· Reagan’s decision to abandon “protectionism” for Industry was key move in the Party, allowing global actors to more easily abandon the Democratic Party
Republican Party made key shift.
Many in Republican Party had been “protectionist”—this emanated from 19th
century influence of big business, such as steel industry, which had built US
industry with tariff protections;
--now steel and other key actors were trying to be players overseas, and sought to reduce tariff protections; old-line conservatives like Ronald Reagan made shift—Reagan had been a protectionist, when he made shift toward “free trade”, he got big bucks from key corporate sponsors; previously business elites had been divided by trade issue
·
Reagan campaign
brought together the key strains of conservatism, elite economics, hard line
militarism, with populist evangelical conservativism
·
appointed Moral
Majority (see speech to Evangelicals), tapped into New Right ;
·
Iranian Hostage
crisis (after overthrew the Shah, which the CIA had installed in power in 1953,
took American embassy hostages-will discuss this later) and the Soviet invasion
of Afghanistan (more on these in future outline) proved fuel for Reagan
assertion that US needed to reclaim world leadership that was slipping
·
As Carter moved
to the right (see above), Reagan moved from far right to center
right—“originally supported by ultraconservative entrepreneurs in California,
large fortunes hostile to New Deal, armaments industry, small businesses and
PROTECTIONISTS in textile, steel and
oil industry
·
but big business had not supported him in
1976 Republican nomination campaign;
·
drew away from commitment to Taiwan
(multinationals want to do business with large China trade market); when Reagan
declared his commitment to free trade talks to promote global trade,
multinational interests supported his candidacy
·
Reagan, acting on the Laffer curve argument, argued for
“supply side” economics—which held that tax reductions would stimulate the economy by putting money
into the hands of investors and consumers, thereby reversing economic
stagnation of the 1970spromised to simultaneously cut taxes, balance the budge,
preserve social spending and vastly increase military outlays
it is now
clear that REAGONOMICS was carefully crafted to create a large political
constituency that would enable the administration to put in place a program to
restore U.S. business to higher profitability through withdrawing social
responsibility
·
Reagan offered vision of return to former glory of US power
through military escalation and getting government off the backs of people.
·
Once in office, put in place policies aimed at restoring
business profits & reduced taxes for wealthy. Idea was to give money back to business which would invest in
America, create jobs, and the benefits would “trickle down” to the rest of the
people.
·
Result: Tax breaks to wealthy, but tax burden for everyone
else increased or stayed the same. Evidence that tax breaks for corporations
did not contribute to addition of new jobs in the U.S. for those sectors that
benefited the most from them--in fact, a continuing deterioration in investment
in plant and equipment in U.S.
·
Economic Recovery Tax Act of 1981
—lowered corporate share of federal tax burdens that had been dropping for some time—now lowered faster. Tax rates for business were halved, to 16% even after the 1982 restoration of some taxes. Loopholes grew astronomically, many corporations no longer paid taxes.
---lowered tax rates on wealthy significantly—see graphs and overheads distributed in class; ; for those making over $200,000 a year, Reagan cuts brought an average reduction of 15%
--tax rates for individuals
·
Shift from social spending to military spending; -intent,
as revealed by David Stockman, to drive up budget deficits so that social
spending and welfare programs [for people, not corporations] could be reduced;
(see article from 1981 in recommended websites)
·
Mainly spending on redundant weapons, aimed at defense
contractors needs (sunbelt constituency) and programs (for Texas, military
industrial complex) like “Star Wars” (by 2000, this program had cost $60
billion dollars, while it is no closer to reality, and most who have looked at
it closely contend it will never be a reality. The inventor of the idea was a
brilliant physicist who also lived in a fantasy world, and many scientists
discredit it. But the plan appealed to Reagan, who didn’t look at the details
and wanted to believe it was possible.
In 1998 Congress added $9.9 billion to the program without much debate)
Rise in military spending coupled with tax cuts for wealthy meant the most extraordinary record of deficits and spending in US history
·
National debt tripled, forcing US to borrow abroad, piled up
the largest foreign debt in the world. (see Greider article for long term consequences) Policies drove
deficit spending
·
To finance such spending US borrowed abroad and piled up the
largest foreign debt in the world.
Deregulation--had begun under Carter, but in
Reagan years it was vastly expanded and extended into new areas such as
banking, saving-and loan industry, transportation, communications, easing
enforcement of affirmative action laws, cuts in air polition regulations that
had begun under Nixon administration. Secretary of Interior James Watt opened
federal wilderness areas, forest lands, coastal waters to developers (see
article)
·
Reagan’s appointees to key regulatory agencies were pledged
drastic cutbacks in federal regulation of business. Reagan: "Government is not the solution to our problems:
government is the problem.”
Reagan and
Anti-government outcomes
Reagan's
disdain of government was at the heart of the
corruption that plagued the administration
·
In 1980, as a candidate, Reagan listed 70 issues: ethics in
government was not among them. He also didn't mention the subject in his
memoirs.
·
---came to Washington as an explicit enemy of
government; private sector and markets
were greater indicators of “people’s desires” than government
·
Reagan's low esteem for government led to to plundering and
deals that have been forgotten--Reagan came to DC with the intention of
dismantling the governement
·
One study suggests that is is “Remarkable that while
preaching against waste, fraud, and abuse of government power, he presided for
8 years over an administration that combined the old fashioned graft of Harding
Administration with an undisguised grab for presidential power that would have
done credit to Richard Nixon. Yet left the white house with highest approval
since Eisenhower.” (Stealing from America)
·
Examples:
o
at the Dept of Housing and Urban Development-will come to
four to 8 billion dollars.--looted the Moderate Rehabilitation program,
designed to encourage low-income housing--these grants instead handed out ot
friends who had left HUD to rake in big money as consultants or to Republican
bigwigs
o
James Watt garnered $300,00 in public funds to arrange loans
for 3 projects
Major example of plundering of public resources: SAVINGS AND
LOAN deregulation and subsequent bailout—how “deregulation” = plundering of
public trust
o
The S&L crisis was triggered in large part by industry
deregulation, specifically the Reagan
administration's decision to permit S&Ls to raise interest rates and to
leave their area of competence (lending
for housing) and venture into other uncharted, riskier waters. And it was caused, to some
considerable extent, by S&L criminal activity.
o
Congress and Reagan deregulated the Savings and Loan
industry; Bill signed in October 1982
o
government rules
(regulation) over the industry reduced,
while government guarantees to back up deposits and thus decrease risk of
investment increased to $100000 (from $10,000—which had been meant to help
small investors who had no control over the decisions of bankers)
o
ideologically designed as part of his program of reducing
government regulation of an ailing industry;
o
but important to remember the Congressional influence on the
legislation: there were alot of Congressmen from both parties who were behind
this, and benefited personally from the deals that were made. Another
example of the corporate and money power influence in both parties....
o
S&Ls had been regulated under New Deal era legislation;
Until deregulation business loaned money to individuals to buy homes,.No loans
for office buildings or shopping centers, high-flying oil drilling ventures.
o
bill allowed industry to pay much higher interest rates, to
generate additional funds by investing in anything they wished;
o
KEY: this “risk” underwritten by American taxpayers;
depositors were allowed to open unlimited number of accounts, each insured by
federal government up o $100,000.
---The
S&L industry was soon turned in to
a huge casino. Money poured out of the
S&Ls into speculative investments in real estate, condos, oil and gas
ventures, high-interest "junk" bonds. Insiders bought luxurious
estates, planes, and yachts with the deposits. One Florida S&L operator
purchased $13 million worth of art and took it home for
"safekeeping".
o
The nation's savings and loans were freed from restrictive
federal regulation and given permission to expand beyond their traditional role
of making home loans. Now they could use federally insured deposits to buy and
develop all sorts of properties. The new law proved a bonanza for high-rollers,
get rich-quick artists, swindlers --Ivan Boesky, of Wall Street manipulator
fame, acquired a small thrift; George Bush Sr.’s son Jeb Bush got one; Democrats also, this was an insiders’ game
o
The gross misuse of people's savings was allowed to persist
because Reagan administration policymakers and key members of Congress accepted
millions in campaign contributions from S&L kingpins. David Stockman,
Reagan's OMB manager, blocked hiring of S&L examiners. Justice Dept under
Edwin Meese refused to respond to issues of criminality that were increasingly
brought before them.
o
entire rickety structure was finally brought down by the
shakeout of the real estate and financial markets in the late 1980s. Fraud and
illegality was discovered in over 60% of the failed thrifts. When depositors
sought their money they learned that it had been invested in worthless
buildings and land, junk bonds, or had been stolen outright. Reports of mob
influence and CIA money laundering operations circulated
o
In 1988 both political parties concealed the mounting crisis
because both involved in profits from the speculation: funding major Congressional
campaigns (including John McCain, who became part of the famous Keating-Five
scandal) == Both parties at the highest levels were aware of the illegal deals
when they quietly, in a bi-partisan fashion it in 1988, both agreed not to use
it in 1988 election, to conceal the problem.
o
After the election,
crisis revealed, and under bi-partisan legislation, the S&Ls were bailed
out, under regressive plan that eroded the social security fund and medicare
funds. And the taxpayer was guarantor of deposits that were invested in deals
that were never viable.
--WILL
COST TAXPAYERS AT LEAST AS MUCH AS $500 BILLION DOLLARS;
o
Congress established the Resolution Trust Corporation, which
has involved government in continual sell-off of properties acquired through the
bailout. Since then, the agency has regularly sold off real estate from failed
S&Ls at far below market value -- to buyers who were able to quickly resell
the properties at much higher prices. Thus, tax dollars are subsidizing profits
for private investors.