Will Bunch has posted on his blog today this killer post: Jobless America: Reagan’s Chickens Have Come Home To Roost. If there is only one thing that you read today, make this it. And be sure to read the links too. Bunch uses this post to locate the Ground Zero of the current economic meltdown with the implementation of Ronald Reagan’s economic policies — policies that firmly reset American economic policy from middle-class supports towards the wealthy and to business. Policy that — among other things — has left most Americans’ wages largely stagnant but made sure that our access to credit increased faster than our wages did. It is hard to excerpt just one piece, but this is important:
It’s important to note that while Reagan’s rhetoric and powers of persuasion are were extremely critical to launching the age of debt in America, he didn’t just talk the talk, he also walked the walk, beginning with his own misguided policies. It was under Reagan’s presidency that the United States went from a creditor nation to a debtor nation for the first time since World War I, initiating America’s massive slide into long-term dependency on China and other foreign powers to underwrite our spending spree. And of course, Tea Party activists today have amnesia over the fact that Reagan drove more debt than all the U.S. presidents who came before him. Years later, Vice President Dick Cheney said that he learned from Reagan that deficits didn’t matter. Like so much of what came out of Cheney’s lips while he was in the West Wing, that was a lie. The huge deficits wracked up by Reagan worsened the recession of 1990-91 by giving central bankers few options — it eventually took politically risky tax hikes by George H.W. Bush and Bill Clinton to undo Reaganomics and trigger the strong economy of the 1990s.
And that Reagan debt paid for things that were unproductive in the long-run — a massive arms buildup that included many weapons that were outdated by the time they rolled off the assembly line, and massive tax breaks for the wealthiest Americans — as the top marginal rate for high-earners went from 70 percent to 50 percent (where it was for most of Reagan’s presidency, much higher than today) to 28 percent after the tax reform of 1986. This launched the huge spike in CEO pay; when Reagan was elected the average chief executive made 40 times what his average employee earned, but by 2000 that had risen astronomically to a multiple of 400. No wonder Gordon Gekko’s “Greed is good” speech from “Wall Street” is such an indelible image of the 1980s.
But earning power for middle-class Americans has barely budged since the dawn of the Reagan era. So in order to take part in the great festival of materialism that Ronald Reagan called “Americanism,” people borrowed. The 40th president tried to make that easier by deregulating the savings-and-loan industry — which proved to be a massive boondoggle that cost taxpayers $160 billion even as policy makers failed to learn the lessons of the S&L debacle. Still, people found many ways to borrow and buy, mainly on credit cards. In 1980, the typical American saved 10 percent of what he or she earned, but by 2004 that plunged to zero. Household and consumer debt went from 100 percent of the U.S. GDP in 1980 to 177 percent today. If you’ve been around for the last 25 years, you saw how this was accomplished through the chasing of bubbles, first on Wall Street and then in the housing mania of the mid-2000s. Now, with falling home prices and record foreclosures, there are no more bubbles to inflate, which is why the Reaganist chickens of our unsupported spending binge are finally coming home to roost.
And now we pay — we pay in large part with an economy that will be very slow to recover enough jobs for the Americans who want them. Not because of the BS story (that our media has lazily bought into) that businesses are uncertain of the regulatory environment — but because businesses are unsure of when we’ll start buying stuff again. Since our own economy is currently built on us getting enough credit to buy more stuff than we need, we are in for a long recovery slog, as most people are reining in their spending and trying to deleverage their own households. There is a part of this consumers economy that is unlikely to ever come back.
And we also pay with the kind of legislative paralysis that refuses to see the real depth of the price being paid by Americans for 30+ years of Reagan-era economic policy. Advocates of the status quo do that advocacy on the backs of the unemployed and under-employed, while pulling off the hat trick of riling up these same people to indulge in the worst of their nativist fears and resentments — specifically ignoring their own economic interests. But the repubs will be trotting out Reagan this campaign season (can’t use BushCo, of course) as an example of wise economic policy. Don’t believe it — Ronald Reagan is specifically responsible for how we got here and we can’t afford any more of it.