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The Abject Failure of Reaganomics

House Republicans got next to nothing from their extortion strategy of
taking the government and the economy hostage, but they are sure to
continue obstructing programs that could create jobs and start rebuilding
the middle class. What they wonu2019t recognize is the abject failure of Reaganomics.

By
Robert Parry ,
https://truthout.org/articles/the-abject-failure-of-reaganomics/


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Even as the Republican Right licks its wounds after taking a public-
opinion beating over its government shutdown and threatened credit
default, the Tea Partiers keep promoting a false narrative on why the
U.S. debt has ballooned and why the economy struggles, a storyline that
will surely influence the next phase of this American political crisis.

If a large segment of the American public continues to buy into the Tea
Party�s fake reality, then it is likely that both the political damage
and the economic decline will continue apace, with fewer good-paying
jobs, a shrinking middle class and more of the bitter alienation that has
fed the Tea Party�s growth in the first place. In other words, the United States will remain in a vicious circle that is also a downward spiral.

The pattern can only be reversed if American voters come to understand
how and why their economic well-being is getting flushed down the drain. Uncompromised, uncompromising news



The first point to understand is that the current $16.7 trillion federal
debt is about $11 trillion more than it was when George W. Bush took
office. Not only did Bush�s tax-cut-and-war-spending policies send the
debt soaring over the next dozen years but it was those policies that eliminated the federal surpluses of Bill Clinton�s final years and
reversed a downward trend in the debt that had �threatened� to eliminate
the debt entirely over the ensuing decade.

Amazingly, President Clinton left office in January 2001 with the federal budget in the black by $236 billion and with a projected 10-year budget
surplus of $5.6 trillion. The budgetary trend lines were such that
Federal Reserve Chairman Alan Greenspan began to fret about the
challenges the Fed might face in influencing interest rates if the entire
U.S. government debt were paid off, thus leaving no debt obligations to
sell.

Thus, Greenspan, an Ayn Rand acolyte who was first appointed by Ronald
Reagan, threw his considerable prestige behind George W. Bush�s plan for massive tax cuts that would primarily benefit the wealthy. In that way,
Bush and the Republicans �solved� the �problem� of completely paying off
the federal debt.

When Bush left office in January 2009 � amid a meltdown of an under-
regulated Wall Street � there was no more talk about a debt-free
government. Indeed, the debt had soared to $10.6 trillion and was
trending rapidly higher as the government scrambled to avert a financial catastrophe that could have brought on another Great Depression.

Reaganomics� Failure

But this debt crisis did not originate with George W. Bush. It can be
traced back primarily to President Reagan, who arrived in the White House
in 1981 with fanciful notions about restoring America�s economic vitality through massive tax cuts for the wealthy, a strategy called �supply-side�
by its admirers and �trickle-down� by its critics.

Reagan�s tax cuts brought a rapid ballooning of the federal debt, which
was $934 billion in January 1981 when Reagan took office. When he
departed in January 1989, the debt had jumped to $2.7 trillion, a three-
fold increase. And the consequences of Reagan�s reckless tax-cutting
continued to build under his successor, George H.W. Bush, who left office
in January 1993 with a national debt of $4.2 trillion, more than a four-
fold increase since the arrival of Republican-dominated governance in
1981.

During 1993, Clinton�s first year in office, the new Democratic
administration pushed through tax increases, partially reversing the
massive tax cuts implemented under Reagan. Finally, the debt problem
began to stabilize, with the total debt at $5.7 trillion and heading
downward, when Clinton left office in January 2001.

Indeed, at the time of Clinton�s departure, the projected ten-year
surplus of $5.6 trillion meant that virtually the entire federal debt
would be retired. That was what Fed Chairman Greenspan found worrisome
enough to support George W. Bush�s new round of tax cuts aimed primarily
at the wealthy, another dose of Reagan�s �supply-side.�

The consequences � especially when combined with Bush�s decision to rush
into two major wars without paying for them � proved disastrous. The
federal debt resumed its upward climb. By August 2008, just before the
Wall Street crash, the debt was over $9.6 trillion, nearly a $4 trillion
jump since Bush took office.

And, after the Wall Street collapse in September 2008, the federal
government had little choice but to increase its borrowing even more to
avert a global economic catastrophe potentially worse than the Great Depression. By January 2009, just five months later, the debt was $10.6 trillion, a $1 trillion increase and counting.

Many of the Republican leaders who stomped their feet during the recent
budget showdown, including House Speaker John Boehner, R-Ohio, were among
those who favored the Bush tax cuts, the costly invasion of Iraq and bank deregulation. In other words, they were denouncing President Obama for a
debt crisis that they helped create.

But the record of reckless Republican budget policies from Reagan through Bush-43 was not only destructive to the fiscal health of the government.
The �supply-side,� �free-trade� and deregulatory strategies � including
some facilitated by the Clinton administration � proved devastating to
the nation�s ability to create good-paying jobs and to sustain the Great American Middle Class.

Zero Job Growth

During the decade of George W. Bush�s presidency, the United States
experienced zero job growth. And zero is actually worse than it sounds
since none of the preceding six decades registered job growth of less
than 20 percent.

By comparison, the 1970s, which are often bemoaned as a time of economic stagflation and political malaise, registered a 27 percent increase in
jobs. Yet, in part because of that relatively slow rise in jobs � down
from 31 percent in the 1960s � American voters turned to Ronald Reagan
and his radical economic theories of tax cuts, global �free markets� and deregulation.

Reagan sold Americans on his core vision: �Government is not the solution
to our problem; government is the problem.� Through his personal
magnetism, Reagan then turned taxes into a third rail of American
politics. He convinced many voters that the government�s only important
roles were funding the military and cutting taxes.

Yet, instead of guiding the country into a bright new day of economic
vitality, Reagan�s approach accelerated a de-industrialization of the
United States and a slump in the growth of American jobs, down to 20
percent during the 1980s. The percentage job increase for the 1990s
stayed at 20 percent, although job growth did pick up later in the decade
under President Clinton, who raised taxes and moderated some of Reagan�s approaches while still pushing �free trade� agreements and deregulation.

Yet, hard-line Reaganomics returned with a vengeance under George W. Bush
� more tax cuts, more faith in �free trade,� more deregulation � and the
Great American Job Engine finally started grinding to a halt. Zero
percent increase. The Great American Middle Class was on life-support.

Ignoring Reality

Despite these painful statistics of the past three decades, Reaganomics
has remained a powerful force in American political life. Anyone tuning
in CNBC or picking up the Wall Street Journal would think that these
economic policies had enjoyed unqualified success for everyone, rather
than being a dismal failure for all but the richest Americans. The facts
were especially stark for the 2000s, the so-called �Aughts� or perhaps
more accurately the �Naughts.�

�For most of the past 70 years, the U.S. economy has grown at a steady
clip, generating perpetually higher incomes and wealth for American households,� wrote the Washington Post�s Neil Irwin in a Jan. 2, 2010,
review of comparative economic data. �But since 2000, the story is
starkly different.�

As the Post article and its accompanying graphs showed, the last decade�s
sad story wasn�t just limited to the abysmal job numbers. U.S. economic
output slowed to its worst pace since the 1930s, rising only 17.8 percent
in the 2000s, less than half the 38.1 percent increase in the despised
1970s. Household net worth declined 4 percent in the last decade,
compared to a 28 percent rise in the 1970s. (All figures were adjusted
for inflation.)

Despite this record of economic failure from Bush�s reprise of
Reaganomics � trillions more in government debt but no net increase in
jobs or household wealth in the last decade � many Americans appear to
have learned no lessons from either the Bush-43 presidency or Reagan�s destructive legacy. Any thought of raising taxes or investing in a
stronger domestic infrastructure remains anathema to significant segments
of the population still enthralled by the Tea Party.

Indeed, across the mainstream U.S. news media, it is hard to find any
serious � or sustained � criticism of the Reagan/Bush economic theories.
More generally, there is headshaking about the size of the debt and talk
about the need to slash �entitlement� programs like Social Security and Medicare. Instead of paying heed to the real lessons of the past three
decades, many Americans are trapped in the Reagan/Tea Party narrative and
thus repeating the same mistakes.

�Voodoo Economics�

The U.S. political/media process seems resistant to the one of most
obvious lessons of the past three decades: Simply put, Reaganomics didn�t
work. As George H.W. Bush once commented � when he was running against
Reagan in the 1980 primaries � it is �voodoo economics.�

Yet, the fact that the United States has embraced �voodoo economics� for
much of the past three-plus decades and refuses to recognize the
statistical evidence of Reaganomics� abject failure suggests that the
larger lesson of this era is that the U.S. political process is
dysfunctional, a point driven home by the recent Tea Party-led government shutdown and threatened debt default.

In the decades that followed Reagan�s 1980 election, the Right has
invested ever more heavily in media outlets, think tanks and attack
groups that, collectively, changed the American political landscape.
Because of Reagan�s sweeping tax cuts favoring the rich, right-wing billionaires, like the Koch Brothers and Richard Mellon Scaife, also had
much more money to reinvest in the political/media process, including
funding the faux-populist Tea Party.

That advantage was further exaggerated by the Left�s parallel failure to
invest in its own media at anything close to the Right�s tens of billions
of dollars. Thus, the Right�s outreach to average Americans has won over millions of middle-class voters to the Republican banner, even as the GOP enacted policies that devastated the middle class and concentrated the
nation�s wealth at the top.

So, even as American workers struggled in the face of globalization and suffered under GOP hostility toward unions, the Right convinced many middle-class whites, in particular, that their real enemy was �big guv-
mint.�

Though Obama won the presidency in 2008, the Republicans didn�t change
their long-running strategy of using their media assets to portray the Democrats as un-American. The Right waged a relentless assault on Obama�s legitimacy (spreading rumors that he was born in Kenya, he was a secret socialist, he was a Muslim, etc.) while a solid wall of Republican
opposition greeted his plans for addressing the national economic crisis
that he inherited.

The Rise of the Tea Party

Like previous Democrats, Obama initially responded by offering olive
branches across the aisle, but again and again, they were slapped down.
In mid-2009, Obama wasted valuable time trying to woo supposed Republican �moderates� like Sen. Olympia Snowe of Maine to support health-care
reform. Meanwhile, Republicans filibustered endlessly in the Senate and
whipped their right-wing �base� into angrier and angrier mobs.

Initially, the GOP strategy proved successful, as Republicans pummeled Democrats for increasing the debt with a $787 billion stimulus package to stanch the economic bleeding. The continued loss of jobs enabled the Republicans to paint the stimulus as a �failure.� There was also Obama�s confusing health-care law that pleased neither the Right nor the Left.

The foul mood of the nation translated into an angry Tea Party movement
and Republican victories in the House and in many statehouses around the country. Gradually, however, a stabilized financial structure and a slow- healing economy began to generate jobs, albeit often with lower pay.

Obama could boast about sufficient progress to justify his reelection in
2012, with most voters also favoring Democrats for the Senate and the
House. However, aggressive Republican gerrymandering of congressional
districts helped the GOP retain a slim majority in the House despite
losing the popular vote by around 1� million ballots.

But the just-finished budget/debt showdown has shown that the Tea Party�s
fight over America�s political/economic future is far from over. Through
its ideological media and think tanks, the Right continues to hammer home
the Reagan-esque theory that �government is the problem.�

Meanwhile, the Left still lacks comparable media resources to remind U.S. voters that it was the federal government that essentially created the
Great American Middle Class � from the New Deal policies of the 1930s
through other reforms of the 1940s, 1950s and 1960s, from Social Security
to Wall Street regulation to labor rights to the GI Bill to the
Interstate Highway System to the space program�s technological advances
to Medicare and Medicaid to the minimum wage to civil rights.

Many Americans don�t like to admit it � they prefer to think of their
families as reaching the middle class without government help � but the
reality is that the Great American Middle Class was a phenomenon made
possible by the intervention of the federal government beginning with
Franklin Roosevelt and continuing into the 1970s. [For one telling
example of this reality � the Cheney family, which was lifted out of
poverty by FDR�s policies � see Consortiumnews.com�s �Dick Cheney: Son of
the New Deal.�]

Further, in the face of corporate globalization and business technology,
two other forces making the middle-class work force increasingly
obsolete, the only hope for a revival of the Great American Middle Class
is for the government to increase taxes on the rich, the ones who have
gained the most from cheap foreign labor and advances in computer
technology, in order to fund projects to build and strengthen the nation,
from infrastructure to education to research and development to care for
the sick and elderly to environmental protections.

In other words, the only strategy that makes sense for the average
American is to reject the theories of Ronald Reagan and the Right. Rather
than seeing the government as �the problem� and higher taxes on the rich
as �bad,� the American people must come to understand that, to a great
extent, government has to be a big part of the solution.

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