Richardt Stormsgaard: The damage Reagan wrought |

Richardt Stormsgaard: The damage Reagan wrought

President Ronald Reagan changed our country dramatically as he re-established the discredited shareholder capitalism that led to the Great Depression. The myth went that as the wealthiest increase their wealth, it invariably trickles down to even the poorest who will then rise.

Huge tax cuts favored the rich, regulations to prevent corporate abuse were weakened or scrapped altogether, and policies advancing “the common good” were undercut whenever possible. Conservative voters supported these policies decade after decade despite their own deteriorating economic conditions as Democrats largely were sidelined except for two short years with political control of Congress following the elections of Clinton in 1992 and Obama in 2008.

The four decades of Reaganomics have come at a huge cost for the vast majority of Americans. The Rand Institute has concluded that the median lower 90% of Americans earn less than half of what they would have been making had the ratio of inequality from 1975 continued until 2018:

Even before the pandemic, 57% of Americans have less than $500 available cash for an emergency, 40% of American workers live paycheck to paycheck, 10% of Americans occasionally lack food, 17% of Americans cannot afford health care, and 66% of retirees depend on Social Security for their primary source of income.

Much of our infrastructure is half a century old with crumbling roads, bridges, reservoirs, and public buildings including schools, rated D+ by American civil engineers.

Before 1980, corporations reinvested half their profits into infrastructure, higher wages, and more jobs. But today it is under 5% as frequent stock buy-backs primarily enrich top executives and speculators, threatening the long-term viability of corporations and our economy.

Some have blamed our economic demise on globalization and international trade deals leading to fewer manufacturing jobs and more service jobs. Others have pointed to increasing divorce rates with more single-parent households and resulting in lower incomes.

However, the many countries that now have surpassed the U.S. in various global comparisons have faced the same issues, and with much fewer natural resources and national wealth at their disposal. Countries from New Zealand to Canada, to Finland and France, have virtually no poverty, much better social safety nets and pension systems, universal and affordable health care, much less crime and higher social mobility rates.

These countries kept prospering because they maintained the stakeholder capitalism that led to our “virtuous cycle of growth” during the 1950s, 1960s, and early 1970s as American living standards rose sharply with around a million poor entering the middle class each year.

According to a 2018 report by World Economic Forum in 1980, the wealthiest 1% earned about 10% of all income, and the poorest 50% earned approximately 20% of all income in both the U.S. and Western Europe with roughly similar taxation rates.

As a result of greatly increasing global wealth by 2018, the top 1% of Europeans earned 12% of all income while the share of the poorest 50% had risen to 22%, and low-income wages increasing three to four times since 1980.

In the U.S. the story was dramatically different. The wealthiest 1% now had doubled their total share of income to 20% while the bottom 50% had seen their part tumble to 10%, half of what it had been in 1980. As a result, lower-income earners in this country in 2018 made less than they did in 1980 when you factor in inflation.

While Republican politicians have fought minimum wage increases for decades, many large corporations increasingly raise wages, and many of the wealthiest Americans have committed to spending large parts of their wealth to repair the damage from Reaganomics.

At the 2020 American Business Roundtable, the CEOs of 181 major U.S. corporations recommitted to the stakeholder capitalism that remained prevalent throughout the Western world, requiring corporations to pay heed to the interests of the larger communities, including the environment as well as to their investors.

Ultimately, however, American voters, through their elected representatives, determine the quality of our society, and the genius of Reaganomics, even after four decades of drastically lowering opportunities for most of its supporters, has been their strong support for tax cuts and deregulation.

The latest example was the 2017 Trump tax scam disbursing $2 trillion in tax cuts overwhelmingly to the wealthiest Americans to be financed by future cuts to Social Security, Medicare and social programs.

Richardt Stormsgaard lives in Nevada City.

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