(c) by Mark Dempsey
An acquaintances yearning for more peaceful politics reminded me that he was a fan of Ronald Reagan and was nostalgic for simpler times. Reagan is hardly a remedy for our current woes.
A few of Reagan's policies:
The Savings & Loan Crisis
Before the subprime/derivatives meltdown in 2008, the largest financial and political scandal in US history was the S&Ls. It was orders of magnitude bigger than Teapot Dome, or Credit Mobilier, the previous "biggest-ever" scandals, and took nearly a half trillion dollars to cure, if you count the interest on the bailout. It was huge.
It happened, and was it so big because Reagan made a rather ordinary bank scandal worse by deregulating the S&Ls. Rather than "growing their way out of trouble," they just made more crooked loans. For the details, see Martin Mayer's The Greatest Bank Robbery Ever: The Collapse of the Savings & Loans.
In fairness, Reagan and Bush 41 regulators actually acted to stop the crooked S&Ls. According to regulator William K. Black, they filed more than 30,000 referrals for criminal prosecution, and the Justice Dept prosecuted more than 1200 cases with a 90% conviction rate. They got big fish, too, Mike Milken and Charles Keating among them.
In financial terms, the more recent subprime/derivative meltdown--the "Global Financial Crisis"-- was 70 times bigger than the S&L scandal. The scandals are getting worse, not better. The number of referrals for criminal prosecution filed by the Obama administration's regulators: zero.
Obama prosecuted about a dozen cases, all small fish. One Swiss banker went to jail, but the big malefactors were given slap-on-the-wrist fines and walked away with the vast majority of their loot without even an admission of guilt, which makes the cases for civil damages harder to prosecute. No one lost his job, no one even lost his bonus. America's net worth declined by 40%, there were 8 - 10 million foreclosures. People lost their homes, their jobs and their savings. It was an economic bloodbath. It's no surprise Trump won in 2016, after the economy digested this outrage.
My Democratic friends send me YouTubes decrying Trump's pardons, and the billions they cost the courts and the victims of the pardon recipients' frauds. But, according to our central bank's own audit, during the Global Financial Crisis, it issued between $16 and $29 trillion in credit to the same financial sector whose frauds crashed the economy.
Just a reminder: a trillion is 1,000 times a billion. And Obama didn't have to pardon people because he didn't jail the criminals. Reagan set the direction; Obama pressed the accelerator.
Iran/Contra
The Reagan administration wanted to wage a war against Nicaragua because Nicaragua elected a socialist government. Congress disagreed and withdrew funding for the mercenaries ("Contras") fighting the elected government.
Reagan's advisors then sold classified weapons to Iran, through Israel, and used the proceeds to fund mercenaries fighting the elected government. "Weapons laundering" through Israel made this possible because the public outcry would have prohibited it otherwise. After all, at the time, Iran had just released the US embassy hostages when Reagan became president.
To pressure Iran to release the US embassy hostages, the defeated Jimmy Carter had refused to sell the Ayatollahs spare parts for its US weapons bought by the US-supported Shah, but Reagan lifted that prohibition--a concession Carter advisor Gary Sick (October Surprise) says made Iran delay releasing the hostages for Carter. That almost certainly lost Carter the presidency. Not only that, Reagan sold not just spare parts, but classified weapons Iran did not yet own to get money to pay the Central American mercenaries.
This amplified previous US aggressive impulses. Carter and Congress previously funded the Mujahedin in Afghanistan. That's where Osama Ben Laden got his training, which he later used for the World Trade Center bombing. So the "uniparty" behaved as usual.
Reagan famously asked the Mexican President to endorse the war against Nicaragua--one of the two poorest nations in the hemisphere--because Nicaragua was such a threat to the US. The Mexican president replied that he would be happy to go along with his friend Ronnie if there was any way he could do so without being laughed out of office.
Kemp-Roth -- Tax Cuts for the Wealthy & "trickle down"
Kemp-Roth is the name of the legislation that is one of the hallmarks of Reagan's administration. It cut the top income tax brackets for the wealthy roughly in half. It's also worth mentioning that between Reagan and his successor, payroll taxes also increased eightfold. Gosh, I wonder why there's such a big income divide in the US now!
Meanwhile, here's what GDP growth looks like in the US over time:
Notice that, in the 1980s, in return for his "trickle-down" policies, the reduced taxes on the rich that increased national debt by a record percentage, Reagan got what amounts to an average business cycle recovery. The Wall Street Journal called it "Morning in America," but it's very modest in comparison to the New Deal and that big public works project called "World War II" whose peaks appear earlier in the graph.
For reference, the government took over 50% of the American economy during WWII. Implementing the Green New Deal would only take 5%.
Reagan was also a fan of Milton Friedman's economics. Friedman says that the central bank (The Federal Reserve) should manage the money supply, and that would save us from the then-current "stagflation." This was tried and abandoned. Like most of Friedman's prescriptions, it didn't work.
Immigration
I've written about this before, but Friedman's economics was given an even more extensive test in Chile after the Nixon administration overthrew the elected government of Salvador Allende, and assassinated Allende and thousands of others. During the term of Allende's replacement--human rights abuser General Augusto Pinochet--Chile's economy grew by 8%. Neighboring South American nations had roughly 40% GDP growth. After Pinochet, Chile's unemployment rate was higher than when Pinochet began his rule.
This is related to immigration because it's standard policy for the US to create refugees who flee north to get behind the battle lines. Between 1798 and 1994, the US was responsible for 41 changes of government south of its borders, leading to a constant stream of political and military refugees coming north. Allende's niece, Isabelle Allende, lives in Marin County, California, and writes novels.
The economic manipulations that create refugees are as bad or worse. One might guess that Mexican corn farmers were harmed by having to compete with subsidized Iowa corn imports, and NAFTA gave the big farmers a bailout. True, NAFTA was a bipartisan collaboration between Harvard-educated Carlos Salinas Gotari, G.H.W. Bush, and Bill Clinton, not really Reagan's treaty, but Reagan would have agreed with the economics behind it.
In the wake of NAFTA, Mexican real, median income declined 34% (says Ravi Batra in Greenspan's Fraud). One has to go back to the Great Depression to find a decline like that in the US. The little subsistence corn farmers were only growing obscure varieties of that important crop that kept the disease resistance and genetic diversity of corn alive; but they weren't making any money for Monsanto, so forget them!
Reagan's contribution to the immigration discussion, besides the military refugees created by Iran/Contra, was an amnesty--something Republicans accused their Democratic opponents of advocating. It's a non-starter in the Trump era.
Antitrust
The Reagan administration effectively stopped enforcing antitrust legislation in the '80s. Breaking up monopolies is absolutely necessary to ensure the markets can operate and do legitimate price discovery.
Monopolies defeat markets, setting prices to maximize their own profits. Monopolies (and oligopolies) are price setters, not price getters--which defeats the free market's claim to make things affordable. The prices of EpiPens and insulin are just some of the latest instance of monopoly rents increasing prices.
Classical economics says there's a law of declining profits. Completely free markets without significant barriers to entry, or dominant monopolies/oligopolies, mean that competition drives prices lower, and with lower prices come lower profits. Firms know this and do everything from buying the competition to selling goods below their production costs to drive competitors out of business.
Here's an example from New Hampshire: "Here's a blow-by-blow of how utility regulators and utilities collude to screw you. In this case, Eversource, New Hampshire's largest utility, got a 43% increase in the fixed monthly charge consumers pay. 43%." (from monopoly specialist Matt Stoller)
Recently, Wright-Patman, a law forbidding different prices for large customers (e.g., Walmart) and small customers (mom-and-pop stores), has been revived, but it has been ignored since Reagan, too. The courts are reviewing one case now, but the game of different prices for the big guys vs. the little guys has been going on for a long time now.
Education/Homelessness
When Reagan was governor of California, he removed "civics" from the schools' curricula. Heavens to Betsy! We can't have educated voters!
He also closed the state's insane asylums, basically evicting the inmates to suffer the tender mercies of homelessness and the streets. In a bipartisan move, the Democrats did something similar to the big federal asylums during the Kennedy administration. The proposal was to close the big, isolated asylums and make transitional housing that integrated the inmates into society again. Congress terminated funding for the federal asylums and failed to fund the transitional housing.
In the presidency, as Reagan cut taxes on the wealthy roughly in half and increased payroll taxes, he also cut HUD's affordable housing budget by 75%. The current homeless population--the biggest since the Great Depression--is the result of public policy, not some accident.
War Crimes
This is hardly an exceptional accusation for really any president since WWII, yet Nicaragua qualifies as a war crime, as does Grenada.
Thatcher
Reagan and Thatcher were allies in economics, both promoting "trickle down" theories that favored the rich. Thatcher famously declared that "There's no such thing as 'society,' only families and individuals" -- a statement roughly equivalent to "You have only cells and organs; you have no body." Childhood poverty in the UK increased three-fold during Thatcher's reign.
Where we are now:
Real, median income for the bottom 90% of US incomes has increased $59 since 1972, says investigative reporter David Cay Johnston. If that increase were an inch on a bar graph, the bar for the top 10% would be 141 feet high; the bar for the top 0.1% would be five miles high. The distortions this wreaks on society are everywhere to be seen. From the precarity of employment, to the largest homeless population since the Great Depression, we are all suffering from the policies that favor the rich and attack the poor.
Consider the alternative: The Carnegie Endowment pointed out that China’s entire strategy for competing with the United States has been to lean into economics, technology, construction, and training. Not military alliances. Not bombs. They build roads, ports, rail networks, energy systems. They invest in other countries’ infrastructure. They compete by making things. In the US, we compete by breaking things. And we’ve spent decades proving it.
We can’t build a subway line in under twenty years. We can’t make insulin affordable. We can’t keep a hospital open in a rural county. We can’t build housing fast enough to keep families off the street. But we can flatten a city on the other side of the world in a weekend. We’re really good at that part. We’ve had a lot of practice.
