan. Finally, the debtproblem began to stabilize, with the total debt at$5.7 trillion and heading downward, whenClinton left office in January 2001.

Indeed, at the time of Clintons departure, theprojected ten-yearsurplus of $5.6 trillion meantthat virtually the entire federal debt would beretired. That was what Fed Chairman Greenspanfound worrisome enough to support George W.Bushs new round of tax cuts aimed primarily atthe wealthy, another dose of Reagans supply-side.

The consequences especially when combinedwith Bushs decision to rush into two major wars

without paying for them proved disastrous. Thefederal debt resumed its upward climb. ByAugust 2008, just before the Wall Street crash,the debt was over$9.6 trillion, nearly a $4 trillionjump since Bush took office.

And, after the Wall Street collapse in September2008, the federal government had little choice butto increase its borrowing even more to avert aglobal economic catastrophe potentially worsethan the Great Depression. By January 2009, just

five months later, the debt was$10.6 trillion, a $1trillion increase and counting.

Many of the Republican leaders who stompedtheir feet during the recent budget showdown,including House Speaker John Boehner, R-Ohio,were among those who favored the Bush tax cuts,the costly invasion of Iraq and bank deregulation.In other words, they were denouncing PresidentObama for a debt crisis that they helped create.

But the record of reckless Republican budgetpolicies from Reagan through Bush-43 was notonly destructive to the fiscal health of thegovernment. The supply-side, free-trade andderegulatory strategies including somefacilitated by the Clinton administration proveddevastating to the nations ability to create good-paying jobs and to sustain the Great AmericanMiddle Class.

Zero Job Growth

During the decade of George W. Bushs

presidency, the United States experienced zerojob growth. And zero is actually worse than itsounds since none of the preceding six decadesregistered job growth of less than 20 percent.

By comparison, the 1970s, which are oftenbemoaned as a time of economic stagflation and

political malaise, registered a 27 percent increasein jobs. Yet, in part because of that relativelyslow rise in jobs down from 31 percent in the1960s American voters turned to RonaldReagan and his radical economic theories of taxcuts, global free markets and deregulation.

Reagan sold Americans on his core vision:Government is not the solution to our problem;

government is the problem. Through hispersonal magnetism, Reagan then turned taxes

into a third rail of American politics. Heconvinced many voters that the governments

only important roles were funding the militaryand cutting taxes.

Yet, instead of guiding the country into a brightnew day of economic vitality, Reagans approach

accelerated a de-industrialization of the UnitedStates and a slump in the growth of Americanjobs, down to 20 percent during the 1980s. Thepercentage job increase for the 1990s stayed at 20

percent, although job growth did pick up later inthe decade under President Clinton, who raisedtaxes and moderated some of Reagans

approaches while still pushing free trade

agreements and deregulation.

Yet, hard-line Reaganomics returned with avengeance under George W. Bush more taxcuts, more faith in free trade, more deregulation

and the Great American Job Engine finallystarted grinding to a halt. Zero percent increase.

The Great American Middle Class was on life-support.

Ignoring Reality

Despite these painful statistics of the past threedecades, Reaganomics has remained a powerfulforce in American political life. Anyone tuning inCNBC or picking up the Wall Street Journalwould think that these economic policies hadenjoyed unqualified success for everyone, rather
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than being a dismal failure for all but the richestAmericans. The facts were especially stark for the2000s, the so-called Aughts or perhaps moreaccurately the Naughts.

For most of the past 70 years, the U.S. economyhas grown at a steady clip, generating perpetuallyhigher incomes and wealth for American

households, wrote the Washington Posts NeilIrwin in a Jan. 2, 2010, review of comparativeeconomic data. But since 2000, the story is

starkly different.

As the Post article and its accompanying graphsshowed, the last decades sad story wasnt just

limited to the abysmal job numbers. U.S.economic output slowed to its worst pace sincethe 1930s, rising only 17.8 percent in the 2000s,less than half the 38.1 percent increase in the

despised 1970s. Household net worth declined 4percent in the last decade, compared to a 28percent rise in the 1970s. (All figures wereadjusted for inflation.)

Despite this record of economic failure fromBushs reprise of Reaganomicstrillions more ingovernment debt but no net increase in jobs orhousehold wealth in the last decade manyAmericans appear to have learned no lessonsfrom either the Bush-43 presidency or

Reagans destructive legacy. Any thought ofraising taxes or investing in a stronger domesticinfrastructure remains anathema to significantsegments of the population still enthralled by theTea Party.

Indeed, across the mainstream U.S. news media,it is hard to find any serious or sustained criticism of the Reagan/Bush economic theories.More generally, there is headshaking about thesize of the debt and talk about the need to slash

entitlement programs like Social Security andMedicare. Instead of paying heed to the reallessons of the past three decades, manyAmericans are trapped in the Reagan/Tea Partynarrative and thus repeating the same mistakes.

Voodoo Economics

The U.S. political/media process seems resistantto the one of most obvious lessons of the pastthree decades: Simply put, Reaganomics didnt

work. As George H.W. Bush once commented when he was running against Reagan in the 1980primariesit is voodoo economics.

Yet, the fact that the United States has embracedvoodoo economics for much of the past three-plus decades and refuses to recognize thestatistical evidence of Reaganomics abject

failure suggests that the larger lesson of this era isthat the U.S. political process is dysfunctional, apoint driven home by the recent Tea Party-ledgovernment shutdown and threatened debtdefault.

In the decades that followed Reagans 1980

election, the Right has invested ever more heavilyin media outlets, think tanks and attack groupsthat, collectively, changed the American politicallandscape. Because of Reagans sweeping tax

cuts favoring the rich, right-wing billionaires, likethe Koch Brothers and Richard Mellon Scaifealso had much more money to reinvest in thepolitical/media process, including funding thefaux-populist Tea Party.

That advantage was further exaggerated by theLefts parallel failure to invest in its own media at

anything close to the Rights tens of billions ofdollars. Thus, the Rights outreach to average

Americans has won over millions of middle-class

voters to the Republican banner, even as the GOPenacted policies that devastated the middle classand concentrated the nations wealth at the top.

So, even as American workers struggled in theface of globalization and suffered under GOPhostility toward unions, the Right convincedmany middle-class whites, in particular, that theirreal enemy was big guv-mint.

Though Obama won the presidency in 2008, the

Republicans didnt change their long-runningstrategy of using their media assets to portray theDemocrats as un-American. The Right waged arelentless assault on Obamas legitimacy

(spreading rumors that he was born in Kenya, hewas a secret socialist, he was a Muslim, etc.)while a solid wall of Republican oppositiongreeted his plans for addressing the nationaleconomic crisis that he inherited.

The Rise of the Tea Party
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Like previous Democrats, Obama initiallyresponded by offering olive branches across theaisle, but again and again, they were slappeddown. In mid-2009, Obama wasted valuable timetrying to woo supposed Republican moderates

like Sen. Olympia Snowe of Maine to supporthealth-care reform. Meanwhile, Republicansfilibustered endlessly in the Senate and whipped

their right-wing base into angrier and angriermobs.

Initially, the GOP strategy proved successful, asRepublicans pummeled Democrats for increasingthe debt with a $787 billion stimulus package tostanch the economic bleeding. The continued lossof jobs enabled the Republicans to paint thestimulus as a failure. There was also Obamas

confusing health-care law that pleased neither theRight nor the Left.

The foul mood of the nation translated into anangry Tea Party movement and Republicanvictories in the House and in many statehousesaround the country. Gradually, however, astabilized financial structure and a slow-healingeconomy began to generate jobs, albeit often withlower pay.

Obama could boast about sufficient progress tojustify his reelection in 2012, with most voters

also favoring Democrats for the Senate and theHouse. However, aggressive Republicangerrymandering of congressional districts helpedthe GOP retain a slim majority in the Housedespite losing the popular vote by around 1million ballots.

But the just-finished budget/debt showdown hasshown that the Tea Partys fight over Americas

political/economic future is far from over.Through its ideological media and think tanks,

the Right continues to hammer home the Reagan-esque theory that government is the problem.

Meanwhile, the Left still lacks comparable mediaresources to remind U.S. voters that it was thefederal government that essentially created theGreat American Middle Class from the NewDeal policies of the 1930s through other reformsof the 1940s, 1950s and 1960s, from SocialSecurity to Wall Street regulation to labor rightsto the GI Bill to the Interstate Highway System to

the space programs technological advances to

Medicare and Medicaid to the minimum wage tocivil rights.

Many Americans dont like to admit it theyprefer to think of their families as reaching themiddle class without government help but thereality is that the Great American Middle Class

was a phenomenon made possible by theintervention of the federal government beginningwith Franklin Roosevelt and continuing into the1970s. [For one telling example of this reality --the Cheney family, which was lifted out ofpoverty by FDR's policies -- seeConsortiumnews.com's "Dick Cheney: Son of theNew Deal."]

Further, in the face of corporate globalization andbusiness technology, two other forces making the

middle-class work force increasingly obsolete,the only hope for a revival of the Great AmericanMiddle Class is for the government to increasetaxes on the rich, the ones who have gained themost from cheap foreign labor and advances incomputer technology, in order to fund projects tobuild and strengthen the nation,from infrastructure to education to research anddevelopment to care for the sick and elderly toenvironmental protections.

In other words, the only strategy that makes sensefor the average American is to reject the theoriesof Ronald Reagan and the Right. Rather thanseeing the government as the problem and

higher taxes on the rich as bad, the Americanpeople must come to understand that, to a greatextent, government has to be a big part of thesolution.

2013 Consortium News

Robert Parry broke many of the Iran-Contrastories in the 1980s for the Associated Press andNewsweek. His latest book, Neck Deep: TheDisastrous Presidency of George W. Bush, waswritten with two of his sons, Sam and Nat. Histwo previous books areSecrecy & Privilege: TheRise of the Bush Dynasty from Watergate to Iraqand Lost History: Contras, Cocaine, the Press &'Project Truth'.
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The Abject Failure of Reaganomics 18 Oct 2013