It has been said by any number of pundits over the past few years that Ronald Reagan could not win the presidential nomination of the current Republican party. But even though the man himself may be considered a dangerous liberal by members of the "Freedom Caucus" and other far-right GOP factions, they still speak of him in hushed tones of reverence. And they still pledge fealty to the cornerstone of Reaganism -- supply side economics.
Since the Reagan era, the US economy has been through the usual cycles of boom and bust. Stocks have risen and fallen again. Americans have seen the creation of jobs in new industries, and later seen those jobs lost to outsourcing. But there is one thing that has not followed the boom/bust cycle: income inequality.
The New York Times published an astonishing chart that shows just how badly the poor and middle class have fared since the age of Reagan in terms of income growth. That chart, the work of economists Thomas Piketty, Emmanuel Saez and Gabriel Zucman, reveals the devastating toll that Reaganomics has taken on American workers.
The chart can be a little confusing at first. The dots along each line represent each percentile of income. Gray is what income growth looked like for those percentiles in 1980 and red represents income growth in 2014. So, if you are poor, on the 5th percentile of income, you saw a decent rate of income growth before Reaganomics. But in 2014, after waiting for over 30 years for something to "trickle down" to them, people in that percentile actually saw negative income growth.
Meanwhile, the very rich were seeing their income increase at a much slower rate than the middle class before 1980. And now the ultra-rich -- the top one-one thousandth of a percent -- are raking it in hand over fist. This is what Republicans are dedicated to continuing, as they talk "tax reform" and prepare to overhaul the tax system again, to the benefit of Donald Trump and other members of the 0.001 percent.
It's not a coincidence that the disparity between rich and poor began during the Reagan years. It is a result of the economic policies that Reagan's administration advanced. We have heard about Reagan's record on raising taxes, but what often gets missed is this: the way Reagan cut, then raised taxes shifted a good deal of the tax burden to those who were less well off. He slashed the top income tax brackets, then, when it became obvious that more revenue was needed, it was generated by eliminating some deductions and loopholes, and also by adding or increasing some consumption taxes, most of which disproportionately affected the middle class.
For example, before Reagan, the interest you paid on your credit card balance, car loans, etc, was deductible on your federal income taxes. Reagan took away those deductions, which wasn't a big deal for the rich, who could pay cash for a new car and probably didn't have much if any balance on their credit cards. But the loss of those deductions meant many middle class taxpayers gave back most if not all of the tax cut they had received, and then some.
And more importantly, Reagan raised the most regressive tax that most Americans pay; the Social Security, or FICA tax. That tax is collected from the first dollar of earned income, but it is subject to a cap, meaning that those with incomes above the cap pay it at a lower percentage of their overall income than those who fall below the cap and pay FICA tax on every dollar they make. Add to that the fact that many of the ultra-rich make their living off "unearned" income, dividends and such, which are not subject to FICA tax at all.
Taxes are only one part of the problem. Another thing that enters into the equation is the disappearance of manufacturing jobs and the shift to a service oriented economy. And it's not just the change in the types of jobs that are available that is to blame, it's the drastic reduction in the number of workers represented by unions. Union jobs help raise pay for everyone. And again, it was during Reagan that the number of private sector union workers began a drastic decline.
Finally, there's one more thing that has to be considered when looking at our problem with income inequality -- the federal minimum wage. In the 20 years before Reagan's first day in office, the minimum wage was raised 10 times. In the almost 37 years since he became president, it has been raised seven times. And, given Republican hostility to it, there is no increase anywhere on the horizon.
Now Republicans and Donald Trump are gearing up for another round of "tax reform." And from everything we have heard about their plans, the people who have been struggling with little or no gains in income are about to get the shaft again.
Given evidence like that displayed on this chart of income growth, it seems it would be hard for a sane person to argue that Reagan's policies put America on the path to prosperity, or that another dose of those same policies is somehow going to bring the prosperity that has eluded us to this point. Those at the top have been quite prosperous, thanks to a system heavily weighted in their favor. But that prosperity has yet to "trickle down" to the rest of us, and continuing to wait for it to do so after more than 35 years is the very definition of insanity.