To jack-up profits even more, U.S.-based companies shipped millions of factory jobs overseas. And, as capital gains taxes were slashed, too, investors kept even more money than those who earned their pay from work, explaining why multi-billionaire investor Warren Buffett could pay a lower tax rate than his secretary.
The consequences on the United States from these three decades under various forms of Reaganomics (including the neo-liberalism of Bill Clinton and the full Reagan restoration under George W. Bush) are now apparent: massive federal debt for the public sector and major concentrations of wealth in the private sector.
These twin factors have fed two competing political movements: one, identified with the Tea Party, demands sharp cuts in government spending on domestic programs and even fewer regulations on business, and the other, associated with Occupy Wall Street, implicitly favors higher taxes on the rich to fund jobs -- and tighter government controls on reckless gambling by the banks.
The danger for the Republicans is that they have gone pretty much all in with the Tea Party. Some top Republicans are even advocating raising income taxes on the poor and middle-class in order to fund more tax cuts for the rich.
So, if the momentum shifts from the Tea Party side to the Occupy Wall Street side, Republicans could find themselves caught in a dangerous cross-current. They must hope that the Reagan narrative -- hostile to government and favorable to the rich -- isn't swept away before the November 2012 elections.
On the other hand, it is less clear that the Democrats will benefit substantially from a more anti-corporate tide, since they have done their best over the past several decades to muddy the waters regarding their differences with Reaganism, not wanting to be labeled "tax-and-spenders" or "anti-business."
Still, as careful as many Democrats have been to stay in the middle of the mainstream, President Barack Obama and others have at least offered some limited proposals for raising taxes on the rich to pay for infrastructure investments and other jobs programs. That could put them in position to be pulled along by a favorable public current.
As imperfect a test as Election 2012 is sure to be, it seems likely to offer some measure of whether the Reagan narrative has finally run its course.
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