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June 9, 2004, 9:28PM

Reality behind lofty rhetoric on Reagan legacy

By BOB BUZZANCO

WITH the passing of Ronald Reagan we will read tributes to his legacy as the "great communicator," his political skills, his patriotic fervor. What will probably go unsaid, however, is that Reagan's policies, particular his economic views dubbed "voodoo economics" by candidate George H.W. Bush during the 1980 election contributed to the greatest disparity between wealth and poverty since the Depression, caused huge reductions in real wages and income for most Americans, accumulated the greatest budget deficits in U.S. history, and, in "reverse Robin Hood" fashion, redistributed wealth from working people to the rich. A critical aspect of Reagan's legacy, which has become a persistent social problem for the past generation, was class war from the top down.

Reagan ran for president promising massive cuts in taxes and social services but attendant increases in military spending, hence the "voodoo" label. As president, he and his economic team were able to secure huge reductions in taxes, driving the top income tax rate down about 30 percent, from 38.5 percent to 28 percent, the lowest in the industrialized world. With this loss of revenue, and trillion-dollar Pentagon budgets, Reagan was forced to borrow to meet government financial obligations.

Government debts, much of them foreign held, rose into the hundreds of billions by the mid-1980s and hit $1 trillion in the early 1990s. Personal debt, a result in cuts in social services, declining wages and a ramped up consumer culture, erupted, climbing to more than $3 trillion, while nonfinancial corporate indebtedness rose to more than $2 billion. Reagan, who ran and governed as a fiscal conservative and small-government advocate, had in fact created the greatest deficit and biggest government obligations in U.S. history.

Such policies, hailed by Reagan's supporters as an economic revival in the 1980s, created great wealth for one segment of the population, the top 20-30 percent, who saw their tax burdens drop and their incomes rise. The level of tax paid by the top 1 percent decreased from 31 percent to 23 percent between 1981 and 1984, while their income share rose from 41 percent to 44 percent.

Incomes of the top 5 percent rose more than 27 percent, to about $120,000, and the highest 20 percent went up about 25 percent, to around $70,000. The next 20 percent of income earners saw a nominal rise in wealth during the 1980s, while the rest, 60 percent of Americans, saw no rise at all or, in the case of the lowest two-fifths, actually saw a decline in income and savings. In fact, income inequality rose each year of the Reagan administration, while taxes were correspondingly lowered and the national debt grew. Adding to the economic burden of working Americans, public services were deeply cut at federal, state and municipal levels, and, because of the tight-money policies pursued by the administration and federal reserve system, wages remained low, if not falling.

In fact, weekly per worker income dropped substantially during the Reagan years. Where the average American might take home a paycheck for $366 in 1972, she would earn $312 in 1987. Median family income, about $31,000 a year in 1973, plummeted in the early 1980s until recovering to 1973 levels in the late 1980s. After-tax median income, however, remained well below 1970s-era levels because of the redistribution of wealth caused by the tax cuts and debts regimen of the Reagan years.

The data on family income is likewise striking. Only the top 20 percent of Americans saw an increase in family income between 1977 and 1988, with the top 10th gaining an increase of about $17,000, the top 5 percent seeing an extra $31,000, and the top 1 percent with a whopping $134,000 increase. Middle-class and working Americans, however, saw declines in real income from about $600 to $1,600 in the Reagan era.

Real wages fell also. Where the median pay for working men in 1973 was a little over $10 an hour in 1973, it fell to $8.85 by 1987. The average worker without an advanced degree might have made about $24,000 a year in the early 1970s, but by the end of the Reagan years, that was down to around $18,000. Exacerbating such economic problems, millions of jobs were "downsized" or fled overseas, while unions, traditionally the source of better wages and working conditions, were further crushed.

So, as we listen to the testimonials to Reagan, as we reflect upon his visions, presidency and goals, we must, for the sake of historical integrity and political realism, acknowledge his economic policies. "Reaganomics" took wealth and income from working people and reallocated it to the wealthy via huge tax cuts, job losses and debts. He caused a reduction in wages for the majority of Americans. He spent trillions on the Pentagon but cut services to the average American. Today, as we survey a generation of job losses, of wage cuts, of opportunities lessened, we have to make that part of the Reagan legacy as much as his lofty rhetoric and patriotic imagery.


Buzzanco is associate professor of history at the University of Houston.





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