Ronald Reagan Was the Worst President: Why Tax Cuts For the Wealthy Destroy Economies

Ronald Reagan, the favorite President of conservatives everywhere, is representative of the economic policies that have ruined America. I must admit that the title is an exaggeration. The worst President, by far, was Andrew Jackson, Donald Trump's favorite President, who committed unspeakable atrocities against Native Americans, as well as having terrible economic policies. In reality, Ronald Reagan is merely representative of what a bad President is. The Reaganomics-style conservative economic policies that have devastated the American economy really started in the mid-1970s under Richard Nixon. Reagan only serves as a stand-in to represent every conservative President and advocate of trickle-down economics. Today, conservatives are merely pushing a more radical and politically incorrect version of Reaganomics. I'm only going to mention a few points to establish that Reagan was morally despicable, then I will focus more on the science of economics and how conservatism leads to stagnating wages, high unemployment, and economic instability.

Like Donald Trump, Ronald Reagan was an actor and a celebrity. As a celebrity, he contributed heavily to McCarthyism, helping to get actors, writers, musicians, and directors blacklisted in Hollywood. Anyone who was not a conservative was a "communist" who deserved to be deprived of an income and decent living. He also provided the FBI with names of other celebrities whom he suspected of having communist and socialist sympathies. His McCarthyism ruined the lives of hundreds of innocent people whose only crime was holding different political beliefs. He also testified before the House Un-American Activities Committee. The people he reported were blacklisted, no longer able to find work, and put under government surveillance. During the Berkeley protests for People's Park in 1969, as governor of California, Reagan gave the authorization for the police and national guard to use deadly force against unarmed, non-violent protesters. In his extremism, he claimed that the creation of Medicare was the end of liberty in America. His administration purged names from the Social Security disability rolls in order to save money by cutting benefits going to disabled people, while subsidizing the wealthy at the same time. Throughout his life, Ronald Reagan put ideology above ethics. I am doing this badmouthing of Reagan simply for the sake of shattering the myth of Reagan as a great person. Reagan was certainly no Dr. Evil. He probably believed all of his own bullshit, but the road to hell is paved with good intentions. Reagan probably did believe that his actions were all justified, but he was mistaken. However, this is no excuse because ignorance and immorality are entangled, so that it is impossible to be entirely ethical whilst being ignorant. The Puritans believed that "witches" used magic to harm children. That belief was false. If their belief had been true, they would have been totally justified in executing witches. However, they were wrong—both in their convictions and in their actions—, insofar as witches who harm children with magic simply do not exist. There is no is/ought dichotomy. Instead, there is a fact-value entanglement. You cannot take the right course of action without first discerning the facts of the situation!

But the real problem with Ronald Reagan is his economic policies, which have devastated the American economy and, of which, we are still feeling the negative consequences today. It is true that Reagan increased taxes during his time in office, but it is also true that he cut taxes on the wealthy. The Tax Reform Act of 1986 dropped the top income tax rate to 28% (compare that to 70% in 1980). Such tax policies, although generally favored by conservatives, are economically unsound and unethical, and result in stagnating wages in spite of increased productivity. The end result is that while workers produce more, corporations and wealthy individuals end up taking more of a share of that wealth rather than raising wages for the working populace.

Allow me to reintroduce an economic observation from Karl Marx. Marx observed that the capitalists/bourgeoisie (owners of capital and the means of production) under capitalism have an incentive to maximize their own profits. They are motivated by their own self-interest. In a totally unregulated market, employers will attempt to maximize profits by cutting costs. This can be done by cutting wages, refusing to spend money on safety measures, etc. Consequently, in an unregulated market system, wages have a tendency to fall to the subsistence level and working conditions tend to get worse over time. Thus, Marx predicted the immiseration of the proletariat, a gradual worsening of the condition of the working class, so that wages would fall until they become starvation wages and working conditions would become increasingly worse and less safe over time. The condition of the proletariat (or working class) would gradually get worse as capitalism progressed. This immiseration is what Marx predicted would lead to the revolution, when the working class spontaneously throws off its shackles and takes over. Marx's analysis is totally correct if markets remain unregulated. However, this is not how things have historically played out. Revisionist Marxists and social democrats, like Eduard Bernstein, pointed out that in reality government policies tend to mitigate the negative effects of unregulated capitalism and thereby prevent such a total immiseration from occurring. Throughout Europe and America, governments imposed minimum wage laws, workplace safety requirements, and social welfare programs (e.g. Social Security, Medicare), and progressive taxation (i.e. taxing the income of the wealthy at a higher rate than that of the poor) as ways of staving off the immiseration of the proletariat. Because of such policies, capitalism ended up raising the entire populace rather than just the upper classes. Minimum wage meant that wages were not allowed to drop below a certain point. OSHA meant that employers could not cut corners on maintenance and cleaning in order to cut costs and maximize profits: if working conditions become hazardous due to mold or faulty equipment, employers are required by law to rectify the situation and ensure that their employees have safe working conditions.

The recession ended in June of 2009, the economy started to grow again, but the average person still feels like they're stuck in the recession. While GDP has increased since 2009, unemployment remains high and wages have been declining. While the economy is expanding and wealth is increasing, none of it is trickling down to the people. Instead, the newly created wealth is all going to the top 1%.

So, why do we simultaneously have growth in GDP, an increase in real wealth overall, alongside declining wages for the vast majority of the populace? Well, the answer lies in Marx's analysis of the immiseration of the proletariat and the role that government policy has in mitigating the immiseration effect. The creation of a minimum wage and safety standards kept the immiseration from increasing, but it was entitlement programs like Social Security, Medicare, Medicaid, and VA programs that helped raise the condition of the working class. Furthermore, high income tax rates on the top earners led to rising wages overall. When tax rates are high for the people at the top, the people at the top tend to keep less of the profits for themselves in order to avoid raising their own tax rates. Instead, they will raise the wages of their employees. When profits exceed the amount that the rentier/capitalist class can siphon off without government confiscating it via tax policy, the owners of industry will use that excess to raise wages for their employees rather than increasing their own income and thereby losing the money to higher taxes. The higher the tax rates on the top earners, the higher the average wages in the economy are. When top earners have lower tax rates, all new wealth goes to CEOs and other people at the top. When conservatives cut taxes on the wealthy, it causes wages to stagnate. By imposing a high income tax rate upon the wealthy, the government circumvents the immiseration of the proletariat and ensures that wages rise as productivity and wealth increase.

In the 1920s and the 1950s, the economy was booming. The whole populace in America seemed to be rising from the ashes. In 1916, the top tax rate was just 15%, but that was raised to 77% in 1918. The result was the booming 20s. Wages rose throughout the economy. Since workers are also consumers, the higher wages for the workers meant more spending money for consumers. This stimulated the economy and sparked unprecedented growth. In the latter half of the 1920s, however, the government cut the tax rate for the highest earners down to 25%, which led to the disaster of the 1930s and the Great Depression. The Great Depression dragged on as long as taxes on the wealthy remained low and wages, consequently, remained low. World War II pulled the United States out of the Great Depression, not because war is inherently good for the economy as Keynesians suggest, but because it induced the government to increase the top tax rates. When the United States began preparing for war in the late 1930s and entered the war in 1941, it had to raise the tax rate on the wealthy in order to fund the war effort. They couldn't just tax the working class since the working class didn't really have any money, so they raised the top tax rate. By 1944, they had raised the top tax rate to 94%. It is true that government spending for the war created jobs and helped to stimulate the economy, but it was the increase in tax rates that led to rising wages for the working class and allowed the economy in general to recover so that the 1950s could be the Booming 1950s. The war and government spending only helped the situation insofar as they affected a redistribution of wealth downwards, thereby counteracting the immiseration effect.

Starting in the mid-1970s, the top tax rates were reduced under Richard Nixon. These tax cuts have never been undone. American wages have not risen since these tax cuts went into effect. The Trump tax cuts are going to exacerbate this problem, making another Great Depression nearly unavoidable, and will ensure that American wages won't rise in the foreseeable future.

Henry Ford was an advocate of paying workers enough to buy the product. At the end of the day, the workers are also consumers. If all of the businessmen in an economy begin to pay subsistence level wages, so that the working class majority cannot afford to purchase luxury items, then the economy will enter into a depression. If the workers can't afford to buy things, the economy will go bad. That's essentially what causes recessions. There are many different factors that contribute to the creation of situations wherein the consumers cannot afford to purchase the products they produce. I am aware of the other contributing factors to recessions/depressions, but the role of monetary/fiscal policy in allowing wealth to trickle upwards is by far more significant than any other. Economic recessions have several causes and contributing factors, so I do not mean this to be seen as contradicting classical Ricardian, Austrian, and Monetarist theories of the business cycle. Most business cycle theories are correct but incomplete. Contraction of the money supply, malinvestment sparked by artificially low interest rates, and foreclosures are contributing factors, all of which lead to more money concentrated in the hands of a few people at the top and less income for the average working class people that make up the majority of the populace. The recession occurs because there is a lack of spending or a substantial reduction in spending as a result of the general populace becoming poorer in real terms. When the average consumer/worker becomes poorer, aggregate demand falls, creating a general glut as the consumers fail to buy up all the products they have produced as workers. As a result of the decrease in aggregate demand, industries will start cutting back on production and laying off workers. As a result of conservative economic policies, we end up with recessions, stagnant wages, and high unemployment.

America has been ruined by conservative economic policies. America will not become a decent society until the day that no conservative ever holds any amount of political power ever again.