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The Dark Legacy of Reaganomics

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It may be political heresy to say so, but a strong case could be made that the greatest American "job creator" over the past 80 years has been the federal government -- or put differently, the government built the framework that private companies then used to create profits and jobs.

This heretical view also would hold that it was Ronald Reagan's deviation from this formula for success some 30 years ago that put the United States on its current path of economic decline -- by starving the government of resources and providing incentives for the rich, through sharply lower taxes, to get super-greedy.

Rather than continuing a half century of policies that made smart investments in research and development -- along with maintaining a well-educated work force and a top-notch transportation infrastructure -- Reagan declared "government is the problem" and built a political movement for deconstructing it.

That movement, which boasts powerful right-wing media outlets and well-funded think tanks, now dominates the American political landscape. And, today it presses even harder than Reagan did for dismantling government programs while rejecting the slightest revenue enhancements, like closing tax loopholes for corporate jets or any other tax advantage favoring the rich.

In the future -- if the American Right and its Tea Party foot soldiers have their way -- the federal government would be reduced to doing little more than paying the Pentagon's bills and eliminating regulations.

According to the Right's economic orthodoxy, the rich -- or the "job creators" as the Republicans like to call them -- would then be freed up to create millions of jobs. That's their plan, even though the available economic data indicates that the reason for corporations not hiring is a lack of demand because so many Americans are out of work or deeply in debt.

Almost certainly, if the Right's economic prescription is filled again, there will just be more retrenchment among companies, big and small, and large corporations will continue sitting on the sidelines with trillions of dollars in cash. Economic times will likely get appreciably worse.

The hard truth for the Republicans and the Right to swallow is that a three-decade experiment with historically low tax rates on the rich has done little more than concentrate America's wealth at the very top and leave everyone else either stagnating or falling backwards.

Yet, what is ironic about this dilemma is that none of it needed to happen. Without doubt, there were painful economic dislocations in the 1970s -- caused largely by Middle East oil price hikes and inflationary effects from the Vietnam War -- but the United States was on the cusp of what could have been a new golden era.

A half century of wise policies by the federal government -- from the depths of the Great Depression through Franklin Roosevelt's New Deal, Harry Truman's Fair Deal, Dwight Eisenhower's Interstate Highway System, John Kennedy's Space Program, Lyndon Johnson's civil rights laws, Richard Nixon's Environmental Protection Agency and Jimmy Carter's commitment to renewable energy -- had created momentum for a resurgent middle class in which average folk could have enjoyed a level of comfort and security unparalleled in human history.

That was the potential payoff from all the achievements and innovations that had been accomplished through investments by the American taxpayers and their government, in collaboration with U.S. industry. Productivity was about to skyrocket.

National Progress

Government-backed projects had extended electricity and communications to all corners of the nation; created a transportation infrastructure that was the envy of the world; spurred development of microprocessors for computers; funded advances in pharmaceuticals, agriculture and science; and opened the door to a new information age with the early development of the Internet.

Despite the tough challenges of the 1970s, the jump in productivity from these technological advancements could have been shared broadly with the American people, who had after all paid for them with their tax dollars.

And even if most productivity gains did go to the top percentiles of wealthy Americans, a robust and progressive tax system could have ensured that the profits were recycled through the country, via the government, in the form of middle-class jobs to upgrade the infrastructure, improve quality of life and keep the nation competitive.

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Robert Parry broke many of the Iran-Contra stories in the 1980s for the Associated Press and Newsweek. His latest book, Secrecy & Privilege: Rise of the Bush Dynasty from Watergate to Iraq, can be ordered at secrecyandprivilege.com. It's also available at

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