Assessing Reagan at 100-Yay or Nay?

[Ken]

One doesn’t need a standard definition of what the middle class is to determine where income has been going and not going. There is no conflict there whatsoever. It doesn’t matter which specific standard one uses to identify the middle class: middle quintiles, median family income or a specific numerical range. What matters is that the wealth produced by GDP expansion for several decades has gone to none of those categories, but in fact pooled in one place.

Beyond that, the middle and working classes have seen their well-being diminished in additional ways.

http://www.latimes.com/news/opinion/s...

The changes that have made Americans more vulnerable have occurred in the struts that hold up working families and that have held them up for generations. Jobs, benefits, housing, health coverage, college and retirement savings, even bought-and-paid-for insurance all played crucial roles in maintaining families' economic stability during the second half of the 20th century. But the protective value of each has been weakened over the last generation.

"People who try to claim their employer-sponsored benefits are worse off than they were two or three decades ago," said Judge William Acker Jr., who was appointed by President Reagan to the U.S. District Court for the Northern District of Alabama in Birmingham and who has written extensively about ERISA. "The law that was supposed to protect them has been turned on its head."

Homeowners insurance is a classic case in which people go out and try to buy their own private safety nets rather than turning to government or to their employers for security. But homeowners have not had very good luck with this do-it-yourself approach in recent years.

That's because over the last two decades -- with relatively little notice and almost no awareness on the part of the buying public -- the insurance industry has changed the nature of its policies in ways that leave homeowners on the hook for vastly more than they used to be on the hook for.

As recently as the early 1990s, the most widely sold type of policy, especially in the nation's most populous areas, was a "guaranteed replacement cost" policy. Under it, your insurer promised to replace your home if it burned or was destroyed by a hurricane, essentially no matter what the cost. It was up to the insurer to get the price right and keep the coverage current.

However, following a rash of disasters that included the Northridge earthquake in Los Angeles, insurers phased out guaranteed replacement cost policies in favor of "extended replacement cost" policies. Under these, the insurer provides you with up to a certain fixed dollar amount of coverage, plus typically 10% to 20%. It is up to you to decide what the amount should be. It is up to you to figure out what it would cost to rebuild your home. And it is up to you to keep your policy current.

Theoretically, you could do this job. But the industry's own estimates show that more than half of American homeowners simply have too much else going on in their lives to keep tabs on changing building codes, the fluctuating price of plywood or what carpenters and plumbers are making in their neighborhoods.

Similar changes -- with similar shifts of economic risk from business and government to families -- have occurred in retirement, where the switch from traditional pensions to 401(k)s has left individuals largely on their own to provide for old age.

Essentially, the numbers have flipped. The fraction of private-sector workers relying on traditional pensions has dropped from 62% a generation ago to a mere 10% today, while the fraction depending solely on 401(k)s has jumped to 63%.

Similar changes have occurred in the way people pay for college education, where rocketing costs and the declining availability of federal grants have meant that most families can no longer pay as they go to send their kids to school, but must borrow. That's left parents more financially exposed. And it's meant that after they graduate, most young people are saddled with debt and, in many cases, must make a beeline to the best-paying jobs to help defray the costs of college.

Twenty years ago, loans were used to pay about 15% of the tuition, room and board and fees that parents and students paid for college. Today, they account for fully one-third, according to the College Board.

And similar changes have occurred in health coverage, which costs more today and covers less. In just the last eight years, employees' average annual premium costs have more than doubled, from $1,600 to almost $3,300, according to the Kaiser Family Foundation.

[Arminius]

I posted sources that have different conclusions than the ones you posted. So post a .org or .gov site to back up your claims, if you want me to buy it.


Also the additional pain that the middle class has been enduring did not start happening until the 1990's, after President Reagan's presidency.

[Ken]

Arminius wrote: "http://books.google.com/books?id=J6cx......"

Kunic’s interpretation here is similar to views elsewhere: Reagan did not propose SDI as a means of “squeezing” the Soviet Union, but as the ultimate futuristic (almost sci-fi) defense tool for the United States. This view is confirmed by the fact that Reagan offered the technology (useless as it was then, and still is) to Gorbachev during their arms negotiations.

What’s made clear here is that Gorbachev came to power wishing to end the cold war himself (in the same way reformers in the US saw the waste and futility of increased arms spending on the US side of the arms race) and that his priority was to reform the Soviet Union. The importance of SDI is that initially it made Gorbachev’s job in that regard MORE DIFFICULT, meaning it complicated his plans internally and threatened to prolong the status quo, and hence the cold war. Again, the Soviet Union changed because it had a lousy system and wanted and needed to change, not because of any external prompting. But Ronnie the effective Dove as opposed to Ronnie the rhetorical hawk assisted the process.

http://www.foreignaffairs.com/article...

Gorbachev -- "a man in a hurry," as FitzGerald calls him -- took power in March 1985 and got right to work. A month later, he unilaterally suspended the deployment of Soviet intermediate-range nuclear forces (INF) in Europe, offering to make the cessation permanent if the United States did likewise. He began shifting government rubles away from the military, publicly assailed the failures of the socialist economy, and promised economic and political reform. The next year, at the Communist Party Congress, he renounced the doctrine of fundamental conflict between socialism and capitalism, calling for global cooperation to avoid nuclear and ecological disaster. For the rest of his tenure, he made news practically every few months with another bold reform in the areas of perestroika, glasnost, and arms control. He made it clear he wanted out of Afghanistan, his country's Vietnam-like quagmire. Based on even the incomplete knowledge we now possess about what was going on inside the Soviet Union, it is clear that in the history of the Cold War's end, the Soviet role was far more critical than the American.

Even on the American side, though, FitzGerald provides ample evidence to distrust the thesis that Star Wars and the early 1980s arms buildup (actually begun by President Carter in his post-Afghanistan anger) toppled the Soviet Union.

But in retrospect, the talks were an important step -- not because Reagan drove a hard bargain on sdi but, to the contrary, because he proved willing to compromise on so much else. The real news of Reykjavik, buried under the headline of the last-minute collapse, was that the two nations were not so far apart.

The next key step came, FitzGerald recounts, when Gorbachev met in December 1986 with the dissident physicist Andrei Sakharov, whom he had recently released from exile. Sakharov told the Soviet leader not to worry about Star Wars, predicting that the impracticable technology would eventually "die on its own." Persuaded, Gorbachev offered in February 1987 to separate the Star Wars negotiations from arms-control talks. The 1987 INF treaty and continued improvement in U.S.-Soviet relations followed apace. Thus, it is fair to note that the United States made a contribution to the Cold War's end -- but in the area of arms control, that contribution was the revival of summitry, not the threat of Star Wars.

http://www.slate.com/id/2102081/

The precise effect of Reagan's "Star Wars" speech—his high-profile and insanely impractical plan to build an antimissile "shield"—is hard to gauge. On the one hand, documents reveal that Gorbachev asked Yevgeny Velikhov, his chief science adviser, to evaluate whether Reagan's Strategic Defense Initiative, as it was formally called, would pose a threat. Velikhov replied that the project was fanciful and that the Soviets could build countermeasures—or deploy additional offensive missiles to saturate the Star Wars system—much more cheaply than the United States could construct additional defenses.

The next month, April '86, brought the Chernobyl disaster, which, among other things, made Gorbachev realize that information had to circulate more openly (the beginnings of glasnost) and made him think that the ultimate enemy may be nukes themselves.

He didn't realize it, but Reagan viewed nukes the same way. Samuel Wells, a Cold War historian at the Woodrow Wilson Center, who has examined all the relevant documents, put it this way in a phone conversation: "His staff, for all of the first term and most of the second, kept this out of the press, but Reagan was terribly, deeply opposed to nuclear weapons—he thought they were immoral."

Reagan's vision of SDI—a shield that would render nuclear weapons obsolete—was scientifically preposterous but, by all accounts, genuine. Many of his hawkish aides (most notably the still-active Richard Perle) scoffed at it; they liked SDI because it would scare the Russians and, if it worked, might give us nuclear superiority. But Reagan believed what he said.

At their face-to-face summit of October 1986 in Reykjavik, Reagan went far beyond Gorbachev's proposal of a 50 percent strategic-arms cut. To the alarm of some aides, who were not let in on the discussion, he suggested that the two sides get rid of nuclear weapons altogether and jointly build an SDI system to guard against a nuclear revival. Gorbachev initially dismissed the idea. "I do not take your idea of sharing SDI seriously," the minutes (which were declassified by the Soviets 12 years ago) show him saying. "You don't want to share even petroleum equipment, automatic machine tools, or equipment for dairies, while sharing SDI would be a second American revolution—and revolutions do not occur all that often." Reagan replied, "If I thought that SDI could not be shared, I would have rejected it myself."

However, Gorbachev returned to Moscow persuaded that Reagan—who had earlier struck him as a "caveman"—honestly had no intention of launching a first strike against the Soviet Union, and he made this point clear to the Politburo. He could continue with perestroika, which involved not just economic reforms but—as a necessary precondition—massive defense cuts and a transformation of international relations. He needed assurances of external security in order to move forward with this domestic upheaval. Reagan gave him those reassurances. Subsequent conversations between his foreign minister, Edvard Shevardnadze, and Secretary of State George Shultz reinforced his confidence.

[Ken]

Arminius wrote: "I posted sources that have different conclusions than the ones you posted. So post a .org or .gov site to back up your claims, if you want me to buy it.


Also the additional pain that the middl..."

I don't see anything in your sources that disputes anything in mine, or really addresses them actually. You'll have to make clear what "claims" it is you're disputing. The sources used in my citations are government sources generally: CBO, Census, OMB.

As for middle class pain, losing well-paying manufacturing jobs which are replaced by low paying service jobs counts as pain as far as I'm concerned. As I said, the process begun during Reagan's terms continued given that those policies and processes were mostly frozen into place.

[[deleted user]]

King Dinösaur wrote: "I like Reagan because his presidency brought about a lot of really good punk rock. :)"

[[deleted user]]

King Dinösaur wrote: "I like Reagan because his presidency brought about a lot of really good punk rock. :)"

Can't argue with that. Black Flag, Minor Threat, Fugazi, all the bastard children of Reagan's first term.

Plus, Springsteen's Nebraska wouldn't have been possible without Reagan.

[Arminius]

Don't forget the Heavy Metal bonanza during his term.

[Ken]

BunWat wrote: "I heard an interview recently with the filmmaker who make the Reagan biography that's out right now, and he said something I really liked. He said we Americans have got to get past either demonizi..."

In terms of analyzing and understanding the significance of presidents, neither demonizing nor mythologizing has much use. But there is a great deal to be looked at in between.

Reagan has been one of the most mythologized of recent presidents (very much a concerted partisan initiative of course) and I believe it’s important to separate mythology from reality as often as possible. Reagan is an interesting case for several reasons, in particular because the conservatism he is lauded for, in practice wasn’t very conservative by today’s standards, and many of his actions would be intolerable for today’s American right. In fact, he may have been as much or more The Great Compromiser as the Great Communicator. Reagan raised taxes several times, unthinkable for today’s Republican politicians, and in fact one of those increases was in service of the bolstering of Social Security, a program inexplicably a bogeyman for much of today’s “mainstream” conservatism.

The economic recovery under Reagan was taken out of the FDR playbook, classic deficit spending as stimulus. And his contribution to the easing of Cold War tensions was not through massive military buildups or bellicose rhetoric, but at last, his realization of the economic and moral futility of the nuclear arms race, and his earnest pursuit of cooperation with Gorbachev.

Unfortunately, Reagan’s economic legacy is also one of fierce anti-labor practices, which combined with his and his successor’s nine year freeze on the minimum wage depressed wages for working people and the middle class. At the same time, his tax and regulatory policies greatly benefitted the wealthy, shifted the tax burden and began a trend of large “conservative” deficits. His favoring of capital over labor in such an imbalance accelerated a process of wealth and income disparity and uneven economic growth that plagues our society today, as well as reckless behavior by an empowered capital class whose behavior eventually created great hardship for all the rest.

Rather than the old land of opportunity, there is much less social mobility or wealth equality here today than in other industrialized nations. So Reagan’s contribution to that process, though others since have done their share, is what troubles me about Ronald Reagan, and the either craven or simply unthinking mythologizing of him.

[Ken]

Arminius wrote: "I posted sources that have different conclusions than the ones you posted. So post a .org or .gov site to back up your claims, if you want me to buy it.


Also the additional pain that the middl..."

Arminus, to the extent you’re not simply attempting to dismiss or deny inconvenient information (again, I didn’t see in your links any dispute of the basic facts upon which the analysis of the economists I presented was based) for the sake of understanding what transpired during Reagan’s era, and why the legacy of it lasts today, I’ll take your lack of trust in the widespread economic analysis at face value.

Though your comment about “claims” was vague, I’ll assume it had to do with Reagan and the middle class and the ongoing and growing wealth inequality exacerbated by Reagan’s policies, policies that essentially linger to this day.

Again, after a difficult economic slowdown in the 1970’s, plagued by high oil prices (which luckily for Reagan receded in the Eighties) and high inflation and unemployment, before which for several decades economic growth in America benefitted the middle and working classes as much or even more than the wealthy, the economic recovery in the Eighties could have been a return to that growth in middle class prosperity as the economy began to grow again. However, Reagan’s tax and regulatory policies were influenced by radical and unsound theorists (the nefarious “supply-siders” Arthur Laffer and George Gilder more prominently).

These policies in combination kept much of the benefits of growth out of the hands of the middle class and working poor, and out of their hands as consumers, and shifted it to a wealthy class, whose use of it turned out seldom to be wise, and which clearly did not “trickle-down.” This process of economic growth benefitting only the few, and a less secure middle class as the result of government and private shifts continues and remains very problematic.

To the extent unanalyzed raw data is useful, here is some that requires little more than looking at it and looking at its source for a very clear (and indisputable) picture.

This data from Census shows that income growth from 1950 to 1978 was fairly even across the income classes, but slightly heavier for the working poor and middle percentiles. From 1979 to 1993 this dynamic was the reverse, with only the top 20% showing any growth whatsoever.

Income Growth by Quintile2
Quintile 1950-1978 1979-1993
Lowest 20% 138% -15%
2nd 20% 98 -7
3rd 20% 106 -3
4th 20% 111 5
Highest 20% 99 18

2 U.S. Bureau of the Census, Current Population Survey.

This data from the Labor Bureau shows average weekly earnings peaking in 1973, remaining in the same ballpark (around or near $300) even through the economic hardships of the mid and late Seventies. However, the economic recovery of the Eighties shows those earnings not only not returning to previous levels but in fact declining.

Average weekly earnings of nonsupervisory workers, total private industry,1982 dollars.4

1965 $290
1970 297
1973 315 (Peak)
1975 292
1976 297
1977 299
1978 301
1979 291
1980 274
1981 271
1982 267
1983 272
1984 274
1985 271
1986 271
1987 269
1988 266
1989 263
1990 259
1991 255
1992 255 (Nadir)

4 U.S. Bureau of Labor Statistics, Bulletin 2445, and Employment and Earnings, monthly, June and March issues.

[Sally, la reina]

How do you type that much? Do you create word documents?

[Ken]

Presidents Reagan and Bush froze the minimum wage for 9 years, which had the effect of creating a pay cut for those workers after inflation.

In 1992 dollars, the 1963 minimum was $5.74, or 35 percent more than it was in the early Nineties.

Raises in the Federal Minimum Wage. 5

Percent of average

Year New rate production earnings
1950* $0.75 54%
1981 3.35 43
1990 3.80 35
1991 4.25 38
1994 -- 35

5 U.S. Department of Labor, Employment Standards Administration, Minimum Wage and Maximum Hour Standards Under Fair Labor Standards Act, 1981, annual and unpublished data.


This income data shows how unevenly economic benefits of American productivity increasingly have been distributed.


Salaries and benefits of corporate CEOs as a multiple of the average factory workers'. 6

1980 30 times
1991 130-140 times

6 Kevin Phillips, Boiling Point (New York: HarperPerennial, 1993), p. 251.

[Ken]

This data on income distribution by quintiles shows that between 1980 and 1992 income declined for every group except for the very top quintile.

Percent of National Aggregate Income Received by Each Quintile (by Family, in 1992 dollars)13

Quintile 1980 1992
Lowest 20% 5.2% 4.4
2nd 20% 11.5 10.5
3rd 20% 17.5 16.5
4th 20% 24.3 24.0
Top 20% 41.5 44.6

13 U.S. Bureau of the Census, Current Population Reports, P60-184; and unpublished reports.

This data is likewise informative.


Approximate number of millionaires and billionaires in the U.S., 1978-19888

Year Millionaires Decamillionaires Centamillionaires Billionaires
1978 450,000 1
1979 519,000
1980 574,000 ?
1981 638,000 ?
1982 38,885 400 13
1983 500 15
1984 600 12
1985 832,000 700 13
1986 900 26
1987 1,239,000 81,816 1,200 49
1988 1,500,000 100,000 1,200 51

Kevin Phillips, Boiling Point (New York: HarperPerennial, 1993), p. 251.


http://www.huppi.com/kangaroo/4Inequa...

[Ken]

This data from the IRS shows that combined salary growth for all the years of the Eighties, revealing that wages for people who earned less than fifty-thousand a year, in other words eighty-five percent of Americans, increased by around 2% a year, less than the rate of inflation. For millionaires it increased 243% a year. That is an extremely, even radically uneven economy.

Percent Increase of Combined Salaries by Income Bracket, unadjusted for inflation (1980s)9

Income Bracket Percent Increase
$20,000 - 50,000 44%
200,000 - 1 million 697
Over $1 million 2,184

9 Internal Revenue Service.

[Ken]

This data from CBO divides income into deciles rather than quintiles, and it shows that from 1977 (in the period of economic stagflation) to 1990 (post recovery) families in the bottom seven deciles suffered negative growth or stayed even. Income grew modestly in the eighth and ninth deciles, and only really grew for the top ten percent.
Percent change:


1977-
1980- 1985- Decile 1977 1980
1985 1990 90 90 90
1st $4,277 3,852 3,568 3,805 -11.0% -1.2 6.7
2nd 8,663 7,982 7,717 8,251 -4.8 3.4 6.9
3rd 13,510 12,530 12,230 13,110 -3.7 4.6 7.2
4th 18,980 17,240 17,010 18,200 -4.1 5.6 7.0
5th 24,520 22,380 22,070 23,580 -3.8 5.4 6.9
6th 30,430 28,100 27,620 29,490 -3.1 5.0 6.8
7th 36,880 34,370 34,620 36,890 0.0 7.3 6.5
8th 44,820 42,050 43,370 46,280 3.3 10.1 6.7
9th 56,360 53,660 56,190 59,860 6.2 11.6 6.5
10th 111,100 107,900 123,200 133,200 19.9 23.4 8.2
top 5% 149,500 146,000 172,100 187,400 25.4 28.3 8.9
top 1% 319,100 321,400 415,700 463,800 45.4 44.3 11.6
All 34,830 32,850 34,480 37,050 6.4 12.8 7.4

11 Congressional Budget Office, House Ways and Means Committee, 1992 Green Book.

http://www.huppi.com/kangaroo/4Inequa...

[Ken]

This data also illustrates the way in which the economic pie during the period covered grew only for the top 20%.

Percent of National Aggregate Income Received by Each

Quintile (by Family, in 1992 dollars)13
Quintile 1980 1992
Lowest 20% 5.2% 4.4
2nd 20% 11.5 10.5
3rd 20% 17.5 16.5
4th 20% 24.3 24.0
Top 20% 41.5 44.6

Top 5% 15.3 17.6

15 Peddling Prosperity: Economic Sense and Nonsense in the Age of Diminished Expectations (W.W. Nort
on & Company, 1994), p. 138.

[Ken]

This chart depicts change in real family income by quintile and top five percent 1947-1979.

http://extremeinequality.org/wp-conte...

Source: Analysis of U.S. Census Bureau data in Economic Policy Institute, The State of Working America 1994-95 (M.E. Sharpe: 1994) p. 37.

[Ken]

This chart depicts change in real family income by quintile and top five percent 1979-2008.


http://extremeinequality.org/wp-conte...

Source: U.S. Census Bureau, Historical Income Tables, Table F-3 (for income changes) and Table F-1 (for income ranges in 2008 dollars).

[Ken]

So in sum, if you lived in ancient Rome, or in pre-Enlightenment mercantilist England, or feudal Europe, then as long as economies grow and wealth is created, it doesn’t matter at all how that productivity is distributed. However, the point of capitalism and markets as conceived by Adam Smith and the other Enlightenment intellectual fathers of capitalist theory was a system that rewarded labor in balance with capital, and distributed the rewards of national production across all strata.

[Sally, la reina]

Someone broke Ken.

[Ken]

BunWat wrote: "Ken, I appreciate that your most recent post was a bit shorter. I understand that you feel strongly about these subjects but I think you'll find you can communicate more effectively if you resist ..."

I agree that when it comes to casual exchanges of opinion and point of view the standards of effective communication come into play.

However, if the conversation extends to long-term economic analysis, that demands more extensive explanation, and brevity is near impossible.


And when someone either genuinely or disingenuously questions the basic data behind analysis, there's no pretty way to oblige them with the real facts.

[janine]

[Ken]

Sally wrote: "Someone broke Ken."

I needed more room to stretch out. Sometimes a little in-depth discussion is really good exercise (and the information provided is a public service).

On the other hand, turns out you were right: I broke myself last night at the bar. How ‘bout sending me your credit card number. I’ll use it judiciously, I promise.

[Sally, la reina]

**runs away**

[Stacia (the 2010 club)]

That doll is wooden?

[Arminius]

http://www.usgovernmentspending.com/d...%

U.S. Debt rose more in President Clinton's term than President Reagans.

[Ken]

Arminius wrote: "http://www.usgovernmentspending.com/d...%

U.S. Debt rose more in President Clinton's term than Pres..."

National debt and budget deficits are two different things. Reagan and Bush senior left large deficits. Clinton left a budget surplus.

The graph depicts debt rising steeply every year of Reagan’s presidency, leveling off at that high water mark for several years in the early Nineties, then declining from 1995 to the end of the century.

[Arminius]

http://www.1980sflashback.com/1980/Ec...

If you page through the years 1980-1989 (and I know many of you don't want to) take notice to how the Median Household Income rises each year.

This is my last statement on this topic. I soon will not have internet access for a while. So I will not be able to post anyway.

But I was a child in the 1970's and a teenager in the 1980's. I can tell you how I felt. Honestly in the 1970's I thought the country was going to hell and I know I was not alone in that opinion.

We had lost our first war, our President resigns, people constantly complaining about prices, having certain days to get gas on, Iran hostages, my father's layoffs from work.

During my teen years (the 1980's) my opinion changed for the better.

[Sally, la reina]

[Lobstergirl, el principe]

I think she will look a little like Nancy Reagan in her later years.

[Félix]

Sally that's so funny.

[Lobstergirl, el principe]

I think at 100 he smelled bad. The question is, now that he's 105, does he smell even worse? Or is the smell dissipating? I tend to think it's dissipating.

[Scout]

Reagan had the advantage of not being mocked constantly by the media. That didn't happen until Trump. Can you imagine a Colbert mocking Obama nightly? Would the nation have tolerated that? So why is it okay for him to mock Trump? Think about it.