What we are seeing is a collapse in our economy that is 25 years in the making. The real blame for our predicament is the entire "government is the enemy" Republican philosophy which was championed by Ronald Reagan and followed to the nth degree by George Bush. The reality is that the financial meltdown we are seeing now is the final verdict on that bankrupt philosophy. The verdict is in -- the Reagan revolution was a stunning failure, and we are now harvesting the fruits of that failure.
Our current problems are the long term result of the destruction of the middle class due to a massive redistribution of wealth which Reagan set in motion. Reagan ran through Congress huge cuts in the top marginal tax rates and simultaneously ran up a huge budget deficit with his love of military contract spending. Having slashed taxes on the wealthy, it was left to the middle class to pay off Reagan's budget deficit. Simultaneously, the government had no money to invest in the type of domestic spending that would have paid dividends for decades to come -- improving teacher pay (which would have recruited better teachers and paid long term dividends in a better educated population), developing our infrastructure (mass transit anyone?), and moving toward some type of universal health care system are just a few examples. If we hadn't gone down the path of trickle down economics, working people wouldn't have collapsed financially so far so fast -- leaving so many foreclosures -- at the first sign of trouble in the economy. That's what started these dominos falling.
It's the final verdict on the complete failure of the Republican philosophy of weak government and unbridled greed by the wealthy. Basically the flip side of the new deal -- which brought growth and prosperity to the middle class for 60 years until the effects of the Reagan revolution starting unraveling the benefits brought by FDR. By the way, don't bother blaming Clinton, whose government did well in spite of what Reagan started (and what Bush finished). The effects of these policies take 20-25 years to fully realize. The kids that are getting a good education when they are 10 are doing well or not 25 years later. The new deal that was pushed through in the 30's brought huge growth in the middle class in the 50's and onward, until the Reagan/Bush policies eventually took their toll by gutting the middle class.
The Republicans fought like hell against the new deal policies that created that middle class - social security, medicare, workers' benefits, college aid. Fortunately, FDR was able to push those social contract policies through and the long-term result was the creation of a middle class our country had never seen before - a large class of people that owned homes, had money to send their kids to college, had comfortable retirements. But now, the Republicans have had the keys to the government in the form of holding the White House for 20 out of the past 28 years, and it's their appointees that have dominated the federal courts, the Treasury Department, the Justice Department, the FCC, the FDA etc. since 1980.
What we are seeing now -- the bankruptcy of the entire working class and much of the middle class (most middle income people are now in the red on the balance sheet unless they have had substantial inheritance) -- has been a 20-25 year process, in the same way the new deal didn't create a large middle class overnight. Reagan famously claimed that government was the problem.
He started in motion two things - 1) tax policies (massive reduction in the top marginal rates) which pushed us toward a huge redistribution in wealth toward the top 5 percent, and 2) massive deregulation, which included gutting antitrust enforcement, which over time led to industry consolidation and the type of monopoly/oligarchy capitalism we enjoyed 100 years ago, when the country had a small aristocracy of wealthy people that owned everything and a huge class of peasants that owned nothing. Again, if you disagree with my basic theory, give me examples from the rest of the world. Let's hear about the prosperous, "government stay out of the way" countries and contrast them with the social democracies of Europe, of Canada, of Australia and New Zealand, of Israel. Be specific.
What caused this was a massive concentration of wealth over 25 years starting with Reagan. The top 1% have 90% of all of the wealth in the United States. True fact. That didn't happen overnight. It started 30 years ago. The "middle class" simply doesn't have enough money to live a middle class lifestyle anymore and that's behind the collapse of the real estate market. It's a much bigger issue than just some subprime loans in recent years.
During the Republican Eisenhower administration of the 50's, when the U.S. saw unprecedented growth, the top marginal tax rate was 91%. That applied to wage income in excess of about $3.5 million dollars per year in todays dollars. It only applied to huge amounts of income - people like Brad Pitt and Lebron James, and Warren Buffett and the like. We needed the money to send World War II vets to college and build our transportation system and it worked.
Those tax rates on the rich were slashed over time, dramatically by Reagan, to where it is now about 38%. During the same time, we cut capital gains taxes (again a tax cut for the rich), and estate taxes (same), and capped the income subject to social security tax (also a tax cut for the wealthy), and we saw a growth in offshore tax loopholes (for the wealthy). All of that has gutted our treasury, and destroyed the middle class.
We are going to have to go back to the policies of the 40's and 50's if we want to rebuild the middle class, who are bankrupt and increasingly unable to afford to educate their children.
Americans love the myth of Reagan. He was an actor who created a character that Americans adore. But his policies gutted the middle class over time. Americans need to get their heads out of the clouds, stop living in fantasy, and face the reality that because of these policies we are now a country with a tiny aristocracy that owns everything and a huge peasant class that owns nothing. Americans' pride was what allowed this to happen. It is time we wake up!
http://www.ireport.com/docs/DOC-110451
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