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TechnoratiReagan Did It
"This bill is the most important legislation for financial institutions in the last 50 years. It provides a long-term solution for troubled thrift institutions. ... All in all, I think we hit the jackpot." So declared Ronald Reagan in 1982, as he signed the Garn-St. Germain Depository Institutions Act.
He was, as it happened, wrong about solving the problems of the thrifts. On the contrary, the bill turned the modest-sized troubles of savings-and-loan institutions into an utter catastrophe. But he was right about the legislation's significance. And as for that jackpot - well, it finally came more than 25 years later, in the form of the worst economic crisis since the Great Depression.
For the more one looks into the origins of the current disaster, the clearer it becomes that the key wrong turn - the turn that made crisis inevitable - took place in the early 1980s, during the Reagan years.
Attacks on Reaganomics usually focus on rising inequality and fiscal irresponsibility. Indeed, Reagan ushered in an era in which a small minority grew vastly rich, while working families saw only meager gains. He also broke with longstanding rules of fiscal prudence.
On the latter point: traditionally, the U.S. government ran significant budget deficits only in times of war or economic emergency. Federal debt as a percentage of G.D.P. fell steadily from the end of World War II until 1980. But indebtedness began rising under Reagan; it fell again in the Clinton years, but resumed its rise under the Bush administration, leaving us ill prepared for the emergency now upon us.
The increase in public debt was, however, dwarfed by the rise in private debt, made possible by financial deregulation. The change in America's financial rules was Reagan's biggest legacy. And it's the gift that keeps on taking.
The immediate effect of Garn-St. Germain, as I said, was to turn the thrifts from a problem into a catastrophe. The S.& L. crisis has been written out of the Reagan hagiography, but the fact is that deregulation in effect gave the industry - whose deposits were federally insured - a license to gamble with taxpayers' money, at best, or simply to loot it, at worst. By the time the government closed the books on the affair, taxpayers had lost $130 billion, back when that was a lot of money.
But there was also a longer-term effect. Reagan-era legislative changes essentially ended New Deal restrictions on mortgage lending - restrictions that, in particular, limited the ability of families to buy homes without putting a significant amount of money down.
These restrictions were put in place in the 1930s by political leaders who had just experienced a terrible financial crisis, and were trying to prevent another. But by 1980 the memory of the Depression had faded. Government, declared Reagan, is the problem, not the solution; the magic of the marketplace must be set free. And so the precautionary rules were scrapped.
Together with looser lending standards for other kinds of consumer credit, this led to a radical change in American behavior.
We weren't always a nation of big debts and low savings: in the 1970s Americans saved almost 10 percent of their income, slightly more than in the 1960s. It was only after the Reagan deregulation that thrift gradually disappeared from the American way of life, culminating in the near-zero savings rate that prevailed on the eve of the great crisis. Household debt was only 60 percent of income when Reagan took office, about the same as it was during the Kennedy administration. By 2007 it was up to 119 percent.
All this, we were assured, was a good thing: sure, Americans were piling up debt, and they weren't putting aside any of their income, but their finances looked fine once you took into account the rising values of their houses and their stock portfolios. Oops.
Now, the proximate causes of today's economic crisis lie in events that took place long after Reagan left office - in the global savings glut created by surpluses in China and elsewhere, and in the giant housing bubble that savings glut helped inflate.
But it was the explosion of debt over the previous quarter-century that made the U.S. economy so vulnerable. Overstretched borrowers were bound to start defaulting in large numbers once the housing bubble burst and unemployment began to rise.
These defaults in turn wreaked havoc with a financial system that - also mainly thanks to Reagan-era deregulation - took on too much risk with too little capital.
There's plenty of blame to go around these days. But the prime villains behind the mess we're in were Reagan and his circle of advisers - men who forgot the lessons of America's last great financial crisis, and condemned the rest of us to repeat it.
57 Comments so far
Show AllI became old enough to vote in 1979. I didn't vote for Reagan because I *never* liked Reagan, I felt (and still feel) that whatever came out of his mouth just could not be believed because, after all, he was an *actor*, and a second-rate one at that. And why is it that not a single comment has been made about his thieving wife, Nancy, who made off with every piece of the White House china, the fine crystal used at state dinners and several pieces of furniture, paintings, linens, etc.,that were paid for by the citizens of the United States, a.k.a. OWNED by the American people? I'm sorry, did I miss the part in government class that states where the First Lady gets to loot the entire White House when it's time for her to leave? If so, I'm thinking about encouraging my husband to run in 2012 because I'd *really* like a new microfiber sectional sofa. ;o)
Although Reagan started this mess, Clinton and his treasury secretay, Rubin with the help of Senator Grammm were instrumental in bringing this current debacle by repealing the Glass-Steagall Act which seperated commercial banking from Investing banking thus opening the way for all the financial shenanigans perpetrated by Wall St. fruadsters.
Actually, they are all in it together and to pretend there is one party more responsible than another is to ignore the truth. Clinton didn't come out of no where. Read about Iran-Contra/Mena, Arkansas. It's not like Clinton himself decided to repeal Glass-Steagall. Or even that W was the reason all hell broke loose. It was thirty years of stepping stones, and we're at the final stone, or pretty darn close.
I agree with you 100%. The current economic debacle is the result of a co-operative effort by both the Democrats and the Republicans pushed and prodded by Wall Street.
I said it started by Reagan but Clinton was important step along the way with the help of Senator Gramm who is a staunch Republican. Bush II almost finished the job and Obama is putting the final touches to it.
>> Party of Lincoln,
Not exactly.
The modern Republican Party is an amalgam of the old Dixiecrat (racist) wing of the Democratic party and a few other fringe groups who may or may not have been Republicans to begin with, although they have a fairly consistent fiscal-conservative wing.
Many of the former Republicans became Libertarians, who may or may not vote Republican.
Lioness
It should come as no surprise, as Reagan (or one of his staffers) invented "starve the beast" as a way to achieve right-wing utopia, where even if serious problems were identified, solutions could not be implemented because there was "no money" available for government.
Every massive deficit strategy since is "starve the beast" by other names, the aim of which is to destroy the US government (save, perhaps, the military) and leave us a nation of guarded-gate enclaves in a sea of general poverty, with even police forces privatised and made into mercenaries for hire...
Lioness
An actor for president - we voted for an illusion.
Now we must find the heart of the beast behind the curtain and smash it forever.
Not quite so easy to nail it on Reagan. He was a great parrot with a script in hand.
Ronald Reagan governed as president, the same way he governed when he was governor of California.
Essentially 9 to 5, at Nancy Reagan's insistence, and then retiring for supper in his pajamas to watch old Westerns and other early films around 6 p.m. in The White House living quarters.
According to Helen Caldicott, M.D., of Physicians for Social Responsibility, at a private lunch with him arranged by Patti Davis Reagan, she was quite sure he had had a mild stroke. This was early in his presidency. Reagan also made incorrect statements of fact to Dr. Caldicott, and she gently called him on it: If you send out a nuclear missile to bomb the Soviet Union, for example, it can be recalled, Reagan said. NOT. Dr. Caldicott disagreed, and Reagan protested because he had read it in THE READER's DIGEST, his favorite magazine.
[Read Helen Caldicott's book: MISSILE ENVY for background on the 1980's Nuclear Holocaust Threat.]
Reagan was a master of phrases, such as The Evil Empire, for example, and the demeanor of righteous indignation, "Mr. Gorbachev, take down that wall!" but it was known he relived a lot of old movie roles, and got confused about what was fact and the fictional accounts that he had played as an actor. I'm sure REAGANOMICS was a pleasing term as opposed to VooDoo economics, and he was sincere as far as his mind could stretch, and I suspect not too far.
Reagan gradually began to slip into the early stages of Alzheimer's, and by the time he was into his second term, he was really slipping. Nancy was always by his side to whisper in his ear when he didn't hear well or got confused about a question or a statement.
Surrounding him were advisors, the SHARKS, which included George Herbert Walker Bush, Vice President, who also got Reagan to appoint him to be Director of National Security also. This dual officialdom was unprecedented.
Reagan's preference was for his advisors and staff to put down the points of an issue on a 4 x 8 index card, with their brief recommendations. He would then check which of their recommendations was his decision or decisions.
This included matters of foreign policy, economics, and just about everything of importance a president must deal with.
He didn't like to seriously read. That's why he had advisors and staff to do it for him and present what they chose on those 4 x 8 cards.
The Iran-Contra mess and illegalities whizzed right by Reagan, but eventually when he was told he had to make a speech of apology because there was a danger of impeachment, he was quite confused, but read the prepared script and apologized to the American people in his sincere way and that matter was put to rest. In his fantasies and given the information he was given, the savage CONTRAS became FREEDOM FIGHTERS. During Reagan's tenure, HELL became the lot of the peasants in various Central American countries ... El Salvador, Nicaraqua, Guatemala ...
Reagan was a man of slogans and policies that were not necessarily his, but he unwittingly played his part well.
There were indictments regarding the double-edged sword of chicanery of Iran-Contra, and all the rest, but very little jail time resulted and, of course, the spinning of it all created a fog, and the found-guilty players turned up later in the Bush Administrations.
You'll also find Rumsfeld and Cheney and the familiar, "usual suspects" threaded through the narrative.
MORE ...
Ronald Reagan had a few shining moments, but he was really not in command, even though he played the role well and the public thought he was Swell.
The author chosen to be Reagan's biographer after the presidency had a heckava' time. There was just not much substance to work with, and the Alzheimer's likely was progessing.
Here's the formula that worked so well: After a peanut-farmer governor without much charisma or old-boy network who could be dissed easily; then an actor of limited intellect with a progressive disease; then the big step, the former C.I.A. agent and director and old-money, Skull & Bones member, G.W.H. Bush; then the unexpected upstart Clinton, brought to heel with 70 million to prove his pecadilloes with Monica and that he lied, but then he was brought into the fold; then the truly intellectually - challenged son of old-money, Skull-&-Bones forebears, who could win with a little cheating, who also didn't read and was useful for his God-made-me-do-it pronouncements, which made the right-wingers swoon with joy; then a charming, handsome black-white unknown with a gift of rhetoric, 48, and with admitted limited experience and knowledge of economics [how convenient], and obviously now, either limited experience in the SHARK pool, a faulty or seemingly thin knowledge of history, and/or it's just selling-soul time and selling-out the ordinary folks of the country for bigger and better ONE WORLD GOVERNMENT by the elites, financial establishments and corporatocracy with a partnering Israel, as all part of the deal ... well, here we are.
The coup d'etat that began with JFK's assassination is reaching fruition now. We're broke, and we have below-zero moral standing in the world, and we are devising more ways to kill more people with Weapons of Mass Destruction of all kinds, including a whole new generation of nuclear weapons in the works, started by GW and a stamp of approval by Obama.
Be careful who you wish for to be President; you may get what you asked for. But it's a moot point. The presidency is controlled as are the rest of the workings of the government, with the occasional hero who keeps going and going and going like the energizer bunny, but who never will be given enough press to get anywhere with his/her pronouncements or proposals.
Fascinating stuff. The question though is: What's the next step? and what are WE going to do about it? And can we really do anything?
/cm
Sioux Rose
CEE: Great post. You didn't mention Nixon in it, but certainly he began to set the template for a unitary executive. Many of his "hit men" have been instrumental to recent policies that have managed to turn the clock back centuries on civil liberties, Nixon's dream.
Thanks all who got something from my post. Connecting the dots is sort of a macabre fun, and history has always been a prime field for me.
Covered the Nixon thing with his minions re the Imperial Presidency, Sioux Rose, in another previous post in today's [now yesterday's] essays.
And just finished another one about JFK in answer to CarlaWaters' questions about him in another of today's [now yesterday's] essays.
The flashpoint which begins all of this to here is FDR's bold actions ... the socialistic Social Security we have, all the work projects, the various kinds of assistance to people during the Depression. The bankers loved him the first year when he saved their asses. He then totally went against "the class" he came from and helped the people. And, of course, from then on the Republicans hated him; the bankers hated him, etcetera. The Catholic Father Coughlin was the Rush Limbaugh of his time. It was all quite vicious. He was referred to as That Man in the White House by those of his socio-economic class.
The transformation for him was the debilitating polio experience that became part of his life until he died [simulating walking with around 100 pounts of braces on his legs]--the pain, the humiliations, the constant struggle--forced the connection with similarly suffering people, mostly poor, at Warm Springs, Georgia, and that pain and that intimate connection transformed him as a person, and that made all the difference in the world. Prior to that illness, he was considered somewhat shallow and a lightweight politician, and certainly he gave very little to no consideration to poor and disenfranchised people or people not of his old-money class.
Highly recommend the HBO film, "Warm Springs," on DVD [free at your library] with Kenneth Branaugh as FDR and Cynthia Nixon as Eleanor, Jane Alexander as FDR's overbearing mother, which covers this period and ends with his re-entering the political scene at the State Democratic Convention. I watched it about three times. Amazing story and acting.
Always apparent throughout U.S. political history is the war or chasms between the classes. But to really get a handle on what's happening now, educate yourself on the picture from about 1900 on when we changed from an agrarian society to an industrial one. That's when the national wars really began big-time in terms of hot-button economics, a carefully planned educational system to create literate factory workers, and the Federal Reserve became our "national banking entity," even though it is a private banking consortium, with Woodrow Wilson's reluctant signature in 1913.
William Manchester's two-volume history of the U.S. from 1932 to Watergate in 1972 reads like a novel. The Eagle and the Dream, I think.
I think what all of us are wrestling with now is that we do not have a leader or leaders who are going to get us out of the situation we are in. We all pretty much know just about everything is controlled, under surveillance, and there is an agenda that has nothing to do with the comforts for and security of the ordinary citizen of the United States.
We all have to get that The System is now dysfunctional and broken in a lot of places in terms of a government of, for and by the people, with the added burden ... depending where you're standing ... that the citizenry of this country are uninformed, misinformed, apathetic, busy with their stuff and that's about 80 to 90 per cent of us.
So the challenge is how do we pull whatever we need to pull out of the fire? How do we negotiate this challenge?
And even if you have ideas or an idea that might be transformational, even globally so, how do you get it out there in a climate that is decidedly not favorable and in fact is downright dangerous toward and about real CHANGE?
That is our individual and collective dilemma.
Interesting ride, this.
peace, cm
CM, SR and BFK, excellent points and discussion on this thread. This type of info should be published on the front page of every American newspaper. It's a shame only a few of us here on CD have the priveledge of reading it.
Cee Miracles, interesting information. But his Alzheimer's didn't start in the White House. When he was governor of California, his then press secretary Lyn Nofziger was following him around saying "That's not what the governor meant". The San Francisco Chronicle was gleefully reporting many of his idiotic statements, although the LA Times was being discreetly quiet.
I remember when he became president, a reporter asked him how it felt to be the president, and he said "I don't know, I've never played a President before".
When the people fear their government there is tyranny,
when the government fears the people there is liberty.
~ Thomas Jefferson
Cee,
Beautifully written. That is what I call...connecting the dots.
Listen. Raygun must be tagged with the start of this cycle.
There are younger generations out there who have only "neutral, but fuzzy and warm" feelings about the Raygun Era largely because of the way he's been portrayed in current affairs. It's really quite alarming to witness it in general discussion groups under the age of 30.
Here is one serious historical opportunity to set the record straight for an entire generation. We can start by educating younger people how Obama and Bush and Clinton continue down the path of Reaganomics. Start at the source and work our way to the ocean of sh*t breaking on our shores.
Re "Raygun must be tagged with the start of this cycle."
I actually peg the start of the cycle to the assassination of JFK in 1963. There is no question that that assassination, and perhaps those that followed, were inside jobs. Reagan was just the first fruit of the dynamic that was unleashed that day. With George W. Bush, it reached its full flower.
All that remains now is the withering and death.
Party of Lincoln, my ass. Reagan and all of his followers suck. I can only imagine him on Mt. Rushmore grinning like a baboon in the presence of the great men who have already and unfortunately been carved into the mountain. And all of this while the flock genuflects in front of him like the Tories they are. Another of the great ideas from the Republican Party and those that would embrace kings. But I digress…
Oh, well, you know it was that old flip/flop thing the Republicans do so well. Back in Lincoln's day the Republicans were liberals and the Democrats were pseudo-populist conservatives of the deep south. Somehow they flipped that around by the great depression and even more so by the 60's.
Now we're so confused no one knows which party is what. Republicans are leaving in droves to become "Libertarians." Democrats are hoping for "change." Republicans who still cling to the party are lunatics.
I'd like to see a party of moderate liberals, but alas, I doubt that day will ever come. :)
"Capitalism is the astounding belief that the most wicked men will do the most wicked things for the greatest good of everyone." John Maynard Keynes
I think America has been a giant experiment; and I find it really difficult to believe we will all stop buying crap food, crap cars, crap clothes, and just crap in general and start living sustainably.
Reagan started something far, far worse than stupid economic policies. He started an ugly era of shopping sickness that still hasn't stopped and is spreading around the world. It is an interesting surmising to wonder exactly how that will be stopped without utter catastrophe.
Shows like 'Sex and the City' are a good example: they were nothing but advertisements for people to buy things they couldn't afford during a time of insanely easy credit.
Louise, I love your Keynes quote, I have to add it to my portfolio of email signatures.
I think Reagan's ugly era of shopping sickness is an outcome of his philosophy of self centeredness. If self gratification becomes our reason for existence, it becomes a devouring beast that destroys us. Like any addiction.
When the people fear their government there is tyranny,
when the government fears the people there is liberty.
~ Thomas Jefferson
Couple of points:
- Krugman evidently hasn't read Shock Doctrine. He wouldn't be so surprised if he had. Reagan was just one in a string of Chicago School practitioners, though the first directly applied to the US.
- 2nd, as Thom Hartman repeatedly mentions, as should we all, it's "The First Republican Great Depression", not just the Great Depression. Words matter. The Righties have figured that out. So should we.
Mr Krugman states: " ... Americans were piling up debt, and they weren't putting aside any of their income, but their finances looked fine once you took into account the rising values of their houses and their stock portfolios. Oops."
No sane and serious person publicly rationalized the bubble economy on the basis of this contention. It is absurd on its face and demonstrates perfectly the logical fallacy that underlies growth and development economics. "Oops" is not a substitute for "shame."
I'm not sure what to make of your post. I thought Krugman as right on the money with that comment, indeed that's what I did. My net worth includes the value of my home and stock portfolio. And we've all been encouraged to think like businesses, that as long as these items are larger than our loans, we're doing alright. But, in the 1950s, people didn't think that way. They thought about savings, primarily.
Reagan famously said (many times) that "deficits don't matter." Elect an idiot, the result is idiocy . . . and debt so big it can be paid down to a certain extent but never paid off. There is no Shining City on a Hill. There is, however, a public toilet on a hill that hasn't been cleaned in over thirty years. Those are the jobs our children and grandchildren can look forward to, cleaning that Filthy Toilet on a Hill.
The Reagan yrs. were when the US was high on Coke and crack so whose surprised. Reaganomics was the crack cocaine of economics.
Bravo to Paul Krugman. He is the sort of public figure needed to begin the long and painful process of chipping away at the putative figure of "Saint Ronnie" that the Reagan Legacy mini-industry would have the guileless believe, and instead paint him by all too appropriate sobriquet Jello Biafra has given him, Grandpa Caligula.
Grandpa Caligula was as damaging and regressive a figure in American public life who made the Bush error possible, and deserves the harshest rebuke that history can grant...by reversing his policies & taking his name off of the airports, high schools, and aircraft carriers.
It's amazing to me when people actually catch up to what I have been saying for damn near 30 years, now. I am NOT an economist, but I saw this disaster coming when Reagan started it. I was never shy about saying it, either, which has caused me to get a pretty fair amount of abuse over the last 3 decades.
The whole idea of giving the rich the tax breaks while you screw the rest of your country for every penny you could while at the same time "privatizing" everything that the gov't used to do is a sure sign of Alzheimer's if I've ever seen it. The idea that adding a profit motive and level of expense to those things that used to be taken care of by a non profit entity is going to result in savings is pure self delusion. It's physically impossible. So is the idea that the rich will provide jobs for anyone if you just give them more of YOUR money. It was a boondoggle from the word go.
I just hate being right about this kind of crap. And it disgusts me when a 20 something year old like I was back then is smarter than every trained economist and gov't official in the country, and can tell you what the disaster is going to be and how bad it's going to be decades before it actually happens. How is it that the economists DIDN'T see what I saw? How is it that there are STILL people who worship at the alter of Reagan the addled? Why does anyone take seriously those who still think that Reagan was anything but a brain dead sell out?
I remember having bulletin board arguments back then telling people just what the problem was, who made the problem, and what was going to happen, saying that Reagan was the worst thing that had happened to this country in my lifetime, and they all told me I was out of my mind, was crazy, didn't know what I was talking about, etc. Look who is still standing, now. ME. How could a whole country allow itself to be so brain washed by a braind dead fool? I just don't get it.
Re "... it disgusts me when a 20 something year old like I was back then is smarter than every trained economist and gov't official in the country..."
Replace the words "economist" and "gov't official" with "paid toadie" and it becomes easy indeed to see how it all happened.
Well said, WJM. I remember those discussions with my own beloved husband as a newly married couple circa 1983. I gave him a little leeway since he was a recent Army vet at the time. And since he is a man of intelligence and discretion he soon came around, and now he is very credible as he relates the changes in his own thinking.
But not so the rest of the world, it seemed. I hit a brick wall with most of the people who loved Reagan. I have asked myself the same questions that you have proposed, and I guess the answer is that Ronnie made the USA LOOK good. He was smooth, folksy, and managed to deflect criticism with a superhuman ability. Despite having the most amount of corrupt military and CIA operations, he SEEMED like such a good guy, saving us from the commies once and for all.
In ways that were subtle and insidious, selfishness and greed were promoted as pulling oneself up by the bootstraps. Remember his story about the Welfare Queen driving a Cadillac? Not remotely true, but it did serve to quash any humantiarian aspects of policy-making and to drive the idea of selfishness over the top. Ronnie gave us permission to hate the undeserving poor, to wag our fingers in the air and selfishly shout We're number ONE!
If you can't become a success in America then you are an insult and an embarrassment to the rest of us. Getting us to identify with the rich as something we could actually achieve was his greatest trick. It helps guys like Joe the plumber reject things like the estate tax because he wants to protect his possible future riches.
Amazingly enough, I was still having these discussions last year!
The sheer and solid popularity of Reagan is what impressed politico's everywhere. He was Saint Ronny to way to many people. And the message that sent to many in governance was, 'we have govern smarter and smaller'. Note, Reagan himself DIDN'T make government smaller or smarter. He just cut taxes and figure that by expressing the 'tax revolt' mania of his times, he had done enough. We see now how selfish and immoral that attitude has been: 'Since I hate taxes, I propose to make my grandchildren pay them!' Mourning in America...
Clinton/Gore took the Reagan Revolution seriously: how to govern smarter and smaller. They undertook a general review of the government and tightened belts where they could. In effect, because they actually CARED about governance, they did the work Reagan refused to do. But their policies were Reagan-lite, especially as we now see with Finance-sector deregulation.
Then Bush happened.
People on the right are beginning to suspect that maybe it wasn't all that responsible to sweep your taxes onto the backs of your children, and generally dislike Bush. But they still love Reagan. I don't think the nation can move forward until the general public develops a serious dislike for Saint Reagan and his policies. Obama, for example, is politician enough to kiss up to the Reagan legacy whenever he can. Kill that image, and you'll kill the tendencies of the Obama administration to continue Reagan policies for votes.
I was a college student when Reagan was running in 1980 and I saw what was coming too. I am sure millions of us did. While we had no reason to provide anything but a fair and honest appraisal, the establishment economists and officials were doing their own risk analyses, where there was a downside for predicting economic troubles from Reagan's policies. Undoubtedly many of them saw what we did, but making such a prediction would not have been a good career move, especially since with the long time period involved it was unlikely they would ever reap any significant rewards from being right.
kivals and WJM, I'm older than you, and lived in CA when Reagan become governor in 1967. He started right off refusing federal grants that required matching state funds. Money that normally came to the communities from the state dried up. Suddenly there was no money for schools, libraries, public clinics, after school programs, any community projects. Property taxes started rising to keep the communities going. No one seemed to realize this was all a result of Reagan's policies. When he got reelected, I thought my God, he could get elected president. And if he does, he will do the same thing to the whole country. Unfortunately that's just what happened.
But there's more. He brought a new philosophy to the country. My mother came to visit me and my newborn son in 1981 and she said "I fear for our country. I see a new attitude, a loss of idealism in our youth. Our country needs the idealism of youth". It goes beyond that, he also brought the idea that we should be self centered and think only of ourselves. Some of us never went there. But many, many did. That attitude still persists. Even today there are many who say, "Why should I pay for someone else's health care?" Of course the answer to that is, "You do anyway, only you're paying double for yourself and for them. Who do you think is paying for their ER visits? The insurance CEOs?" I digress, as always, into the health care outrage.
A few brave people don't let their careers affect their choice to do the right thing. Have you seen "Flash of Genius"? I'm not generous with 5 stars, but it got it.
When the people fear their government there is tyranny,
when the government fears the people there is liberty.
~ Thomas Jefferson
You're right, there, it was all based on CYA. Unfortunately it has cost the vast majority of us our asses, as well as those of the next generation or three. It just drives me crazy to have seen it being so obvious and have people that I thought were smarter than I was tell me that I was out of my mind. Funny, but of those that I still know, the majority of them have started to agree with me, though most of them don't remember telling me that I was wrong back then.
I consider all those economists who championed this Alzheimer's economic system to be guilty of theft of a country's promise. I think they should all be kicked out of the business and relegated to pushing a broom or emptying trash cans into trucks from now on. They don't deserve to be working in a field that they clearly either don't understand or aren't strong enough to tell the truth about. They had an obligation to be honest and didn't do it. We all suffer for their cowardice. Those that still follow the stupidity of this should be removed for the good of the country.
Too much money in too few hands, and until that changes, nothing else will. That is Reagan's fault, too. And it's just disgusting how many people in this country still kiss the ass of the man who destroyed their futures.
It was also the Reagan era that brought us the economic necessity of the two-working-parent family...one of the larger blows dealt to that institution, in my opinion...
I caught the end of a comment about interest rates are rising, which would overpower any attempts to save the economy.
Was that China et.al. lending rates?
I have been saying this all along ... Reaganomics started all our trouble ...
"Federal debt as a percentage of G.D.P. fell steadily from the end of World War II until 1980. But indebtedness began rising under Reagan... The increase in public debt was, however, dwarfed by the rise in private debt, made possible by financial deregulation."
The chart here from Naked Capitalism tells the story :
http://www.nakedcapitalism.com/2008/07/has-deleveraging-even-begun-not-for.html
Reaganomics was the tri~fecta of bad policy. Lowering tax rates on the very rich, corporations and LBO firms enabling a huge leverage up with the increased cash flow, the loosening of financial regulation allowing even more leverage and the looser rules allowing the gutting of American firms through LBOs or threat thereof to causing even more leverage, cutting of benefits, off shoring and out sourcing ... the easing of consumer credit underwritten by all the new leverage.
Krugman is finally "getting it" ...
What we have is NOT " Magneto Trouble" . It is a debt bubble twice the size of that during worst of the Great Depression, the outsourcing and off shoring of our industrial base, while we import 2/3's of our oil ... During the Great Depression we were still the great industrial power, we weren't in severe debt until the unwind of the leverage and we were the Saudi Arabia of oil production at that time ...
Welcome to reality Paul Krugman ...
You alos have to remember the other failing of Reaganomics.
While he did indeed lower the various tax rates, he increased Social security taxes significantly. The monies raised here were to be used to help pay down the debt wherein they felt that money saved on the interest payments could then be used to fund social security.
Now while that is what was SOLD to the public, they in fact spent those extra funds faster then they came and and then used chicanery (as did presidents after him) to label it as revenues.
His entire philosophy was "Borrow our way to prosperity".
It was ALL about debt.
The Clinton Presidency was not a heck of a lot better. While there was surpluses they were phony. They were based on that chicanery used with Social Security taxes AND predicated upon creating "Bubbles" that gave the illusion of prosperity.
When someone buys a stock for 10 dollars and sells it for 200 dollars Government revenues go up even if that stock only worth 5 dollars in reality.
Yep.
And there is hardly a more regressive tax than the wage-only, flat, only on income less than about 100K, (much less back then) social security tax.
Yep.
And there is hardly a more regressive tax than the wage-only, flat, only on income less than about 100K, social security tax.
It's true enough that Reagan may have ended Prohibition-- that is, regulatory prohibitions against unfettered greed and venality in the financial sector.
But if Reagan let loose the dogs of greed, every succeeding administration fed and fattened and bred those dogs. And not with table scraps, either-- those are only fit for the ordinary citizens who've been slowly starved to death since the Sixties.
Clinton's enthusiastic Republican-Lite partnership with the Wall Street banksters was a precursor to Obama's transforming the US Treasury into a division of Goldman-Sachs.
Our elite duopoly no longer even pretends to show concern and consideration for the common man-- even Krugman has bought into the corporate-serving scam that single-payer health care is a "political impossibility", and subscribes to the cold-blooded notion that the "better" (pragmatic) alternative is to squeeze dollars from the bottom of the economic pyramid to fund and support a half-assed, problematic plan intended to preserve the solvency (profits) of the insurance cartel at taxpayers' expense.
In other words, an insurance corporation "preventative bailout" disguised as health care reform.
It's Morning in Amerika again!
· Yr Obd't Servant
Many times I hear the comment that history is best forgotten. Krugman gives us yet another example to the contrary.
The problem is that history is forgotten. If we give the governing bodies the benefit of the doubt we can imagine an opposition party and a public who had forgotten why the Garn-St.Germain Depository Institutions Act was important.
Given that history gets forgotten, some means of remembering it is needed when it is proposed that laws are changed or replaced.
One solution to consider would be to have professional historians involved in the process. Imagine a group of historians on retainer to a governing body, say 100 historians. An existing law is to be replaced, so part of the process is to select by chance 4 of the historians to look at the law, why it was enacted, and how its passage has affected the country since its passage. By random selection two of the historians would be selected to find the postive arguments in favour of the law and the other two would be assigned to look for the negatives. A bit later when discussion of the law by the lawmakers is to begin, the process begins with a debate between the two groups of historians, the intent of the debate being not to settle the issue but to bring the important issues into the debate, and hopefully into public awareness.
Lest we forget: None other than George Bush I called Reagan's policies "voodoo economics" during the 1980 Presidential primary, referring to the supply-side/tax-cut gospel espoused by Saint Milton Freidman and others. Cut taxes for the rich and the benefits will trickle down, so they said.
Today, the Republicans are a party of anti-tax fundamentalists. Dare to consider that tax increases might be necessary for a healthy society and government and you're excommunicated. We're seeing the disastrous results here in California, where the anti-taxers have effectively strangled the state.
The purpose of memory is not to help us recall the past , but to let us anticipate the future. Memory is a tool of prediction.
(Alain Berthoz)
"Obama get away from the stove!! Do you remember what happened the last time you were playing by it and burned yourself?"
(Somebodies mother to a little child)
"No mother, I am looking to the future, I do not want to reflect on the past....Owwwwwwww WAAHHHHHHHHH "
Another solution is to de-emphasize standardized testing in schools and let teachers teach - especially history, civics, and political science. One of the right's primary purposes for passing NCLB was to let the government control educational content through the testing mechanism.
q
You are SO right! I'm a retired teacher and so glad to be so.
Rainborowe
As Cheney famously stated, "Reagan proved that deficits don't matter." Reagan and Bush-Cheney led the way in deficit spending with Bush wanting to see everyone become "homeowners." The utter arrogance of the 'free market' and America's place atop it all carried us from one stupidity to the next. At least Reagan kept his imperialism to only invading the nutmeg capital of the world, whereas Bush-Cheney threw caution to the wind with multiple torture wars in their orgy of hysteria.
At this point, Raygun is irrelevent given that neither Clinton nor Obama let alone Dubya cared to reverse Raygun's policies. "Saint" Obama still adores Raygun's conservative ideology. We can complain about who started all this and who started all that but when are we going to find the right leader to end it?
We're not. At this point, the financial community's choke hold on the US Government -- and therefore the American people -- is firmly in place. We may as well admit that we've enetered a period of capitalistic feudalism. Americans have become peasants, a situation that will be enforced by Predator Drones if need be.
Yep, we got to get it together.
Clinton ended regulations on derivatives and default swaps which now are counted at the 600 trillion range.
Obama is piling it on. War economy and all.
Its revolution or bust.... and Bust is here already.
It was Obama's praise of Raygun, in the interview where he also called the 1960's and 1970's "a time of excess", that convinced me I would never vote for him.
Nah. Reagan isn't irrelevant. Its important to identify the source of the irritation before you can treat it.
And that source if irritation was been long ago identified.
But Clinton only accelerated the Reagan Revolution - pushing through stuff like the "Personal Responsibility" (welfare dismantling) and "Effectve Death Penalty" (hang-en high) Acts that even Reagan dared not push. Obama continues the "Reagan revolution".
Xyy, thanks. You beat me to it. I didn't mean to say that Raygun was irrelevant completely but the longer time passes and no Democrat or Republican comes in and abolishes Raygonomics, the less meaningful it sounds blaming Raygun alone. And if I remember, Krugman has been playing nice with Obama despite Obama's support of Raygun. I don't know what to make of Krugman at times.
Carla,
Krugman has actually been very critical of Geithner's plan to loan the hedge funds up to $1 trillion to buy toxic assets from the banks. He has strongly favored temporary nationalization of the most troublesome large banks because he thinks that Geithner's plan is too expensive, tilted towards Wall Street, and unworkable.
Thanks VAGreen for pointing this out and clearing my doubts. I guess where I got confused was his support for Obama and nothing about Nader or Mckinney last year. But that's long past for now. I hope Paul Krugman throws his support to a 3rd party progressive in 2012 provided we can get one if Nader doesn't run.
Just curious, which part of VA are you from? I'm from Loudoun County, used to be rural now a suburban sprawl in the making.
I'm guessing Krugman wanted to get to the source of the problem. Reagan was immensely popular, and his policies were immensely popular. Its fair to say he didn't just change the Republican Party, but the Democratic Party as well. I had no love for Reagan, but realized in late 90's the degree to which he'd touched off an irresponsible policy of public debt that continues to this day made me actively hate him. Knowing he touched off a broad and accelerating loosening of gov't restrictions on the finance sector that indebted the private sector to match his public sector debt is important information. Krugman does a service digging out the roots of these policies. We cannot move forward until everyone, Republicans included, repudiates the Reagan legacy. That is a tall order, but must be done. This is important ammunition in that debate. Obama is a politician: meaning he follows the public rather than leads it. If the public at large is still under this romantic image of Reagan and his policies, then Obama will kiss up to those policies. We need to dismantle Reagan in the public image before we can move forward.
Reagan immensely popular? Boy, I guess the conservative Revision-of-History agenda has struck pay dirt!
In fact, Reagan's popularity wavered regularly throughout his tenure, tanking into the high 30% range in his first term, and again revisiting negative territory after Iran/Contra, where it turned out that his operatives were essentially felons -- if not outright traitors -- and had played a crucial role in spawning the California crack epidemic of the late 1980s.
Actually, if he had been immensely popular, I would be even more dismayed than I was by his administration. Did anyone besides me smell a fish when those embassy hostages were held until after the 1980 election and then released just before Reagan was inaugurated? Did anyone besides me suspect sabotage when those helicopters that Carter sent in to rescue them went down in the desert with their compliment of marines on board? Was anyone besides me appalled when it turned out that Reagan was doing business with those same embassy captors, selling them military hardware no less? While at the same time furnishing Saddam Hussein with military intelligence to spur on a war that claimed millions of lives? Was anyone besides me disgusted that our government under Reagan was training goon squads to terrorize Latin America?
I do give him credit for his "Tear Down This Wall" speech, which I thought was a good and resolute position. Other than that, I thought that the seeds of America's destruction were sown during Reagan's administration. Seeds that reached their full bloom under George W. Bush. And his popularity was justifiably lackluster because a lot of other people thought so too. Revisionist history nothwithstanding.