Reagan Destroyed America
(and How Obama Can Fix It)
(Part I)
(and How Obama Can Fix It)
(Part I)
Birth of an Economic Crisis
Ronald Reagan, 40th President of the United States of America from 1981 to 1989, may not have directly destroyed America but he set this nation on a direct course for the economic crisis today. Reaganomics, also referred to as "trickle down economics", is the legacy that Reagan left the United States. It's also the policy Republicans picked up which helped to erode economic regulations causing the problems we are having today.
Reaganomics had four "pillars": reduce government spending, reduce taxes, reduce economic regulation (deregulation), and reduce inflation (keep prices down). And, where have we heard that before? The general concept to Reaganomics is to put more money in the economy to spur economic growth. If we have more money, we spend more, support businesses, and in return those businesses create more jobs.
However, the question at the time was how to execute these plans effectively. And this is where Reaganomics becomes "trickle down" economics. Besides Reagan destroying local communities by cutting social programs to curb spending, the tax cuts went to the wealthiest of Americans and to large corporations. If wealthy Americans could get to keep more of their wealth, it would "trickle down" to the middle class and the poor. Wealthy Americans would have more money to start businesses, corporations would grow current business, and everyone would create more jobs.
Fatal Flaw: Underestimating Greed
There's a reason rich people stay rich and get richer: they're cheap! The prevailing thought of the time is that wealthy Americans would pay fair wages for fair work. If this was the truth, there would be no need to set a minimum wage. In other words, the people we relied on to pair us fair wages were not and are not going to do that. The wealthiest of Americans are going to find a way to keep their money in their pockets or have it tied up in ventures that will somehow get them more.
In essence, they are a black hole keeping US currency from flowing through the US economy. This is why the tax refunds didn't work. The bulk of the money went to wealthy Americans who sat on it while a small chunk of it went to the people who basically gave it to large corporations to pay off bills.
Deregulation
The idea behind deregulation is to free up business to expand. The problem is the belief that regulations somehow hinder business in a negative way.
There are many reasons regulations were put into place by the US government. John Maynard Keynes is the economist behind Keynesian economics which promoted government intervention into the economy over the current free market economic policies. The reasons for regulation are obvious but easily forgotten. Allow me to jog your memory: sweat shops, Triangle Shirtwaist Factory, rat feces, monopolies, tainted beef, Unsafe at Any Speed. The purpose for regulation was broad but necessary for the protection of the people in all aspects of life.
As far as the current economic crisis is concerned, regulation was important to keep these lenders from taking on too much risky debt. It would have kept them from doling out loans unless people were specifically qualified to get these loans. The problem with the loan crisis is that lenders and agents went wild throwing out loans, racking up major incomes because they get a fee for every loan they set up. The real problem in deregulation is putting trust in greedy, get-rich-quick types.
On another note, massive job loss may be the true reason for the economic collapse. With so many people losing their jobs, how are families supposed to pay off their mortgages? They have no income. If we think about it, subprime loans weren't really a bad thing until the massive job loss hit the economy. If people get their jobs back with new jobs being created, I believe this nation will be able to get back on course.
Finally, have you noticed "the international food wars" in the news over the past few years? The US is not only rejecting food grown in other nations but even US food is being rejected for being substandard. How about the big tomato recall which turned in the pepper recall because no one can figure out where in the system our vegetables picked up bacteria? Mad cow disease.Various medications are being recalled because the death rate has gone up. What isn't getting recalled these days?
Reaganomics is Fundamentally Wrong
Republicans basically seek to decrease the influence of government over the lives of the people. Reaganomics was a "great" all-inclusive policy for what Republicans want to achieve - smaller government in terms of its responsibility to the people. However, they sign a deal with the devil by putting the socioeconomic responsibilities of the people in the hands of the wealthy. It's obvious in practice that the wealthy has no interest in society, socially or economically. They are only interested in their own personal society, socially and economically.
History has taught us this lesson already. Here is another lesson that we must learn again. Just as no regulation brought us the Great Depression of the 20th Century, so has a lack of regulation brought us the new Great Depression of the 21st century. When are we going to realize that the economic policies of the Republicans simply will not work? How much more proof is necessary?
Go to PART II.
