Ronald Reagan - The Anti Robin Hood

Commentary By Ron Beasley

There is little doubt that Ronald Reagan was indeed the great communicator but in fact he was the great snake oil salesman. He used his communication skills to sell a poison pill to the middle class.  Economist Ravi Batra explains:

    "Socialism" is a pejorative term in American politics and needs to be carefully examined. It usually refers to increased government control over the economy, or policies that promote the redistribution of wealth. There is no doubt that President Obama's economic measures, passed and proposed, will raise tax rates on the richest Americans to pay for increased government funding of health care, green energy and education. So the new president is indeed a redistributionist, but so was Ronald Reagan, except that Obama's plans will transfer wealth from the rich to the poor, whereas Reagan's bills transferred wealth from the poor and the middle class to the opulent. In fact, Obama's measures are puny, whereas Reagan's were massive. If the Democrat is a "small" socialist, Reagan was the Great American Socialist.

So how did Reagan do it?  Simple, he looted.

  Let's go back to the early 1980's. In 1981, Reagan signed a law that sharply reduced the income tax for the wealthiest Americans and corporations. The president asserted his program would create jobs, purge inflation and, get this, trim the budget deficit. However, following the tax cut, the deficit soared from 2.5 percent of GDP to over 6 percent, alarming financial markets, sending interest rates sky high, and culminating in the worst recession since the 1930's.

    Soon the president realized he needed new revenues to trim the deficit, bring down interest rates and improve his chances for reelection. He would not rescind the income tax cut, but other taxes were acceptable. In 1982, taxes were raised on gasoline and cigarettes, but the deficit hardly budged. In 1983, the president signed the biggest tax rise on payrolls, promising to create a surplus in the Social Security system, while knowing all along that the new revenue would be used to finance the deficit.

    The retirement system was looted from the first day the Social Security surplus came into being, because the legislation itself gave the president a free hand to spend the surplus in any way he liked. Thus began a massive transfer of wealth from the poor and the middle class, especially the self-employed small businessman, to the wealthy. The self-employment tax jumped as much as 66 percent.

But the anti Robin Hood was not through:

   In 1986, Reagan slashed the top tax rate further. His redistributionist obsession led to a perversity in the law. The wealthiest faced a 28 percent tax rate, while those with lower incomes faced a 33 percent rate; in addition, the bottom rate climbed from 11 percent to 15 percent. For the first time in history, the top rate fell and the bottom rate rose simultaneously. Even unemployment compensation was not spared. The jobless had to pay income tax on their benefits. A year later, the man who would not spare unemployment compensation from taxation called for a cut in the capital gains tax. Thus, Reagan was a staunch socialist, totally committed to his cause of wealth redistribution towards the affluent.

While all of this was bad for the middle class it was also bad for the economy and was ultimately responsible for the current economic problems.  The driving force of an economy is a customer base with disposable income.  Reagan's policy reduced the disposable income of the middle class - the vast majority of the customers.  The Greenspan Fed flooded the market with easy credit  to mask the fact that the customers had no money.  That results in an unsustainable bubble and here we are.  Yes we are where we are today because of Reaganomics.  If Obama is really serious about fixing the economy he will bury Ronald Reagan once and for all.

Comments

[John Ballard]

[Loud Cheering... sustained applause... Cries of "Bravo!"... jumping up and down, yelling!]

You got it.

Read my comment at Beasley's post.

These links are my latest picket signs in the blog world. Advisory: I'm wordy but I eventually get to the point.

Top Tax Tiers History

Losing a Brace of Kensmen

[John Ballard]

D'oh...
Boy, do I feel stupid. YOU'RE Beasley.

Sorry about that. Too much focus on content, not enough on sources...

Just found out this morning what my problem is. I never heard of the Overton Window.
It's a real phenomenon but I never knew it had a name. This is from Wikipedia:

...named after its originator, Joe Overton, former vice president of the Mackinac Center for Public Policy. It describes a "window" in the range of public reactions to ideas in public discourse, in a spectrum of all possible options on an issue. Overton described a method for moving that window, thereby including previously excluded ideas, while excluding previously acceptable ideas. The technique relies on people promoting ideas even less acceptable than the previous "outer fringe" ideas. That makes those old fringe ideas look less extreme, and thereby acceptable. The idea is that priming the public with fringe ideas intended to be and remain unacceptable, will make the real target ideas seem more acceptable by comparison.

The degrees of acceptance of public ideas can be described roughly as:

* Unthinkable
* Radical
* Acceptable
* Sensible
* Popular
* Policy

The Overton Window is a means of visualizing which ideas define that range of acceptance by where they fall in it, and adding new ideas that can push the old ideas towards acceptance merely by making the limits more extreme.

My problem is spending too much time at the "unthinkable" end of the continuum.