Reagan's legacy

(After posting this essay, I decided to analyze US Macroeconomic History, which illustrates several quantitative claims herein.  Links to relevant figures were added to this essay.)
* Conventional wisdom holds that Jimmy Carter failed as president and Ronald Reagan succeeded. At the time, it seemed to me that Carter interpreted circumstances objectively, spoke candidly, understood economic dynamics, and steered the nation appropriately into the future. It seemed to me that Reagan interpreted circumstances mythically, spoke deceptively, misunderstood economic dynamics, and steered the nation toward environmental destruction, debilitating debt and eventually endless world strife.
* The Carter/Reagan race was a watershed of American spirit. Reagan popularized resentment of the poor, distrust of government, hatred of taxes, contempt for science, environment, peace, social justice. He encouraged profligate consumption of nonrenewable resources, pollution, overpopulation, job outsourcing. For example, he imposed a gag rule on US-supported family planning, removed family planning from foreign aid, contemptuously ripped solar panels from the White House, appointed anti-environmentalist James Watt to Interior, encouraged Americans to buy big cars. He exposed American workers excessively to competition from foreign low-wage workers unencumbered by environmental rules and to illegal immigrants (amnesty), as part of his successful strategy to slow inflation by castrating our labor movement. Union membership declined, and homelessness rose steeply under Reagan and Bush I--quite a price for reduced inflation. He made objective discussion of taxes the true third rail of American politics.
* He single-handedly created the intellectual environment fertile for Rush Limbaugh, Grover Norquist, Dick Cheney, Jack Abramoff, K-Street Project, Bush II, Drill Drill Drill, Tea Party, Citizens United, Rick Santorum, Glen Beck, Sean Hannity, Mark ***. Owing to this legacy, it is no longer possible to have a rational national conversation about any public policy.
* Fox talk-radio hosts, Republican politicians and conservative think tanks regularly misrepresent Reagan's economic legacy.
* For example, they claim that his reduction of the top marginal income-tax rate from 70% to 50% or less actually increased income-tax revenue. They postulate that people avoided high tax brackets by withholding work effort, so eliminating the highest brackets unleashed their economic potential hence raised their tax payments and those of their employees and suppliers. This postulate underlies the Laffer Curve, which was said to have influenced Reagan's tax policies. Truth is, in these days of high productivity, coasting to avoid a high tax bracket would result in better sharing of economic activity, not less economic activity.
* In fact, Reagan's tax policies resulted in a 20% fall of income-tax revenue relative to Gross Domestic Product (GDP), despite reduction or closing of some deductions and loopholes (see also Fig 5); and his trade, labor, monetary and fiscal policies reduced fractional GDP growth rate by half, from 10% per year during several decades before 1983 to 5% per year after 1983 (see also Fig 1). GDP today is about 1/4 what it would have been without the Reagan revolution, and tax revenue is about 1/5 what it would have been without the revolution. After Reagan's tax cuts, it took about 4 years for tax revenue to return to pre-tax-cut levels. It would have taken 2 years were it not for Reagan's slowing of GDP growth.
* Between WWII and Reagan's presidency, the federal debt relative to GDP fell gradually from 1.2 to 0.35. This debt/GDP ratio then doubled during Reagan's and Bush I's administrations to 0.7 (owing to a quadrupling of debt with a doubling of GDP). It then declined to 0.6 during the Clinton years (tech bubble and increased tax rate) and then jumped to 1.05 (near bankruptcy) during the recent recession (see also Figs 3 &5). Had GDP continued growing as it did before the Reagan revolution, our debt/GDP ratio today would be less than 0.3, a perfectly safe value, less than 0.2 without the tax cuts.
* Of the debt quadrupling under Reagan and Bush I, the increases were 2.7x under Reagan and 1.5x under Bush I. Thus, Reagan's debt was almost twice that of all previous presidents combined. His repeated campaign claim, that he could cut taxes and increase spending while balancing the budget, was a lie that seems to have been forgiven and forgotten when the Ronald Reagan Legacy Project was getting schools, streets and an airport named for the man. The massive Reagan debt had two main components. About half was due to tax cuts and went to enrich the already rich. About half was due to increased spending and showed up in the military-industrial complex. Most of the debt was elective and could have been avoided.
* Reagan believed that the economy was unsatisfactory for lack of capital. It was for lack of consumer capacity (incident to high oil price), which could have been relieved by government spending on projects to reduce oil dependence (see also Fig 2). Reagan's tax, labor, regulatory and trade policies then caused a massive transfer of wealth and power from American workers to already wealthy Americans (see Fig 4) and to foreign and global interests. The shift of wealth to the already wealthy far exceeded that needed for capital formation, so unproductive speculative instruments were invented to occupy the excess. I don't think any of the above Reagan effects are laudable. Nevertheless, those policies helped bridle inflation (see Fig 1) and woke up the Dow after two decades of quiescence--good for those of us who saved systematically for decades before 1990.
* Ford and Carter were victims and Reagan was beneficiary of oil-producer actions to raise crude price from $16/barrel to $74/barrel between 1973 and 1981. Failure of OPEC discipline and efficiencies implemented under Carter then led to a gradual fall of crude price to $20/barrel between 1981 and 1987 where it remained until it rose sharply to $95/barrel during Bush II's administration (see Fig 2). Those oil-price swings caused corresponding swings of inflation, interest rates, unemployment and misery index (except during the recent housing bubble) (see Figs 1 & 2). This dynamic along with the hostage crisis defeated Carter and gave Reagan credit for improvements he did not influence. In particular, unemployment and misery declined with minor bumps from 1981 to 2000 following the price of oil.
* Some observers credited Reagan's military buildup, especially "Star Wars", with the fall of the Soviet Union. More likely it was demoralization of the Soviet army in Afghanistan, fugacity of tribes mingled in the union, attraction to western opulence, food insecurity due to the falling oil price (see also Fig 2) and to losing as innovators and producers in the global market.
* Why does this matter? In 1980 America was poised to lead the world in development, manufacture and deployment of solar voltaics and wind turbines. We could have led the world in responsible reproductive mores, resource husbanding, waste management and juster sharing of life's satisfactions. Reagan abdicated that kind of leadership and turned our future over to global market forces. There were 4.5 billion people back then, more than 7 billion now, about 1/5 not sure of eating tomorrow. Smart phones, millions of unemployed middle-class graduates and government policies concentrating wealth in the financial-service industry constitutes an incendiary Reaganomic mixture. Obama's failure to appreciate the rationale of his presidency with respect to these dynamics probably accounts for the Occupy movement.