Power in the US V: Reaganomics and Class Division

Ronald Wilson Reagan was inaugurated as 40th President on January 20, 1981, launching the “Reagan Revolution” under the banner of “conservatism.” But Reagan’s conservatism was not the community oriented traditional philosophy with that name, but rather the new libertarian brand promulgated by Barry Goldwater and William Buckley. Edmund Burke was out and Ayn Rand was in.
This was indeed a period during which America was splintered anew but not by the Newtonian Politics of the previous years. This time the fissures were engineered from the top down. This “revolution” would usher in a transformation in the American Power structure as the US would move from Industrial Capitalism to Financial Capitalism: Big Capital and Big Money would take center stage; much of Big Industry would be deconstructed and production outsourced overseas; Big Labor would be marginalized; Big Government would be ridiculed and “starved” but Big Military and the military-industrial complex would continue to grow; the War on Drugs would become a war on Black America; growing incarceration would make the private prison industry an investment opportunity; the Wealth Gap would become staggering and the billionaire would replace the millionaire as the symbol of success.
This transformation was guided by pro-business, right-wing think tanks funded by plutocrat éminences grises such as the Koch brothers, Joseph Coors, Richard Mellon Scaife, … . Foremost among these extra-academic thought influencers was the Heritage Foundation which also advocated for the Christian right – it had Moral Majority activist Paul Weyrich among its founders in 1973.
The Reagan administration took office with a policy guidebook in hand, the Heritage Foundation’s study Mandate for Leadership, 1981 edition. The study called for an increase in military spending but for cuts in taxes, cuts in social spending and cuts in government regulations: Reagan gave a copy to each of his cabinet members and the Reagan administration delivered – 60% of the some 2000 proposals in the document were acted on in the first year alone.
Indeed, early in his presidency, Reagan oversaw a drastic tax-cut which ultimately created the billionaire class and which turned much of the storied American working class into a resentful underclass, easy prey for demagogues as we have seen with the Trump presidency. With Reagan’s 1981 tax bill, the top income tax rate was slashed from 74% down to 50% and the capital gains tax was cut to 20%, the lowest it had been since Herbert Hoover’s time.
To make up for some of the resulting revenue shortfall, the income tax was applied for the first time to social security benefits in 1983 legislation – reverse Robin Hood in action; moreover, it was celebrated Democrat, Speaker Tip O’Neill, who saw this legislation through the House of Representatives, a betrayal of trust with the New Deal and a significant step in the alienation of the working class from the Democratic Party. Adding insult to injury, O’Neill helped Reagan overcome resistance in Congress to push through the 1986 tax bill which cut that top income tax rate further to 28%.
These various tax machinations were opening salvos in a new round of old-fashioned “class warfare.” Contrast all this self-interested reallocation of the nation’s riches to favor wealthy individuals with the way Elvis Presley’s manager Colonel Parker used to brag that it was his “patriotic duty” to keep his client in the top 90% income tax bracket.
The War on Big Government was launched. Reagan “famously” framed it this way: “The nine most terrifying words in the English language are: I’m from the Government and I’m here to help.” Cutting taxes also served another conservative goal: reduce the effectiveness of government by “starving the beast.” Conservative lawmakers have stayed true to this code; for example, they continue to underfund the IRS to prevent it from examining tax returns properly even though such enforcement would pay for itself many times over – but then maybe their motives are more than purely ideological.
As president, Reagan was quick to attack the source of worker strength – the labor unions. In 1981, he fired 11,359 striking air traffic controllers and dangerously had non-union replacements hired (scabs, in labor parlance). This impacted air travel for months but Reagan won the fight. Looking back, organized labor never recovered; union busting became a sport. Savvy Japanese and European companies would locate their new plants in areas of the country known to be hostile to unions – basically in the old Confederacy where unions were perceived to be too egalitarian and too fair to women and minorities. (Boeing has tried the same thing more recently by moving production to South Carolina to thwart unions, but to their great chagrin they forgot that much of the expertise in aircraft construction is housed in the work force.) The fact that much of the new economic growth was in industries like high tech didn’t help – unions never had a chance to take root there. Moreover, the shift from Industrial Capitalism to Financial Capitalism made it logical to shift production abroad to low wage countries, further weakening the great industrial unions. Big Labor was soon history: the hope of the labor movement became the teachers’ unions (UFT, AFT) and the service employees’ unions (SEIU), humble guilds compared to the once mighty giants but ones still standing simply because teaching and service jobs cannot be outsourced to foreign countries – at least not yet.
The administration’s economic policies, playfully known as “Reaganomics,” were a version of “trickle-down economics”: that by making the wealthy and the corporations richer, money would flow down and automatically raise wages – “a high tide lifts all boats” was the catch phrase. Nothing trickled down though. Workers earned less in 1989 than in 1979. A nefarious pattern was begun where increases in worker productivity no longer translated into increases in workers’ salaries. With the Reagan presidency and its trickle-down economics, the Wealth Gap began its dizzying rise. For a recent update on all this, click HERE .
Homelessness accelerated in this period; school lunch programs were cut; food stamps were cut, … . And the prison population exploded: in 1980, the total prison population was 329,000; eight years later, the prison population had virtually doubled, to 627,000. Contributing to all this was the Sentencing Reform Act of 1984, which had the effect of lengthening federal prison sentences. And things have only gotten worse, far worse since. Indeed, the US has risen to first in the world in the rate of incarceration of its citizens; and for its African-American population, the US rate even bypasses that of Apartheid South Africa. For a recent NY Times piece, click HERE .
All this led to dramatic growth in the for-profit incarceration business, a malevolent industry which goes back to the antebellum South. This increase in incarceration created a new economic opportunity; by way of example, there is the very profitable corporation CoreCivic – founded in 1983 and traded on the NYSE as CXW. To the naïve observer, private prisons would seem unconstitutional. The Israeli Supreme Court so ruled on human rights grounds when the legitimacy of these prisons was challenged in that country; however, the US Supreme Court has not had to rule on the matter. (Some argue, however, that private prisons actually improve conditions for state prisoners!)
On the other hand, following the Mandate for Leadership this presidency saw the largest peacetime defense buildup in history – high-tech weapons systems, military infrastructure, military pay increases, the “600 ship navy” (which only fell short by 6 in the end), etc. Ever ready to spend on things military, Reagan was an enthusiastic backer of a project straight out of Science Fiction, the Strategic Defense Initiative, SDI or “Stars Wars.” (Apparently his attachment to this idea originated with a 1940 spy movie he co-starred in, Murder in the Air, where death-ray “inertia projectors” were used as weapons against airplanes. Reportedly the George Lucas movies also played a role as did Heritage Foundation proposals.) For its part, SDI itself soaked up lots of dollars but never delivered on its promises. Moreover, under Reagan the Department of Defense was enlisted as a covert actor in foreign policy. On his watch, there were illegal arms sales to Iran and illegal movements of money to the right-wing Contra rebels in Central America – rebels against duly elected governments, no less. This led to several members of the administration being indicted – have no fear, Secretary of Defense Caspar Weingartner and the others were pardoned by George H.W. Bush.
So in addition to the Wealth Gap, two hallmarks of these years were the increase in incarceration plus the growth in military expenditures, all trends which continued into the 21st Century. In his scholarly opus The Collapse of Complex Societies (1988), Joseph Tainter gives a perceptive analysis of the situations that can accompany a civilization’s collapse; in particular, he singles out increased coercive control of the population and increased military spending. Just sayin’.
But it only gets worse. More to come.