(originally written in 2009 or so)
The 1970’s were economically tough in America, very tough. But the downturn afflicted all classes, to no one’s benefit. There was no deliberate siphoning of wealth from the middle class to the wealthy. That is the difference between Nixon and Reagan…and something Steve Forbes, of course, is loathe to admit. With the election of 1980 there begins a dramatic rise in the income of the very wealthy…but more importantly, the middle class began to divide…and the upper middle class began also to benefit tremendously from New Right economics while the rest of the middle class began to drop to working class wage levels. The top twenty percent, before the latest recession, had 85% of all the wealth in the country. And 90% of all the liquid money. There is far too much focus on the top one of two percent….you cannot have a functioning economy with a handful of rich and everyone else broke. But you can have an economy with one fifth rich and the rest struggling. Which is what we have now. And which we did not have before Reagan. Why? Because it was an impossibility before. There was literally no way for one fifth of the population to acquire four fifths of the wealth. That had to be legislated into effect, which is what happened in the first half of the first Reagan Administration. And you can see the effect in the charts…whereas rich, middle class and poor alike had all seen their income suffer in the seventies, from 1982 onward there is a dramatic change. The wealthy become increasingly wealthy, and the rest of us have very little income growth at all. And in fact when you account for inflation and the fact that we are paying for so much of our own benefits today, we are often making less than we were before 1980. I’m not denying that there would have been wage deterioration anyway…but I am saying that it would not have been to the degree it is now. The income structure that exists now is the result of Reaganomics. Without Reaganomics, the upper 20% of the United States would not be as separated from the rest of us as they are now.
What we have now was the creation of the Reagan Revolution, though the degree was something the Reagan adminstration never imagined. They thought all our wages would rise along with the wealthy (the essence of trickle down economics)…but at the same time they allowed upper management to begin shipping production–i.e., our jobs–overseas (mainly through tax benefits–which are still in effect). Thus began the great divide between the classes, something that seems by now impossible to stop. It will stop, I think. The Reagan Generation, those children of the FDR generation, who rejected everything their parents believed about income equality and egalitarianism as an American virtue, is dying out now. There are less and less of them. And the young voters today, the vast majority of them raised in cash strapped environments, are voting to the left pretty regularly. So eventually a big shakeout will occur, a counter to the Reagan Revolution, and much of what created such disparity will be legislated back out again. We’ll never be as rich as we were in the 1960’s, because the world has recovered from the two successive world wars and all the economies trapped in communist regimes have now rejoined the rest of the world. But it will be a lot better than it has been now. I think the Reagan Republicans somehow had the idea that money was unlimited, and that if the rich could make more money then everybody else could make more money too (again, that is trickle down economics). There was no limit to how much money you can make. Kind of like the way Republicans thought about the economy in the 1920’s. But there is a limit. Wealth is not infinite. It’s even less infinite when you begin to allow the upper class–that top 20%–to make a lot of their wealth from business in foreign countries and not allowing the rest of us to do the same. We can’t tap into that income, nor can we get any of it back via higher taxes on the rich. We’re just cut off, completely. So when it began to dawn on the Right that there model did not allow for rising profits for the whole nation, they just flat out didn’t give a damn. Which is pretty much their position now. The rich are rich because they deserve to be rich, and we are not because we are not rich. That wasn’t part of the Reagan creed. That evolved since then, crystallizing in the George W. Bush years. It is the greed unleashed by Reaganomics being hardened into privilege. The top twenty percent are the aristocracy, and we are the dirty masses. And that, more than any other factor, is why everything is so messed up now. Until that divide is smashed and the wealth disparity ended through some sort of redistribution (e.g. tax increases on the wealthy, limits on upper management pay, the replacement of benefits once provided by employers), the rich will only get richer and the rest of us poorer. What a dismal future that will be.