Reagonomics & Tax Cuts for the Rich

Rich and defenders of the rich (who have an unfounded belief that one day they will be rich) love to argue for tax cuts for the rich. Afterall, they earned it. The people working in the factories didn’t earn it. The indigenous who were living on natural resources the rich took away didn’t earn it. The taxpayers (which excludes some of the wealthies US companies that pay no taxes at all) who bail out the rich didn’t earn it.

Who owns most of the wealth? The best way to determine this is to add all wealth and invested wealth. The only factor that should be excluded is the wealth invested in the houses people live in because it can’t easily be translated into tangible wealth and in this market many people lose their homes after investing lots of money into them. So, going by all wealth accept for homes, the top 1% own more wealth than the bottom 95%.

How do wealthy people get their wealth? Most wealthy people are born into and grow up with wealth. Most wealthy business owners received larged start-up money, inherited a business, or inherited other forms of wealth.

Another way of thinking about wealth is wealth disparity. Ever since Reagonomics, the wealth disparity has increased to the highest in the developed world.

“At the simplest factual level, it is not accurate that Reagan’s tax policies were responsible for bringing inflation down, from an average rate of 8.2 per cent under Nixon, Ford and Carter, to 4.6 per cent under Reagan. The main force here was the stringent monetary policies imposed by then Federal Reserve Chair Paul Volcker. Volcker was appointed not by Reagan but by Jimmy Carter in 1979… Volcker did indeed break the back of persistent and rising inflation brought on primarily by the four-fold oil price increases in 1973-4 and again in 1979. But he achieved this at a very high cost… real wagesi.e — . the buying power of your dollars of wages — peaked in 1973, the period of high inflation. Average real wages fell sharply throughout the Reagan presidency. The average figure for those eight years, at $15.72 per hour (in 2005 dollars), was 7.6 per cent below the average hourly wage under Carter of $16.95, and 9.6 below the Nixon/Ford peak of $17.39.

…This decline in real wages, beginning in the late 1970s and accelerating sharply in the 1980s under Reagan, is also a crucial link in understanding why inflation did not rise up as unemployment fell in the 1990s, contrary to expectations of virtually every single economics textbook. The standard theory held that when unemployment gets too low, workers gain in bargaining strength. They then push up wages, and businesses pass along these additional costs in the prices they charge consumers. This means rising inflation. But beginning in the 1990s under Clinton, unemployment fell, to as low as 4.0 per cent in 2000, but inflation stayed low. What happened?

Former Federal Reserve Chair Alan Greenspan’s own answer to this question (as reported by Bob Woodward in Maestro, his book-length hagiography of Greenspan) was that U.S. workers had become increasingly “traumatized” in the 1990s, and as such did not feel sufficiently secure to attempt to bargain up wages even at low unemployment. …if one would have to pick the single most important turning point over the past 30 years in the treatment of U.S. workers, I would choose Ronald Reagan’s decision to summarily fire more than 11,000 air traffic controllers who, as members of PATCO, the air traffic controllers’ union, went on strike eight months into Reagan’s presidency, in August 1982. This early attack by Reagan was followed by eight years of relentless hostility to the organized working class.

But Reagan did not attack the organized working class only. More broadly, Reaganomics entailed a dramatic new framework for fiscal policy, the area in which Mr. Roberts was likely to have primarily involved as a Treasury official. Reagan’s fiscal program was fundamentally about tax cuts for the rich, a massive expansion in military spending, sharp reductions in social expenditures, and an acceptance-or better still, an embrace-of large-scale federal government fiscal deficits on these terms. All of this should have a familiar ring to those who have followed the course of economic policy under George W. Bush.

No doubt Mr. Roberts recalls President Reagan’s frequently recounted stories about “welfare queens” driving to pick up government checks in their Cadillacs. It was through repeating stories like this that Reagan was able to build support for an assault on even the minimal welfare state programs that had been operating prior to his taking office. It is no surprise that the individual poverty rate rose from 11.9 per cent under Carter to 14.1 per cent under Reagan. ..large-scale fiscal deficits create persistent pressure for a permanent contraction in social spending by the federal government… Remember the Reaganites, as with the Bush group, apparently experienced few qualms about throwing more money to the military while cutting taxes for the already overprivileged.”