Supply slide economics
Published December 19, 2019
By Thomas Mills
Back in 1980, Jimmy Carter oversaw an economy crippled by stagflation. Unemployment was high and so was inflation. The loss of the Vietnam War was still stinging the national psyche when a group of Iranian students invaded the US Embassy in Tehran and took Americans hostage, embarrassing the US. While just a few years earlier, the Mossad had famously freed Israeli hostages in Entebbe, Uganda, the US looked impotent against the Mullahs in Iran as the military’s one publicized rescue attempt failed spectacularly. The country was in a funk and needed a new beginning.
We got it with Ronald Reagan. He promised to restore American greatness and pride. He would rebuild our military and bring communism in Eastern Europe and Russia to its knees. And he would get Americans working and earning again. Fed Chairman Paul Volcker’s staggeringly high interest rates ended inflation and the country crawled out of the recession his remedy caused with a renewed sense of optimism.
And Reagan gave everybody a little more money with a huge tax cut and introduced us to supply-side economics. In his second term, with a booming economy and the most optimistic public in a decade, he revamped our tax code to make it simpler. More significantly, though, he reduced the top tax rate from 50% to 33%. He began a thirty year trend of reducing the amount of taxes rich people and corporations pay to shift the tax burden from the wealthy to the middle class. Today, for the first time in modern history, the richest among us pay a lower tax rate than the poorest among us.
Republicans like to point to employment numbers and GDP, but they no longer have the relevance they once did. The Reagan Revolution uncoupled GDP from wage growth. Today, a strong GDP is an indication that the wealthiest Americans are doing better but it says little about the majority who work for wages. People may have jobs, but the wages aren’t covering the increasing cost of living for things like college and health care.
At the same time, taxes for the wealthiest have plummeted and the deficit and debt have exploded. Republicans’ solution is to cut spending on domestic programs that go toward helping middle and lower income families. They never ask the people who have benefited the most from our economy and our system of government to pay a little bit more. The result is massive inequality that’s fueling a malaise not that different from the one that ushered in Reagan.
The driving force behind the inequality is a distortion of the principles upon which the country was founded. Supply-side economics are the gospel of free market extremists who equate wealth with freedom and liberty. Taxation, in their view, is a form of despotism. Poverty, they argue, is more of a choice than a condition.
In the 1990s, these free marketeers pushed through free trade agreements that took into account the bottom line of Wall Street investors while ignoring the plight of communities dependent upon manufacturing industries. They hollowed out the small towns across the Midwest and places like the piedmont of North Carolina, leaving behind boarded up stores, aging populations, drug addiction and a declining life expectancy. In their view, that’s just the cost of freedom. People could move, they rationalize, or get an education instead of trying to find a job.
The cynics who run the modern Republican Party are glad to blame the immigrants, not trade deals, for taking jobs from the economy’s losers and demand that the dwindling tax revenue go to building fences instead of communities. But they are loath to look for revenue that could help the struggling middle class. Instead, they’ve embraced a con man and carnival barker who equates politics with a professional wrestling match. They hope he can distract enough Americans with his antics to allow them to reduce enough regulations, install enough judges and cut enough taxes to further entrench their view of a country of haves and have-nots.
The fervor of the GOP ideologues is so great that they’ve rationalized destroying the norms that have given our country a sense of consistency. We’ve become inured to shocking behavior. The GOP declined to confirm a Supreme Court Justice in a move that would have been unthinkable just a few years earlier. They disenfranchised 200,000 people in Wisconsin and it barely gets a blip in the news cycle. They defend a president who uses the office to promote his business and calls on foreign governments to interfere in our politics. They ignore attacks on the free press, our allies in NATO and our law enforcement agencies. And the most powerful leaders of the party eschew their constitutional obligations by publicly declaring they will not be neutral in an impeachment trial of a president who has seen many of his closest advisors go to prison for corruption.
We’ve witnessed almost 40 years of transformation that took us from a battered and disgruntled but fairly egalitarian nation to one based in cynicism and inequality. The election in 2020 is about where we go next. We can continue a trend of marginalizing the people who struggle the most in this country and further enriching the people who have accumulated generations of wealth. Or we can begin to reverse the trends that began under Reagan, celebrating the individual at the expense of the community.
The calls for a counter revolution in this country are correct. We need to transform our tax system to give those who work for wages the opportunity to better their lives, not just struggle to stay afloat. We need to stop seeing go-fund-me sites to cover the cost of basic medical services. We need a public education system that offers people the skills to succeed in the modern economy without leaving them with mortgage-sized debt. These changes will require re-thinking how we currently fund government and where our priorities lie.
How we get there is a different matter. We must first win at the ballot box to begin re-establishing norms that benefit a majority of people instead of just a few. Reversing the damage of supply-side economics and the Reagan Revolution will takes decades to accomplish, not one presidential term. Taking the presidency from the cynics next year is the first step, not the final one.
