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.

On-Line Donations

* For decades, I have contributed to almost 50 nonprofits by check every December. Last year I realized that my 77-year-old eyes and arthritic hands made this too painful, so I included a note with each check, saying that my future donations would be made on line via PayPal. Most of my favorite nonprofits ignored my note. Considering the ease of setting up PayPal on a web site, this failure is astonishing.
* To donate by PayPal, one clicks on the PayPal button, types the amount to be donated and clicks on two more buttons. That's it. The needed personal information accompanies the donation automatically.
* By contrast, giving on line by credit card is harder than giving by check in the mail. For each donation, one must fill in personal information, type the amount to be donated, type 20 hopefully private digits, select several more numbers, then click on one or two more buttons.
* The money I didn't contribute to recalcitrant nonprofits will approximately pay for my new dentures.

Pride or modesty

* In my declining years, I've been wallowing in existential angst, questioning every source of pride and suspecting that much modesty and even some shame might be appropriate.
* The greatest generation and my generation enjoyed a golden age of resources and advantages which we squandered. Consider the Fleetwood Cadillac.
* We white male American Christians dominated and exploited every other kind of people not so specified, assuming that it was the natural order. I can remember greatly admiring the British empire, over which the sun never set.
* The opportunities for justice and peace that we had within our reach and wasted are enough to make one weep. Is our society or civilization the best that a society or civilization can be? If not, what would be?

Wealth gravity

* The following MotherJones article summarizes some important policies, trends and dynamics that could be the basis for some interesting ethics discussions: http://motherjones.com/kevin-drum/2011/01/matt-yglesias * Reagan believed increasing wealth of the already rich to be good, as do contemporary Republicans. For whom? How? Why? * Unbridled imbalances in an organism are deadly. Far too many Americans lack access to legitimate jobs with apprentice potential. Far too many Americans are becoming hopeless, demoralized and disaffected. That is nothing to celebrate. Can the earth support macroeconomic solutions to such problems? * Was the transfer of wealth from middle class to rich and to other destinations inevitable regardless of policies, eg owing to production technology and international competition? Even if so, government taxing and spending should not be designed to exaggerate and accelerate the trend. * Imagine an economy in which the burdens and opportunities are more widely shared. Imagine a society in which joys and satisfactions are more scattered throughout the socioeconomic pyramid.

Rupert Murdoch punishment

* Back when Rupert Murdoch felonies were in the news, I dwelled on the question whether he could be punished for the lies and gratuitous hate heard on his property, Fox Talk Radio.
* It was just over a decade ago when the FCC stopped requiring broadcasters to balance partisan rhetoric with opposing views. They still forbid certain obscenities under some circumstances. Why not forbid lies or at least require them to be exposed during a 10-minute cleanup segment at the end of each hour?
* Note to judges: Condemn all guilty Murdoch executives to wearing a digital-radio necklace that plays Steve Gill, Glenn Beck, Rush Limbaugh and Mark Levin from 7 am to 7 pm relayed via a fact checker who inserts a buzzer noise at the end of every lie.
* This might be a pretty good punishment for all Republican white-collar criminals, in addition to restitution. Democratic white-collar criminals could be punished with a digital-radio collar playing NPR relayed from a buzzer-wielding fact checker, in addition to restitution.

Remembering Charlie Howell

* Our community lost a friend on Oct 27. I've known Charlie Howell most of my adult life, witnessing from a distance his involvement in public policy at the local, state and national levels. Throughout those years and beyond, Charlie held to an ethic grounded in faith, the law and examples of great leaders. He had a clearer grasp of social, economic and political issues than did most of us; and he came up with imaginative proposals.
* For the past two decades, I've been in Charlie's vortex. It began with a conference he organized titled: Loving our neighbors across time. It seemed to me compelling to extend a New Testament commandment about relations among contemporaries to the asymmetrical relation among generations. Continuing that commitment, Charlie established a foundation, Trust for the future, and created Descendants' Day, June 30, to remind us of our responsibility to leave future generations a healthy planet and decent people with whom to share it.
* During those decades, Charlie contributed many thoughtful letters to the Tennessean editor and several Nashville Eye articles addressing issues of the times. When I got the news of his passing, I looked to my right where on top of a stack of papers was a copy of a year-old letter from Charlie to Gov Haslam with detailed recommendations about state and local taxes.
* In my last conversation with Charlie, more than a month ago, we discussed what course our society might take were it possible to incentivize truth telling in the national conversation. It seems like yesterday.

Bocephus & Football

** Contrary to opinions expressed by print and broadcast media and held by ESPN, Hank Jr did not compare Obama with Hitler. He compared the incompatibility of Obama and Boehner with the incompatibility of Netanyahu and Hitler in an imaginary golf match.
** How could newscasters, newspaper commentators, letter writers and ESPN get this wrong? Perhaps because Hank Jr combined three figures of speech (simile, hyperbole, sarcasm) in a double or triple comparison/contrast (Obama contrasted with Boehner compared with Netanyahu contrasted with Hitler).
** The same figures of speech are in the statement "30-10 is like 100-1", which does not imply that 30 or 10 is like 100 or 1. Where can you find an English teacher when you need one? Bocephus was done wrong by.