Killing The Myth of Reagan Part One: Supply-Side Economics

Ronald Reagan is seen as a deity by a large portion of our population. According to Conservatives, he single-handedly defeated the Soviet Union and ended the Cold War, he cut taxes for everyone and brought our nation to its rightful place as the 'shining city on a hill' for the rest of the world to aspire to be. This... is a bit of a reach. Beyond the Iran-Contra scandal - which simultaneously implicated the Reagan Administration in helping an enemy state (Iran) as well as illegally arming Guerrillas in Nicaragua in direct violation of Congressional decree - the one aspect that Reagan was most popular for (Reaganomics) is deeply flawed.

Reading in textbooks, it's a bit difficult to understand what Reaganomics was exactly. We're simply supposed to nod and agree that it was great for everyone. The crux of Reaganomics was the theme of 'Supply side economics' - that if more money was given to the wealthy (the business owners), that would spur them to hire more workers, create jobs and grow the economy. To facilitate this, Reagan passed the biggest tax cut in American history. Taxes were cut for everyone, but the vast majority of them were given to the wealthy. The highest tax rate was lowered from 70% to 28%.

At first, this doesn't seem bad. We're told that tax cuts are good for everyone. No one likes taxes. But, a government needs funds to function. And while Conservatives may rail against 'Big Government,' no one can actually decide what to cut. This is a phenomenon that occurs again and again in polling. Americans want to shrink government (buying into a Conservative talking point), but when asked exactly what programs to eliminate they cannot name one. Social Security, Medicare, Unemployment insurance, Military and Education funding are hugely popular. So, with all of these programs needing funding, tax revenue needs to track their increases. This was completely undercut by Reagan's tax cuts. How was the gap bridged? Through borrowed money, adding to the National Debt. This tactic was relied upon by every single 'fiscally conservative' President from Reagan onward. Here's a link to a chart showing how the debt progressed from Jimmy Carter through George W. Bush: http://www.pensitoreview.com/Wordpress/wp-content/themes/mimbo2.2/images/Natl_Debt_Chart.jpg

This might be worth it if the growth of the economy grew exponentially. After all, these tax cuts should directly lead to job creation. There is a flaw in the Supply Side model, one that is quite obvious. If the only ones who are getting more money are the wealthy business owners, why should they hire more workers? The number of consumers wouldn't rapidly increase because those not in the top tax rates have the same amount of money. In economic terms, with demand stagnant there is no catalyst for supply to grow. If the money isn't put back into the economy, then it has to go one place - right in the richest people's pocket. In 1980, the average CEO made roughly 42 times more money than their average employee. Today, they make more than 300 times. With all this wealth concentrated in the hands of the few, it doesn't circulate through the economy. There are really only so many yachts and houses you can own. And as the rich get even richer, the poor get poorer.

The whole point of the high tax rate on the wealthy was to promote reinvestment in business. Through the high tax rates, business owners faced a stiff penalty if they decided to keep an astronomical amount from their business. If they weren't going to keep the money, then profits were usually put right back into businesses. This reinvestment paid for new factories, technology, research and development and, yes, jobs. These jobs gave the American public a larger portion of the income in the nation and increased the demand for products and services. It is this increased demand that can grow the economy consistently.

Our nation is now riddled with debt that has mainly been piled on during Republican administrations. From two perpetual wars, to even more tax cuts for the wealthy, to the Medicare Prescription Drug entitlement, huge costs have been put on the nation's credit card. The national debt is now over $14 Trillion, and Republicans are pushing to close the gap by cutting Social Services (i.e. Social Security, Medicare). These cuts will hurt low income individuals almost exclusively. I see another option - roll back the Reagan tax cuts and have the wealthy pay their share while stabilizing our economy.

The economy did grow during Reagan, which seems odd. It deceivingly appears to confirm Reaganomics' validity. Two other factors were key factors in why the economy grew and are also explanations for why our economy is in such dire shape now - deregulation and reliance on bubbles, and offshoring labor. Since this blog is huge already, I guess I'm going to have to break it into three parts. If you stuck with me this far, Thank You! This isn't the most interesting subject in the world but it's VERY important. I'll try to have Part 2 done this weekend and Part 3 done next week.

I spent this late night ranting and listening to some old school Saliva. I figured you should be able to have the same experience

Words I Never Said

I was listening to the new Lupe Fiasco album, Lasers, and heard a song that really stuck with me. It was "Words I Never Said" and here are the lyrics:

It’s so loud Inside my head
With words that I should have said
As I drown in my regrets
I can’t take back the words I never said
I can’t take back the words I never said

I really think the war on terror is a bunch of bullshit
Just a poor excuse for you to use up all your bullets
How much money does it take to really make a full clip
9/11 building 7 did they really pull it
Uhh, And a bunch of other cover ups
Your child's future was the first to go with budget cuts
If you think that hurts then, wait here comes the uppercut
The school was garbage in the first place, that's on the up and up
Keep you at the bottom but tease you with the uppercrust
You get it then they move you so you never keeping up enough
If you turn on TV all you see’s a bunch of “what the fucks”
Dude is dating so and so blabbering bout such and such
And that ain't Jersey Shore, homie that's the news
And these the same people that supposed to be telling us the truth
Limbaugh is a racist, Glenn Beck is a racist
Gaza strip was getting bombed, Obama didn’t say shit
That's why I ain't vote for him, next one either
I’ma part of the problem, my problem is I’m peaceful
And I believe in the people.

Chorus

Now you can say it ain't our fault if we never heard it
But if we know better than we probably deserve it
Jihad is not a holy war, wheres that in the worship?
Murdering is not Islam
And you are not observant
And you are not a muslim
Israel don’t take my side cause look how far you’ve pushed them
Walk with me into the ghetto, this where all the Kush went
Complain about the liquor store but what you drinking liquor for?
Complain about the gloom but when’d you pick a broom up?
Just listening to Pac ain't gone make it stop
A rebel in your thoughts, ain't gon make it halt
If you don’t become an actor you’ll never be a factor
Pills with million side effects
Take em when the pains felt
Wash them down with Diet soda
Killin off your brain cells
Crooked banks around the World
Would gladly give a loan today
So if you ever miss payment
They can take your home away

Chorus

I think that all the silence is worse than all the violence
Fear is such a weak emotion that's why I despise it
We scared of almost everything, afraid to even tell the truth
So scared of what you think of me, I’m scared of even telling you
Sometimes I’m like the only person I feel safe to tell it to
I’m locked inside a cell in me, I know that there’s a jail in you
Consider this your bailing out, so take a breath, inhale a few
My screams is finally getting free, my thoughts is finally yelling through

It’s so loud Inside my head
With words that I should have said
As I drown in my regrets
I can’t take back the words I never said

It leaves me with an interesting thought - do people really regret the things they don't say more than what they do? I think that the answer is yes. To take this beyond the petty issues and move toward the big picture, all you have to look at is the complete apathy of the average voter on politics and the inner-workings of the US. Our nation is in crisis, and in the hands of political parties that more and more resemble each other. As Republicans and Democrats take more and more corporate money, the less they give a fuck about the "Average American." This is not the view that is shown on our corporate media. Politics is shown as a horse race between ideologically opposed groups. The actual agenda is one that trends to the Right with no counterbalance. No matter your viewpoint, Gridlock is the word that best describes our Legislative situation.

Where does this leave the American public? Either to become entirely partisan and root for 'your side' in this sham of a horse race or to become apathetic. Just under 57% of registered voters voted for President in 2008 and only 37.8% voted in the midterms last year. That's a lot of voluntarily voiceless citizens. And while these people may not regret the decision to not vote in the short term, they sure as hell will have an opinion on what tax rates, spending, cuts, social issues that their 'representatives' will enact in laws in the future.

I, myself, will internalize this song and learn the lesson. Centrism and 'balance' does not equal fact. I truly believe that Liberalism is the correct lens to view the world through which you can build the best, most just society. Rush Limbaugh is a racist. Fox News DOES gin up support for causes that benefit only the wealthy through scare tactics and pitting 'real Americans' (White people) against the 'enemy' (non-whites).

The content of the speech is not the most important issue. Whether or not you agree with Lupe Fiasco on his opinions, you have to respect his willingness to share them. John Stuart Mill's philosophy on Speech in a democracy stated that it was bad to silence individuals' speech, whether they were incorrect or not. In a society with an open forum for ideas, all can be shared equally and the best of them can rise to the top. With today's media, there is a loudspeaker repeating the same ideas over and over that can drown out many if not all others. It is up to all of us to think for ourselves and say what we think. Vote. Become politically active by finding something that you're passionate about. Anything less can lead nowhere but regret...