Roll Back the Reagan Tax Cuts

Our bridges are falling apart (among other things), and its Ronald Reagan's fault.

A few hours before the bridge collapsed in Minnesota, a news release landed (among hundreds) in my email inbox. It was from the right-wing "Heartland Institute" and a Minnesota conservative group calling itself the "Taxpayers League of Minnesota." It read:

Minnesota Gov. Tim Pawlenty (R) issued 20 full or partial vetoes of tax hikes and spending increases in May, giving taxpayers reason to smile. ...

May 1, Pawlenty, in a move that took everyone by surprise, vetoed an entire $334 million "emergency" capital investment bill. Pawlenty said in his veto message the bill authorized "more than four times more spending on projects than I requested and is simply too large."

Two weeks later Pawlenty announced another important veto, this one to block a transportation bill containing more than $5 billion in tax and fee increases...

"Buying down property taxes through local government aid programs has never proven to be a long-term solution to property tax pressures," Pawlenty said in a May 30 veto message.

Phil Krinkie, president of the Taxpayers League of Minnesota, agreed.

"Relying on the benevolence of local units of government to restrain their spending and lower property taxes when the state drops sacks of money in their lap is simply foolish," Krinkie said. "Thankfully, Minnesota has a governor that recognizes this."

The transportation bill veto is the only one the DFL [the Democratic Farm and Labor party which controls the Minnesota legislature] tried to override. The attempt came with less than 20 minutes remaining in the session and was defeated by House Republicans, led by Minority Leader Marty Seifert (R-Marshall).

"Democrats made too many campaign promises to win their seats and are now learning they can't pay for them," Marshall [Seifert] said after the failed override attempt.

Ultimately, it was the DFL's inability to override any of Pawlenty's vetoes--particularly of the transportation bill--that resulted in a comparatively small $3 billion increase in state spending with no new taxes.

Said Krinkie of the 2007 session, "Minnesotans really need to thank Gov. Pawlenty and Rep. Seifert's House Republicans. These guys stood strong in the face of overwhelming pressure and came through for taxpayers when they really needed them."

If by "taxpayers" one means "millionaires, billionaires, and corporations," the news release was accurate. And now its authors have blood on their hands.

After the Republican Great Depression, FDR put this nation back to work, in part by raising taxes on income above $3 to $4 million a year (in today's dollars) to 91 percent, and corporate taxes to over 50% of profits. The revenue from those income taxes built dams, roads, bridges, sewers, water systems, schools, hospitals, train stations, railways, an interstate highway system, and airports. It educated a generation returning from World War II. It acted as a cap on the rare but occasional obsessively greedy person taking so much out of the economy that it impoverished the rest of us.

Through the 1950s, though, more and more loopholes for the rich were built into the tax code, so much so that JFK observed in his second debate with Richard Nixon that dropping the top tax rate to 70% but tightening up the loopholes would actually be a tax increase.

JFK pushed through that tax increase to take us back toward FDR/Truman/Eisenhower revenue levels, and we continued to build infrastructure in the US, and even put men on the moon. Health care and college were cheap and widely available. Working people could raise a family and have security in their old age. Every billion dollars (a half-week in Iraq) invested in infrastructure in America created 47,000 good-paying jobs as Americans built America.

But the rich fought back, and won big-time in 1980 when Reagan, until then the fringe "Voodoo economics" candidate who was heading into the election trailing far behind Jimmy Carter, was swept into the White House on a wave of public concern of the Iranians taking US hostages. Reagan promptly cut income taxes on the very rich from 70% down to 27%. Corporate tax rates were also cut so severely that they went from representing over 33% of total federal tax receipts in 1951 to less than 9% in 1983 (they're still in that neighborhood, the lowest in the industrialized world).

The result was devastating. Our government was suddenly so badly awash in red ink that Reagan doubled the tax paid only by people earning less than $40,000/year (FICA), and then began borrowing from the huge surplus this new tax was accumulating in the Social Security Trust Fund. Even with that, Reagan had to borrow more money in his 8 years than the sum total of all presidents from George Washington to Jimmy Carter combined.

In addition to badly throwing the nation into debt, Reagan's tax cut blew out the ceiling on the accumulation of wealth, leading to a new Gilded Age and the rise of a generation of super-wealthy that hadn't been seen since the Robber Baron era of the 1890s or the Roaring 20s.

And, most tragically, Reagan's tax cuts caused America to stop investing in infrastructure. As a nation, we've been coasting since the early 1980s, living on borrowed money while we burn through (in some cases literally) the hospitals, roads, bridges, steam tunnels, and other infrastructure we built in the Golden Age of the Middle Class between the 1940s and the 1980s.

We even stopped investing in the intellectual infrastructure of this nation: college education. A degree that a student in the 1970s could have paid for by working as a waitress at a Howard Johnson's restaurant (what my wife did in the late 60s - I did so working as a near-minimum-wage DJ) now means incurring massive and life-altering debt for all but the very wealthy. Reagan, who as governor ended free tuition at the University of California, put into place the foundations for the explosion in college tuition we see today.

The Associated Press reported on August 4, 2007, that the president of Nike, Mark Parker, "raked in $3.6 million [in compensation] in '07." That's $13,846 per weekday, $69,230 a week. And yet it would still keep him just below the top 70% tax rate if this were the pre-Reagan era. We had a social consensus that somebody earning around $3 million a year was fine, but above that was really more than anybody needs to live in America.

In the worldview Americans held in the 1930-1980 era, Parker's compensation was reasonable. But William McGuire (aka in the business press as "Dollar Bill") taking over $1.6 billion - $1,600,000,000.00 - from the nation's second largest health insurance company (you wonder where your health care dollars are going?) would have been considered excessive before the "Reagan Revolution."

There is much discussion of what the floor on earnings should be - the minimum wage - but none about the ceiling. That's largely because effectively there is no ceiling, and those who control vast wealth in America are happy to have Americans fight over "How poor is too poor?" just so long as nobody asks "How rich is too rich?"

When Reagan dropped the top income tax rate from over 70% down to under 30%, all hell broke loose. With the legal and social restraint to unlimited selfishness removed, "the good of the nation" was replaced by "greed is good" as the primary paradigm.

In the years since then, mind-boggling wealth has risen among fewer than 20,000 people in America (the top 0.01 percent of wage-earners), but their influence has been tremendous. They finance "conservative" think tanks (think Joseph Coors and the Heritage Foundation), change public opinion (Walton heirs funding a covert effort to change the "estate tax" to the "death tax"), lobby congress and the president (who calls the "haves and the have-more's" his "base"), and work to strip down public institutions.

The middle class is being replaced by the working poor. American infrastructure built with tax revenues during the 1934-1981 is now crumbling and disintegrating. Hospitals and highways and power and water systems have been corporatized. People are dying.

And Bush, following closely in Reagan's footsteps, is making things worse. As Senator Bernie Sanders pointed out at recent hearings for the confirmation of Bush's new nominee for the Office of Management and Budget:

Since Bush has been president:

  • over 5 million people have slipped into poverty;
  • nearly 7 million Americans have lost their health insurance;
  • median household income has gone down by nearly $1,300;
  • three million manufacturing jobs have been lost;
  • three million American workers have lost their pensions;
  • home foreclosures are now the highest on record;
  • the personal savings rate is below zero - which hasn't happened since the great depression;
  • the real earnings of college graduates have gone down by about 5% in the last few years;
  • entry level wages for male and female high school graduates have fallen by over 3%;
  • wages and salaries are now at the lowest share of GDP since 1929.

The debate about whether or not to roll Bush's tax cuts back to Clinton's modest mid-30% rates is absurd. It's time to roll back the horribly failed experiment of the Reagan tax cuts. And use that money to pay down Reagan's debt and rebuild this nation.

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