orOften times, a political analyst/scientist will write a book on thepolitics and economics of the time. This writer may also create a work whichemanates views contrary to the opinion of the governing body.
Rarely, however,does one find an analyst who will clearly undermine his own political party by,in effect, saying, “I told you so.”Kevin Phillips, editor-publisher of TheAmerican Political Report, columnist for the Los Angeles Times, and chiefpolitical analyst for the 1968 Republican presidential campaign, describes inhis book, The Politics of Rich and Poor: Wealth and the American Electorate inthe Regan Aftermath, the consequences of the decisions made by the UnitedStates government while under the presidency of Republican Ronald Regan.Phillips’ theme of the widening gap between the upper twenty percent of thepopulation, in respect to annual income in actual dollars, with the lowertwenty percent of the population coincides with the belief of the typicalAmerican avarice,during the eighties, leading the country on a rollercoasterride of economic instability and shaky ground.
These ideas remain constant andprevalant throughout the seven chapters. His views, though somewhat repetitivein the text, strike the reader with astonishment, especially when consideringPhillips’ Republican party affiliation.With his thesis in mind, Phillips discusses three major factors thatescalate and at the same time submerge the state of the economy in America.These factors include:the sudden shift in tax rates, the diminishing “globalwealth” of America, and the inability of the government under Regan to satisfya “happy medium” for economic growth. All of these factors support Phillips’theme and prove his argument of an up and down cycle of economic stability.
From 1921 to 1925 the top one percent of the population’s tax rate wasgradually decreased from the marginally high rate of seventy-three percent allthe way to just twenty-five percent. Over four years this elite group ofAmericans received a forty-eight percent reduction in taxes. This decreaseopened the door for the super-rich Americans to capitalize and increase theircurrent wealth.As the taxes decreased for this group of the population, others alsobenefited. A surge in real estate investments occured, the stock market valuesrose dramatically, and new technology such as radios and automobiles weresurfacing every day. This bull economy lasted only a few short years.By 1929,the situation was reversed entirely.
The economy crashed with unequaledconsequences. The rich citizens who were living “the good life” four years agowere now stuck with paying seventy-three percent of the entire population’staxes.The stock market was on the down side, to say the least, the realestate and technological markets were also paralell to the stocks.Thesolution from the new democrats was to bring the economy back by forcing theaffluent to carry the burden. The highest tax rate eventually reached ninety-one percent.
After about twenty-five years, the economy was finally stableenough to lower this absurd rate. In the mid seventies, the rates weregradually lowered to a mediocre seventy percent. Starting in 1980 therepublican machine decided to again lower the rates, thereby lessening the gapbetween rich and poor.
What actually happened was the high income brackets hadmore of a decrease than anyone. The rates at one point reached a low fiftypercent.This cut, once again opened the door for the elite to become super-elite.The cycle had surfaced again.Just like in the early 1920s, the richwere gradually getting richer at the expense of everyone.
The technologymarkets boomed once again, real estate sales increased dramatically, and thestock market rose by leaps and bounds.It seemed like just what the economyneeded.Regan’s reelection thrived on the fact that the entire country wascaught up in a whirlwind of the seemingly perfect economy.
The cycle continuedjust like economists predicted; the perfect economy suddenly had a recession todeal with.Another one of Phillips’ reasons for the downfall of the United States’economy after Ronald Regan is the diminishing “global wealth” of the country.The stock market crash of 1987 opened Regan’s eyes to the fact that his effortsto heal the economic woes of America were failing.The huge amounts of moneyborrowed to fund the tax cuts of the early eighties were borrowed at highinterst rates.
The republican party decided to raise the United Statesinterest rates to a high level in order to fight inflation on the borrowed money.This surge in interest rates increased the value of the dollar significantly.This increase almost crashed American manufacturing because the products made inthe states were not selling overseas due to a high dollar value.The interestrates were slowly forced down, and the dollar lost value like never before.By1988, other countries were shopping in the states like it was a flea market.
Their currency could buy so much more than ours in our own country. Soon,the trade deficit was increasing, the selling of American companies to overseasinvestors was a daily occurrence, and foreigners were looking at our millions as”pocket change.”Japan began to buy our businesses and real estate more thanany other country.In 1985 the total net worth of America and Japan wasrespectively 30.
6 trillion US dollars and 19.6 trillion US dollars. In aslittle as two years, the Japanese had capitalized on the slouch in the value ofthe dollar and reversed the ratio.
By 1987, the United States had 36.2 trilliondollars in assests compared to Japan’s 43.7 trillion dollars.
Most of Japan’snew capital was formerly American owned companies and property.This trend inforeign ownership was a leading factor in the decline of our economic systemduring the eighties.Clearly, the Japanese were not the only reason for the slip in Americaneconomic history.Phillips’ other reason for the downfall was the lack ofRonald Regan’s party to control a “happy medium” for everyoneCategory: History