Often times, a political analyst/scientist
will write a book on the politics and economics of the time. This writer may also create a work which
emanates views contrary to the opinion of the governing body. Rarely, however, does one find an analyst who
will clearly undermine his own political party by, in effect,
saying, "I told you
so." Kevin Phillips, editor-publisher of The American Political
Report, columnist for the Los Angeles Times, and chief political analyst for the 1968
Republican presidential campaign,
describes in his book, The
Politics of Rich and Poor: Wealth and
the American Electorate in the Regan Aftermath,
the consequences of the decisions made by the United States government
while under the presidency of Republican Ronald Regan. Phillips'
theme of the widening gap between
the upper twenty percent of the population, in respect to annual income in actual
dollars, with the lower twenty percent
of the
population coincides with the belief of the typical American
avarice, during the eighties, leading the country on a rollercoaster ride
of economic instability and shaky ground.
These ideas remain constant and prevalant throughout the seven
chapters. His views, though somewhat repetitive in the text, strike the reader with astonishment, especially
when considering Phillips' Republican party affiliation.
With his thesis in mind, Phillips
discusses three major factors that escalate and at the same time submerge the
state of the economy in America. These
factors include: the sudden shift in
tax rates, the diminishing "global
wealth" of America, and the
inability of the government under Regan to satisfy a "happy medium"
for economic growth. All of these
factors support Phillips' theme and prove his argument of an up and down cycle
of economic stability.
From 1921 to 1925 the top one percent of the
population's tax rate was gradually decreased from the marginally high rate of
seventy-three percent all the way to
just twenty-five percent. Over four
years this elite group of Americans received a forty-eight percent reduction in
taxes. This decrease opened the door for
the super-rich Americans to capitalize and increase their current wealth.
As
the taxes decreased for this group of the population, others also
benefited. A surge in real estate
investments occured, the stock market
values rose dramatically, and new technology such as radios and automobiles
were surfacing every day. This bull
economy lasted only a few short years.
By 1929, the situation was reversed entirely. The economy crashed with unequaled
consequences. The rich citizens who were
living "the good life" four years ago were now stuck with paying
seventy-three percent of the entire population's taxes. The stock market was on the down side, to
say the least, the real estate and
technological markets were also paralell to the stocks. The solution from the new democrats was to
bring the economy back by forcing the affluent to carry the burden. The highest tax rate eventually reached
ninety-one percent. After about
twenty-five years, the economy was finally stable enough to lower this absurd
rate. In the mid seventies, the rates
were gradually lowered to a mediocre seventy percent. Starting in 1980 the republican machine
decided to again lower the rates, thereby
lessening the gap between rich and poor. What actually happened was the high income
brackets had more of a decrease than anyone.
The rates at one point reached a low fifty percent. This cut,
once again opened the door for the elite to become super-elite. The cycle had surfaced again. Just like in the early 1920s, the rich were gradually getting richer at the
expense of everyone. The technology
markets boomed once again, real estate
sales increased dramatically, and the stock market rose by leaps and
bounds. It seemed like just what the
economy needed. Regan's reelection
thrived on the fact that the entire country was caught up in a whirlwind of the
seemingly perfect economy. The cycle
continued just like economists predicted;
the perfect economy suddenly had a recession to deal with.
Another one of Phillips' reasons for the
downfall of the United States' economy after Ronald Regan is the diminishing
"global wealth" of the country.
The stock market crash of 1987 opened Regan's eyes to the fact that his
efforts to heal the economic woes of America were failing. The huge amounts of money borrowed to fund
the tax cuts of the early eighties were borrowed at high interst rates. The republican party decided to raise
the United States interest rates to a
high level in order to fight inflation on the borrowed money. This surge in interest rates increased the
value of the dollar significantly. This
increase almost crashed American manufacturing because the products made in the
states were not selling overseas due to a high dollar value. The interest rates were slowly forced down,
and the dollar lost value like never before.
By 1988, other countries were shopping in the states like it was a flea
market. Their currency could buy so
much more than ours in our own country.
Soon, the trade deficit was
increasing, the selling of American companies to overseas investors was a daily
occurrence, and foreigners were looking at our millions as "pocket
change." Japan began to buy our
businesses and real estate more than any other country. In 1985 the total net worth of America and
Japan was respectively 30.6 trillion US dollars and 19.6 trillion US
dollars. In as little as two years, the
Japanese had capitalized on the slouch in the value of the dollar and reversed
the ratio. By 1987, the United States
had 36.2 trillion dollars in assests compared to Japan's 43.7 trillion
dollars. Most of Japan's new capital was
formerly American owned companies and property. This trend in foreign ownership was a
leading factor in the decline of our economic system during the eighties.
Clearly, the Japanese were not the only
reason for the slip in American economic history. Phillips' other reason for the downfall was
the lack of Ronald Regan's party to control a "happy medium" for
everyone
No comments:
Post a Comment