Reaganomics at War

A. Scott Piraino

In 1981, when Ronald Reagan was sworn in, the country faced the worst economic downturn since the Great Depression. President Reagan proposed a novel solution, lowering tax rates on the wealthiest Americans so they could spend and invest more money. His administration argued that only this increased economic activity could lift the country out of recession.

Quasi-economic terms like “supply side” and “trickle down” were used to give Reagan’s proposal an academic veneer. In fact Reaganomics was nothing more than intellectual camouflage for cutting tax rates on the rich. And if these tax cuts were unfair and would create the largest national debt in history, well so what.

Twenty years later our national debt has climbed to seven trillion dollars. Yearly interest payments on that debt have ballooned to 300 billion dollars. The poorest Americans have seen their living standards decline over the last twenty years, while incomes for our wealthiest citizens have soared.

But these facts did not deter President Bush. His administration used the recession of 2001 to justify a 1.35 trillion dollar tax cut package. Like Reagan, President Bush sold his plan as a tax break for all Americans, knowing these reductions would favor the wealthy.

While reducing income taxes for everyone, his administration quietly increased payroll taxes on working Americans. Social Security and Medicare are flat taxes on all wage income. That means there are no write-offs or deductions, and all payroll income is taxed at the same flat rate.

Of course the wealthiest Americans don’t worry about payroll taxes because they don’t have jobs. They own capital, invested money that makes more money. Capital gains taxes have been steadily reduced, to fifteen percent today. Since this is not payroll income, the owners of capital do not contribute to Social Security and Medicare.

Payroll taxes account for over one third of federal revenue, and nearly all the budget surpluses up to 2001. Yet President Bush did not suggest reducing these taxes, or making them fair. Instead the Bush administration continues the fiction that workers are contributing to a “trust fund”, while spending the surpluses from payroll taxes as general revenue.

This would have been just another craven transfer of wealth to the rich if not for the tragic events of September 11th. After the terrorist attacks, the recession of 2001 suddenly looked like an economic crisis. The surpluses of the previous four years disappeared, spent on military operations, emergency relief, and a bailout for the airlines.

The Bush administration announced an emergency budget increase, and a return to deficit spending. This year’s budget deficit will climb to over 400 billion by year’s end, a new record high. This does not include an additional 87 billion dollars for the war in Iraq, which President Bush requested last week.

With US forces occupying Iraq and Afghanistan, the Bush administration had the audacity to suggest another round of tax cuts for the wealthy. President Bush signed legislation last spring further reducing taxes by 350 billion dollars. Included in this new package are more tax cuts for corporations, and further reductions on capital gains taxes.

The War in Iraq is costing over four billion dollars a month, three million Americans have lost their jobs in the last three years, our trade and budget deficits are soaring, and this President doesn’t care. It’s not that he believes in Reaganomics, George Bush doesn’t believe in anything. Recession and war are not reasons for more tax cuts, they are an excuse.

In 1981 the wealthiest Americans received the biggest tax cut in US history. Make no mistake, Reaganomics has done exactly what it was supposed to do. It has made the richest Americans much wealthier, while transferring more of the tax burden to the middle class and working poor.

President Bush shares Reagan’s agenda. Our wealthiest citizens have received more tax cuts, while the rest of us pay for the war on terror, and pay down the debt created by Reaganomics. It’s a disgrace.

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Published in: on October 10, 2003 at 5:02 pm  Leave a Comment  

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