by RS Bailey
The legacy of Ronald Reagan glows in the memory of much of America today. So as we face an important election that has the potential the determine much of the future course of American history, it looks like time to examine that glow. But the Reagan legacy has dark side; a dark side characterized by the betrayal of American workers and yes, American business as well.
As President, Ronald Reagan is heralded as a man who lowered taxes while making the claim that it would spur economic growth. He is somehow falsely credited with the idea that lowering taxes creates more spending and growth. Simply said, neither Reagan nor the Republicans initiated the theory. John F. Kennedy lowered taxes in the early ‘60s claiming it would spur economic growth. The howl and cry raised by Republicans at the time can still be heard by those who remember the days. At that time the tax rate for the wealthiest Americans was 90%. Kennedy made sure everyone got a tax break and the Republicans screamed bloody murder. But Kennedy was right and the economy prospered, largely through copious government spending in the space program and the Kennedy administration preventing major industries, like the steel industry, from raising their prices.
It’s true that in 1981 Reagan lowered taxes, reducing the top income tax bracket from 70% to 50% and the lowest bracket from 14% to 11%. But a year later he undid about a third of the 1981 cuts when compared with taxes collected as percentage of the Gross Domestic Product. In 1982 he also supported a five-cent-per-gallon gasoline tax increase and higher taxes on the trucking industry for an increase in tax revenue of $5.5 billion a year. In 1983, on the recommendation of his Social Security Commission Reagan called for, and received, Social Security tax increases of $165 billion over seven years. The tax increases that he initiated in 1982 and 1984 were the largest tax increase ever enacted in the United States during peacetime.
In 1986 his administration lowered the income tax rate for Americans in the top bracket to 28%, but took back the tax break to the lowest earners and raised their rate to 15%. He also raised business taxes and closed tax loopholes, affecting the middle class and small to moderate size businesses. The result was that the middle class and the poor paid increased taxes.
In 1980, tax revenues were 25.1% of “national income.” In the first quarter of 1988 they were 24.7%. The 1981 tax cut reduced revenues by $1.48 trillion, but by the end of fiscal 1989, tax increases enacted equaled $1.5 trillion. The Reagan tax cuts were a mirage to everyone except the super rich.
During that time manufacturing began to be outsourced to foreign countries, especially Mexico. While Reagan couldn’t get the North American Free Trade Agreement passed it is celebrated as his brainchild. As more and more American manufacturing jobs disappeared it was Ronald Reagan who proudly proclaimed that America was going to become a “service economy”. His vision was wonderful for bankers and stock brokers but the “service economy” became jobs in fast food restaurants for the American worker. And so it has remained.
Reagan is the President who brought about the ruin of the “Evil Empire” of the Soviet Union. A very real achievement that was the result of focused and well executed planning. It is probably his singular great achievement. After the Soviet Union refitted its military, the Reagan White House drastically raised the budget for the US military, building a force equipped with new generation of high tech weapons. The Soviets went bankrupt when they couldn’t keep up.
To pay the bills the Reagan Administration went on a borrowing spree that tripled the Gross Federal Debt, from $900 billion to $2.7 trillion. It had taken the national debt 31 years to triple prior to that; it took Reagan only 8 years to triple it again.
As the election approaches and politicians praise the sagacity of tax cuts to spur economic growth they still point to Reagan as their mentor. Somebody needs to stop and realize that the economy needs stimulus and that Reagan used the government to do it through military spending as well as raising taxes. Tax cuts are not a panacea. The bills have to be paid and the bills get paid by people working.
However, the darkest part of Reagan’s legacy was and is depriving Americans from all walks of life from access to an affordable education. Reagan’s policy toward education was to have less of it. It began when he was governor of California. When he took office in 1967, California had one of the best educational systems in the world. It provided free schooling through the first two years of college for any California resident and further education for qualified students at State Colleges and the University of California, for extremely modest fees. Reagan raised the fees across the board promising it would be temporary. In reality he began a tuition program that continues to increase to this day. When he ran for President in 1980, part of his campaign was to get rid of the Department of Education.
The theory was that a successful educational system presents problems. Educated workers have to be paid more. If you can stop educating them, they can be paid less. Rumors have circulated for years that this was the goal of Reagan’s blatant destruction of American education. Wages were simply too high and they had to be lowered. Let the rich educate their children and let the middle class and the poor work the remaining “service economy” jobs.
It was a long range plan that has had disastrous effects. The result is the development of the digitization of society and the computer industry has left the US with a shortage of trained workers. We now have to either import qualified people or export jobs to countries like India or China where they have the educated personnel. But that was the plan and it dates back to 1967 and Ronald Reagan.
The result of the Reagan legacy is that subsequent administrations, whether Democratic or Republican, have been following the same plan, a plan that puts wealth into the hands of a privileged few and trusts it will trickle down. It did for a while but these days the flow has stopped and the wealthiest Americans are hoarding what they have. It was inevitable; greed is the continuing and most ominous aspect of the dark side of the Reagan legacy.