So Long Reaganomics, You Won’t Be Missed

Pres. Ronald Reagan

Pres. Ronald Reagan

I know many Americans hate progress, change, liberals, equality and workers, but it still surprises me when I see so many regular folks fight so hard to protect wealthy executives and corporations.

I wonder if CEOs for big pharma and health insurance companies sit around drinking scotch and laughing their asses off watching YouTube videos of all the boobs rallying to protect their positions of power.

I mean think about it, the Tea Partiers fought tooth and nail to protect health insurance companies so they can deny them – the protesters – health care, to take away their health care when they need it and to bankrupt them when they get sick.

It makes no sense.

And who do we have to thank for this mind-boggling insanity? President Ronald Reagan. It wasn’t so much the man as it was the time. Reagan, like all presidents, don’t create movements but they ride them.

The 1980s was the “Me Decade.” It was a time when the Baby Boomers were coming of age and they wanted, not just their slice, but the entire American pie. It was a decade plagued with un-checked greed and individualism. Either you were a Gordon Gekko, you wanted to be him or at the very least respected his tenacity and ruthlessness.

The last thing we needed was government intervention and taxes to slow down our quest for all of the money in the world.

There’s no doubt that this anti-government sentiment was rooted in the 1960s and 1970s when the government was doing some pretty horrible things. We had the Vietnam war and we lost. We had Watergate and we lost again. We did get civil rights legislation and Medicare, but the GOP successfully leveraged that as part of its “southern strategy.”

Animosity towards the government was strong on both sides of our political spectrum, and so when Reagan came in saying that it’s “morning in America,” people liked it.

Taxes for the wealthy were slashed and slashed and slashed again. Banking regulation was relegated to the garbage heap. We didn’t want to pay taxes, we wanted voodoo economics.

The idea behind voodoo economics was that by reducing government spending (that didn’t happen), reducing taxes (that did happen), reducing regulation (that happened) and controlling inflation (see Federal Reserve) the wealthy would get so rich some of that money would trickle down to the workers.

That’s called a top-down approach to economics – make the rich really rich and we all benefit. The problem is that it didn’t work.

Emmanuel Saez report on income inequality

Emmanuel Saez report on income inequality

What happened is that income inequality skyrocketed. While the rich were paying less in taxes, government spending wasn’t reduced and therefore deficits went up and the burden was placed squarely on the shoulders of the middle class. The money did trickle down. It trickled a little here and a little there, but unfortunately, trickle-down economics is just that – a trickle.

And so for the last 30 years, the rich got really rich and the rest of Americans were left with bailing out the Saving and Loans institutions that failed in the ’80s, the hedge fund debacle in the ’90s and the most recent Wall Street bankers who ushered in the Great Recession.

History should be our guide to economic and tax policy. When the rich don’t pay their fair share, like they didn’t in the “Roaring Twenties” which lead to the Great Depression. While we were under the spell of voodoo economics, we all suffered the consequences with the Great Recession. We can’t have an economic system that encourages economic inequality.

You see, one of the fundamental components of a tax system is to distribute the wealth. Either wealth goes up to the rich or down to the masses. Under Reaganomics it went up. Wealth redistribution is not socialism. It’s not communism. It’s how taxation works. And as a society we have to decide who should get the money – the wealthy or the rest of us.

A progressive taxation system is a bottom-up approach. It’s a belief that the real economic engine of this country isn’t the 1 percent of us who are wealthy, but the 99 percent who aren’t. If we have money, we buy a new car every couple of years. We buy new clothes. We go out to dinner. We go on a vacation with our family. The richest among us already do those things regardless of their tax burden, but the rest of us don’t.

It’s the workers of this nation that make this economy strong. When we have money, we spend it.

But the tide is changing. Americans have realized that slashing taxes on the wealthy doesn’t lead to economic prosperity but just the opposite. And when President Obama signed health care reform into law yesterday, he was saying that he supports the workers – the middle class. He said it’s time for the wealthy to start paying their fair share.

Now Obama needs to repeal the Bush tax cuts and then some. What America needs is a return to a progressive tax system and an end to laissez-faire government regulation of our financial system. Obama has a lot of work to do, because Americans don’t want voodoo economics anymore, but those who control the wealth and the GOP surely do, and they’ll stop at nothing to keep things as unfair as possible.

In Health Care Bill, Obama Attacks Wealth Inequality


  • Dave Searcy says:

    You want to talk about a “me decade”? How about the most profound ME-President we’ve ever seen? How about if we curtail the demonization of all insurance providers as wealthy elitists out to screw us all, and the presumption that big-government knows what’s best.
    Here’s what much scarier than Reganomics – the assumption that ALL executives are rich fat-asses sitting around drinking scotch. Maybe a better assumption is that there are too many 20-somethings sitting around getting high waiting for socialistic government hand-outs.
    If our president had so much concern for me, the worker, when he penned his name to the reform bill, why is it that every worthwhile analysis (with the exception of the Democrat-prompted CBO report) shows an extreme likelihood of taxes and premiums increasing as a result?

  • keith says:

    I agree Dave, taxes will go up after health care reform is implemented. As I said in the article, that’s the point. People making more than $250,000 a year will pay more in taxes. If you make more than $250,000 a year, you don’t qualify as a “worker.” If you make less than that, you don’t have to worry about it.

    Clearly you believe in the trickle down economics that has failed us. Good luck with your frustration.

  • Dave Searcy says:

    I believe the phrase “trickle down economics” was invented by the Democrats in opposition to Reagan’s idea of propping up business, large and small, as a means of benefiting everyone involved. I realize that sounds simplistic, and it’s obvious that those left out of this model turned their own frustration on the wealthy. They’re an easy target. And I’m not sure that I agree about those of us under the 250k mark being spared higher taxes. Health Care Reform will cost almost all of us, big time. Not to mention substantial increases in premiums when group plans renew at the beginning of 2011. And that’s not just fear-based speculation. Check with just about any health insurance exec who’s responsible for balancing the numbers. And by the way, they’re really not all evil. Not that [you] said they were, just plenty of other folks these days.
    Thanks for the good luck wish on my frustration. It’s really more about determination though, so I’ll be fine.
    Have a Great Day!

    • keith says:

      Yes I’m sure the phrase “trickle down economics” was invented by Democrats, but that doesn’t mean it’s not a valid description. The basic idea was that if you cut taxes on the wealthy, they will then spend that money creating jobs. Someone has to wash their new yacht. Right?

      And I’m sure if I ask health insurance executives whether premiums will go up because of health reform, they will say ‘yes.’

      Doing nothing about skyrocketing health care costs is not an option. It’s costing us “big time” right now. The last time I checked it was about $7,000 per man, woman and child. Since the GOP clearly has no plan to work on this issue, we’re left with what the Dems can do. I don’t know what else to say, somebody has to do something and Dems were elected in 2006 and 2008 to do something about health care, among other things.

      What nobody talks about directly are people like myself who are self-employed. We’re healthy but we’re not getting any younger. If I were to purchase health ins. on my own it would cost me a minimum of $4000 a year for crap coverage. That’s doubling my tax burden, if you consider health ins. a tax, which it is since at some point I’ll need insurance before I get sick and financially ruined.

      More and more people are choosing to be self-employed and those people need access to affordable health care. And the only way to do that is to regulate the health insurance industry, or get rid of it and switch to government-run health care. The Dems chose the former.

      I get it that there are lots of Americans out there that have good health insurance (or they think they do), and they don’t care about anybody else. But the reality of our government is that it’s not mob rule. Sometimes the government does things to help that minority of people who need help despite what the excited majority may want. We call that a republic. Madison talked about it a lot in his Federalist papers. Virtuous men making virtuous decisions in spite of excited factions who oppose it (e.g. slavery, civil rights, woman’s suffrage, etc).

      Sometimes we just have to work together to solve problems even when some of us don’t want to. If we can’t work together, why even have a country?

  • Dave Searcy says:

    Whatever we end up calling Reagan’s notion of wealth redistribution, one thing’s definite, I won’t challenge your original argument; you detested it, and I thought it had mixed results. But a complete failure? You went from point A, then B, and off to point P at lightning speed. “The basic idea was that if you cut taxes on the wealthy, they will then spend that money creating jobs. Someone has to wash their new yacht. Right?”
    That’s still assuming the vast majority outside of the executive tier was run out.

    And of course, nearly all health care execs will claim higher premiums as a result of this bill. But like you and me, they’re employees, trying to hopefully run a competitive business. Health care costs can’t help but skyrocket if we burden, or eliminate, the competitive landscape. It won’t do an insurance provider any good to essentially screw a participant, if the participant can then choose someone else — at least in a open marketplace free of heavy-handed government regulation. And by the way, several GOP congressional reps did counter the Democrats bill. It just didn’t get a lot of warm coverage. Say what you want on that, but just don’t say nothing else was on the table.

    And personally, I don’t just think I have good employer-based coverage, I’m sure of it. Our provider had announced an increase of nearly 20% going into 2010, and we just about walked away. In which direction? I’m not sure. But after some negotiation we managed to keep the increase closer to 12%. It meant a lot to me as an employee to see how much keeping our business meant to the provider. Their reps spent nearly an hour and half with us explaining almost every detail of the current plan. These people are workers, just like me, trying to take care of the client and stay in business. Is this something I’d want government reps to one day take on?
    Wow… NO!

    And was Madison really referring to something akin to our current situation? Close to 60% (depending on the poll) of the population expressing a no-confidence vote on a sweeping legislative reform? I’m not sure that qualifies as an “excited” majority. It kinda makes it sound like an irrational mob, and if that’s the thinking, why not apply it to any occasion the government thinks it knows best?

    We definitely agree on one big point Kieth, some manner of health reform is needed. I just don’t think Sunday night’s package (and subsequent “we won” expressions) was a good move. Pretty dividing actually.

    • keith says:

      Well we’ll have to agree to disagree.

      You see the world of deregulation and tax cuts as a pretty good thing that worked out pretty well. I see the current a economy in a shambles and it’s in large part a result of deregulation and tax cuts for the wealthy, as well as, gutting our manufacturing industry in a quest for cheap labor.

      And yes, Madison was referring to this type of situation. He worried very much about the oppression of the minority by the majority. Of course, I’d argue that the radical right doesn’t represent the majority, but that’s for another post.

      The reality is that most people are much more like yourself – reasonable. Most people don’t mind an honest discussion and can peacefully disagree. Unfortunately, the people screeching tend to represent the extremes and tend to get on TV a lot.

  • Dave Searcy says:

    I don’t know that there are many people in favor of tax cuts for the wealthy. How about fair percentages based on monetary surplus? Easier said than done I suppose… And manufacturing gutting in favor of cheap labor? That one’s definitely a topic for another post.

    I dislike minority oppression as much as any decent person, but I hope we can strike a reasonable balance between what some feel is oppression and what others see as threatening. And personally, I have a problem with both the radical right AND left. I think well timed moderation is the zipper that at least keeps us unified under one roof. The current division is what very much concerns me.
    Thanks Keith –

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