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The Cost of the Left-wing's Ongoing Vendetta Against Reagan

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I still hear from Readers hostile to Reagan that Reagan's firing of the illegally striking air traffic controllers is proof that he was a "union buster." One sometimes feels sorry for people who have so little grasp of politics. For a new president to let himself be rolled up by a poorly-advised, illegally-striking public sector union would have rendered Reagan impotent and without the power to achieve his ambitious agenda of changing the economic and foreign policies of the US. Even Reagan's court historians do not realize Reagan's extraordinary achievements in economic and foreign policy.

It wasn't Reagan's agenda that was anti-left; it was the rhetoric Reagan used in order to keep the conservative base in line. Conservatives did not understand supply-side economics any better than did the economics profession and Wall Street. Conservatives wanted a balanced budget, which is their solution to every economic problem. Reagan was talking about a 30% reduction in marginal tax rates (the rate of tax applied to increases in income) and about faster depreciation schedules for capital investments.

What this meant to conservatives was more budget deficits. Wall Street never lobbied me to repeal Glass-Steagall, but Wall Street did lobby me to water down the Reagan tax rate reductions.

On the cold war front, conservatives were very suspicious of negotiating with the Soviets. Some conservatives put out the story that Gorbachev was the anti-christ, that he would take Reagan to the cleaners and we would all end up living under the red flag of communism.

All of this was over the heads of the left-wing. Being creatures of words, the left was moved by Reagan's words, not by his actions. Whatever words David Stockman and others put in his speeches about cutting back government and the welfare state, the record is clear that Reagan did not cut back government or abolish the welfare state.

I defend Reagan because I am fair and believe people should be judged on their real record, not on a fabricated or demonized one. More importantly, although people seem unable to learn from history, a lack of understanding can lead to the wrong lessons being drawn from the past.

For example, by the time of George W. Bush's presidency, jobs offshoring by US corporations had reduced US GDP growth and employment opportunities in manufacturing. The Bush administration's solution was to reapply the Reagan solution--tax rate reductions. However, Reagan's tax policy was directed at increasing the supply of goods and services relative to demand in order to stop the rise in inflation and unemployment. Supply-side economics is not a cure for declining employment opportunities and GDP growth due to jobs offshoring. From a policy standpoint, the Bush tax rate reduction was pointless, and it was ineffective as an answer to an economy in decline from jobs offshoring.

The Republicans, however, misreading the past, thought that tax reductions and de-regulation were the stimulus that the economy needed. Their mistake has left us with a hollowed out economy with the once prosperous middle class in decline and with an ongoing financial crisis that is held off with the Federal Reserve's policy of negative rates of interest on overpriced bonds.

If all the uninformed people who ranted about "Reagan deficits" and "tax cuts for the rich" had bothered to educate themselves about the policy that they so desperately wanted to demonize, a wider understanding of the Reagan era might have created an audience among Washington policymakers for writings by myself and others who stressed, to no effect, the adverse impact of jobs offshoring on the economy. Instead, this cancer, masquerading as the benefits of free trade, has gone untreated for 20 years.

I agree that this is a lot of history in a few words, but it suffices to make the point. Now to get on with Reagan's non-responsibility for the financial crisis and war on terror.

The Presidents Working Group on Financial Markets, created in the last year of the Reagan administration, was labeled the "plunge protection team" by the Washington Post. The Working Group consists of the Treasury Secretary, Federal Reserve Chairman, and the financial regulators.

I do not know the reason the Working Group was formed other than it appears to be a response to the October 19, 1987 stock market decline. I suspect that there was concern that speculators either drove down the market by short selling or took advantage of a decline in the market to make money by short selling that worsened the crisis. If speculators were indeed gaming the market at the expense of pension funds, IRAs, and long term investors, the government might have felt obliged to come up with new regulations or to use moral suasion or even direct intervention in order to protect legitimate investors from the greed of speculators. If speculators short the market and the Federal Reserve buys long, the shorts don't pan out for the speculators.

How the Working Group has evolved since 1988 I do not know. The Treasury itself seldom has any money, especially these days when it lives hand-to-mouth from bond auction to bond auction. It is the Federal Reserve that can create money. It would be easy for the Federal Reserve to offset the effect of short sales on the market average by purchasing stock index futures.

Whatever the original purpose of the Working Group, it was not to help protect the foreign exchange value of the dollar from a low interest rate policy that the Federal Reserve regards as a necessary response to the 2008 financial crisis in order to maintain the solvency of banks too big to fail, and it was not to disguise the exit of investors from the stock market. The purpose of the Working Group was to prevent private speculators from gaming the market or to make them pay a price if they did.

The Federal Reserve's use of the Working Group has probably evolved with the crisis, just as the Federal Reserve has used its balance sheet in new ways that go beyond its normal operations. However, it is absurd to blame Reagan for the Federal Reserve's different use or misuse of the Working Group twenty-four years later, if that is indeed what is occurring.

What explains the left-wing's obsession with Reagan to the neglect of the serious war crimes of the Clinton, Bush, and Obama regimes and to the neglect of the destruction of the civil liberties guaranteed by the Constitution? Reagan is not responsible for any of this. Reagan had no war on terror, no PATRIOT Act, and no police state. Reagan neither assassinated nor put in indefinite detention any US citizen.

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http://www.paulcraigroberts.org/

Dr. Roberts was Assistant Secretary of the US Treasury for Economic Policy in the Reagan Administration. He was associate editor and columnist with the Wall Street Journal, columnist for Business Week and the Scripps Howard News Service. He is a contributing editor to Gerald Celente's Trends Journal. He has had numerous university appointments. His book, The Failure of Laissez Faire Capitalism and Economic Dissolution of the West is available here. His latest book,  How America Was Lost, has just been released and can be ordered here.

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Well, maybe I am here included in the lefties who ... by Walter J Smith on Sunday, Jul 22, 2012 at 7:00:47 PM
" It wasn't Reagan's agenda that was anti-left; it... by Christie on Sunday, Jul 22, 2012 at 8:38:23 PM
After all the Bush's did have him shot. One doesn... by Jack Heart on Sunday, Jul 22, 2012 at 9:48:21 PM
Jokes and snide remarks aside but don't expect... by Jack Heart on Monday, Jul 23, 2012 at 12:00:02 AM
not appear to be working, noon MST, 7/23.... by Daniel Geery on Monday, Jul 23, 2012 at 12:58:32 PM
of Calif.,and my State income tax went up. His cam... by bogi666 on Monday, Jul 23, 2012 at 7:23:57 AM
'The Reagan administration's interventions in Gren... by Mark Sashine on Monday, Jul 23, 2012 at 7:52:05 AM
Thanks for proving my point that the left is more ... by Paul Craig Roberts on Monday, Jul 23, 2012 at 11:06:37 AM
Admit u and RR are and were free market devotees o... by Lester Shepherd on Monday, Jul 23, 2012 at 12:42:06 PM
bombing of the  American Marine barracks in B... by bogi666 on Monday, Jul 23, 2012 at 3:43:11 PM
I am an avid reader of Paul Craig Roberts and beli... by Rudy Avizius on Monday, Jul 23, 2012 at 10:14:23 AM
I did not say that the Reagan administration's int... by Paul Craig Roberts on Monday, Jul 23, 2012 at 11:04:26 AM
There is NO excuse for intervention against democr... by Ernie Messerschmidt on Monday, Jul 23, 2012 at 12:13:10 PM
has always been used to turn War into a racket. &n... by Lester Shepherd on Monday, Jul 23, 2012 at 12:49:32 PM
... by Lester Shepherd on Monday, Jul 23, 2012 at 12:50:29 PM
I agree that much of what Paul Craig Roberts write... by E. J. N. on Monday, Jul 23, 2012 at 9:16:49 PM
it is impossible to get excited about someone who ... by Daniel Geery on Monday, Jul 23, 2012 at 1:23:30 PM
I would prefer that of Henry Clay, circa 1850. "Of... by Daniel Geery on Monday, Jul 23, 2012 at 1:32:09 PM
Sorry Paul,Perhaps you're not the most impartial s... by Joe Giambrone on Monday, Jul 23, 2012 at 1:53:42 PM
POTUS ADMINISTRATION ever, based on the number&nbs... by bogi666 on Monday, Jul 23, 2012 at 3:55:35 PM
Reagan was just another tool put in place by the s... by intotheabyss on Monday, Jul 23, 2012 at 5:04:45 PM
This is not the first time I have pointed out that... by E. J. N. on Monday, Jul 23, 2012 at 8:04:45 PM
We could look back and say the stage was set for R... by Ron Brassfield on Monday, Jul 23, 2012 at 8:11:17 PM
I've done considerable research to confirm what is... by E. J. N. on Wednesday, Jul 25, 2012 at 9:20:03 PM
... by E. J. N. on Wednesday, Jul 25, 2012 at 9:22:42 PM
Ronnie was surely pathetic.  I wonder if his ... by Lester Shepherd on Thursday, Jul 26, 2012 at 7:56:24 AM
Very well said, E.J. Nunn. As I observed developme... by Ron Brassfield on Thursday, Jul 26, 2012 at 8:07:17 AM
I agree that: "They know they only have to fool en... by E. J. N. on Thursday, Jul 26, 2012 at 4:19:17 PM