By Jack Jodell, Aug.7, 2011
PART ONE OF A TWO-PART SERIES
All one needs to do is to look at recent headlines to know beyond the shadow of all doubt that capitalism, as it is being badly-mismanaged today with its winner-take-all-and-to-hell-with-everybody-else “free market” assumptions, is FAILING US BADLY. A mere glance through these current headlines bears this out: “DOW DROPS NEARLY 513 POINTS”, “MARKETS PLUMMET ON GLOBAL FEARS”, “CHILDREN ARE LOSING THEIR BATTLE WITH FAMINE IN SOMALIA”, and “A JOBLESS ‘RECOVERY’ ?” they all scream. The truth of the matter, and the root of all this evil, lies in the fact that these free-market enthusiasts, beginning with Milton Friedman and Ayn Rand on down, have been feeding the American public one MYTH after another ever since the dawn of 1981’s “Reagan Revolution.” The end result of this nonsense is becoming abundantly clear. The rich are simply getting exponentially richer, AND EVERYBODY ELSE IS SIMPLY BECOMING POORER.
THIRTY YEARS AGO, we were fed the MYTH about “trickle-down economics.” You may remember how we were told that, if only the wealthy and corporations weren’t taxed so much, their increased savings and wealth would be free to trickle down and benefit all other segments of the economy. That they wpuld have the freedom to invest in new, high paying jobs and develop new industries. What a naughty government we had, to interfere with that process by overtaxing those with lots of money! Economic advisers like David Stockman were proponents of this foolishness. Years later, this same Stockman admitted that the proposed policy was a sham totally put forth to lower taxes mainly for the government-hating wealthy. He and Reagan were successful in strongarming Congress to pass those tax breaks back then, and today, Stockman still marvels at how easy it was to pass them with a fair amount of support from even congressional Democrats. As we all know now, things didn’t turn out quite as Reagan and Stockman had forecast. Their formula only provided a windfall for billionaires on Wall Street, and there was little if any trickle down for the rest of the economy. Very few high pay jobs were created; most of the job creation was for modest or low pay service sector jobs. The recovery from Reagan’s 1982 recession was limited, even though his harsh measures like raising interest rates DID whip inflation and restore confidence to the market. About this time, the beginning elements of the “free trade” crowd began to be heard. Then as now, they wanted a hands-off , anything-goes approach to business and particularly foreign trade. As a result, Reagan stood by and let Japanese automobiles and electronics flood our market. The end rsult was massive loss of market share for American automobile manufacturers and the eventual dismantling of the vAmerican electronics industry. Reagan was also instrumental in providing impetus to the anti-labor sentiments expressed by fellow free-traders. His busting of the PATCO union led to the successful destruction of unions in much of the country in a wide variety of industries. So much for the MYTH of providing high pay American jobs!
The top marginal tax rate when Reagan took office in 1981 was 70%. By the time he left office in 1989, it had been reduced to a mere 28%, REAGAN ACCOMPLISHED THIS BY SHIFTING THE TAX BURDEN FROM THE WEALTHY TO THOSE BENEATH THEM ON THE INCOME SCALE. In fact, Reagan INCREASED TAXES a total of 15 TIMES , but always on the poorer and middle class segments of the economy. Meanwhile, he began a huge increase in military spending, which led to a THEN-RECORD BUDGET DEFICIT. Congressional Republicans AND Democrats in large part supported this activity. Reagan also was responsible for pushing and passing the 1984 Trade and Tariff Act, which was a forerunner to the disastrous NAFTA treaty (more on this in part two of this series). That poor decision by Congress gave the President fast-track authority to negotiate foreign trade deals, almost all of which hurt American workers. Meanwhile, the wages and buying power of the American public had begun to stagnate and even slip as a result of Reagan’s anti-union actions. But as long as conservative Republicans were able to protect their wealthy constituents from tax increases, they simply didn’t care.
This anti-tax mania begun by pampered trust-funder Grover Norquist (the son of a wealthy Polaroid executive) was soon wildly accepted and adopted by conservative Republicans and caused Reagan’s successor, George H.W. Bush, to declare “Read my lips – no new taxes!” in his successful election campaign. But in the face of rising deficits CAUSED by those lowered tax rates, Bush soon found that he HAD to raise taxes. So, in 1990, Bush raised the marginal top tax rate up to 31%. Conservative Republicans were furious. They preferred a candidate who would follow the dictums of the ridiculous taxpayer protection pledge Norquist was peddling, which prohibited a tax increase by elected officials for any reason at any time. As a result, Bush failed in his attempt to be reelected and was defeated in a 3-way race by Bill Clinton. Prior to this, and even after a number of years of a greatly-reduced top tax rate, the econmy began to slide into a mild recession as Wall Street had once again chosen to sit on their profits and tell American workers to go to hell. Before he left office, Bush signed the ill-fated NAFTA treaty with Canada and Mexico, and left it to be ratifiedby Congress during his successor’s term. So much again for the MYTH of “trickle-down” economics, In reality, they were trickling UPWARD!
To his credit, Clinton almost immediately began an intensive jobs and retraining program for displaced American workers. Many were trained for the new up-and coming internet dot-com boom. To pay for this program and to further reduce the federal deficit, CLINTON WISELY RAISED TAXES ON THE TOP INCOME SCALES, TO 39.6%; A WHOPPING 8.6% INCREASE! Rather than doom and gloom, Clinton’s tax increase FUELSD ONE OF THE MOST PRODUCTIVE PERIODS IN OUR POST-WORLD WAR II ECONOMIC HISTORY! An incredible 22 MILLION NEW HIGH-TECH JOBS WERE CREATED and prosperity once again returned to nearly all levels of the economy! In fact, an actual labor SHORTAGE began to appear in certain low pay segments. Not content with leaving well enough alone, congressional Republicans egged on both congressional Democrats AND President Clinton to pass the first of what would become a number of similar one-sided trade agreements, the North American Free Trade Aggrement, otherwise known as NAFTA. This agreement lifted duties on goods shipped to and from the United States to and from Canada and Mexico. It was widely touted as a job booster for all the signatories, but this, too, turned out to be another MYTH. Signing NAFTA into law was perhaps Clinton’s most glaring economic mistake.
UP NEXT IN PART TWO: The lies of the Bush presidency and the devastating effect of conservative Republican trade policies on American jobs.