Monday, January 26, 2015

The Flip-side of Economic Inequality

Robert Reich provides a detailed account of how wealth disparities have widened since Ronald Reagan took office. However, he neglects to mention a single fact about the economic malaise that plagued his predecessor, Jimmy Carter. Economic trends do not emerge over one or two presidential terms and a single Presidential Administration does not have the power to fundamentally widen or bridge the income gaps. He also credits the Eisenhonwer Administration with diminishing the wealth gaps without addressing any connection between their policies and the Structural Crisis that emerged during the Carter Administration.
The Great Recession that we are in has been caused by a concatenation of events spanning for multiple decades. FDR's NIRA may have provided jobs for certain government cronies, but they have actually prolonged the Great Depression because the costs of obeying regulations disproportionately affected small businesses. Large companies that are well-connected with the government can more easily absorb these costs and even negotiate the enactment of policies that lessen the severity of the regulatory burden. However, what merely impedes the growth of big-time government cronies can bankrupt smaller enterprises. That is one reason why NIRA is widely recognized as a failure. With varying degrees of applicability, the same can be said about many other programs of the New Deal because they were founded on similar principles: forcing companies to act more responsibly by imposing regulations upon them that the elite and well-connected enterprises can manipulate to their own advantage.
What Reich has not mentioned about the Eisenhower Administration is that it continued governing in the same fashion. How would he like to tell his liberal friends that the top bracket was taxed at 91%? Would Professor Reich's students still support him politically if he revealed that fact about the Presidential Administration he idolizes? Would this eminent "public intellectual" dare to even begin speculating about the causes of the Structural Crisis of the 1970s? I am sincerely curious how he would go about blaming the Republicans for that debacle because none of the Presidents between the New Deal and Carter endorsed any economic doctrines that even superficially resemble the economic principles of the contemporary Republican Party.
To his credit, Reich was correct that the wealth disparities have widened since Reagan. Yet, what he overlooked was that this outcome was a trade-off for more severe economic plights that plagued the nation. Under Carter, inflation and unemployment were both in the double-digits and keeping the highest tax brackets at over 70% did not help matters. The American citizenry spoke loudly and clearly in the 1980 Presidential Elections where Reagan claimed 44 out of 50 states. I can imagine that Reich would remonstrate that Reagan deceived the general public about his policies regarding wealth inequalities, but that leaves one to wonder why he was re-elected carrying 49 out of 50 states.
Reich is not your typical naive liberal that you'd find among the Occupy Wall-Street movements. He is well aware that despite the income inequalities that the Reagan administration commenced and perpetuated, it solved a broad range of economic problems that have been unheard of for decades. There is nothing that could be said about his decision to suppress these facts other than that he was intellectually dishonest.

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