Who knew when they voted for Ronald Reagan that they would be voting for thirty years of class warfare? Ronald Reagan’s budget director David Stockman wrote a tell all book explaining that the three year fazed in tax cut was a “Trojan Horse” for bringing the top tax rate on the rich down from 70% to 28%. That tripled the national debt from just fewer than one trillion dollars to three trillion dollars when Reagan left office and four trillion dollars when his successor George Bush Sr. left office. That left a 25% gap in the budget from which we have never recovered. Clinton balanced the budget, then George Bush Jr. followed the same Reagan formula of military increases, massive tax cuts, and wildly out of balance budgets. Trump promises more of the same, even after we now know the top 1% have quadrupled their income and flat-lined the middle class. Reagan repealed the equal time provision on radio and television news in 1987 and right wingers were suddenly free to lie until they were blue in the face on the air, creating the current extreme division in politics with no respect for the other side. That’s not quite the Roman “bread and circuses” formula but the circus part is there in the form of today’s news information entertainment shows, as corporations gutted the budgets of media news departments forcing reporters to drop investigations and be stenographers to power instead. Then the Supreme Court turned so far right that moderate Republican appointees became liberals and hard right appointees gave corporations and the rich the right to spend unlimited amounts of money on political campaigns. Now the right wing Senate refuses to hold hearings on Supreme Court appointees unless we go even further on this thirty year class warfare on the middle class. Trump does not offer change, only regression and more of this discredited trickle down theory.
How We Got Here
Hedrick Smith, in his 2012 book Who Stole the American Dream?, blames it all on the Louis Powell 1971 memo to right wingers that we have to stop losing to the left by bolstering corporations and the rich. About this same time, Leo Strauss became a popular philosopher on the right with his teachings that we need just one religion for the society, Christianity, in spite of his own Jewishness. Leo Straus also preached that elites must decide what is best for the people and then tell lies to get the people to follow their policies. The Powell approach began with seventies right wing institutes being set up along these lines such as the libertarian CATO institute and the conservative Heritage foundation and the Koch brothers American Legislative Exchange Council (ALEC). In 1976, George Bush Sr. was CIA director and ordered the CIA to estimate Soviet Military Spending two ways. The traditional A team way was an honest assessment, the new B team way would price Soviet tanks planes missiles and ships at the cost of those same items produced in America. This wildly exaggerated Soviet military spending while not accounting for the huge gap in quality of weaponry between the two nations, where the Soviets were typically eight years behind. All this was a reaction to the Civil Rights and Vietnam War opposition movements. It complemented Nixon’s Southern Strategy where the Lincoln party of Civil Rights changed into the party of segregation and the New Jim Crow (2010), Michelle Alexander’s book of the same name. Nixon’s War on Drugs was the prime vehicle to mass incarceration of black men. Jimmy Carter has said there are six times as many black men imprisoned today as there were when he was president 1977-1981. He has also said we no longer live in a democracy, we are living under an oligarchy of the rich, and he is empirically supported by the new Princeton study of how the top 10% get what they want out of congress while the middle class majority at the 50th percentile is ignored.
Empire, the Real Underlying Cause
Seventy years of empire since World War II is the real problem. With the largest share of military spending in the economy of any Western or NATO nation over that whole period of time, diversion of research and capital out of the manufacturing sector into the military sector has given manufacturing a half life of thirty years, 40% in 1950, 20% in 1980, and 10% in 2010. Because we do not understand well even today that the Smoot Hawley tariff law of June 1930 was the real cause of the Great Depression. The economy was just fine until June 1930, the stock market crash of October 28, 1929 was a reaction to the special session of congress reporting the bill out of committee four days before, the Thursday before the Monday crash. The agricultural trade war that ensued with Europe left the main agricultural power of Europe, France, especially weak and vulnerable for the 1940 defeat. For a generation after the war America was fine except for the gradual erosion of share of the world economy. Incomes doubled across the board, high low and middle incomes prospered proportionally until the seventies oil crisis. Funding for monetarism under Nixon turned economists away from the Keynesian theory of government spending stimulating the economy, and the new right wing think tanks formed after Vietnam propelled Reagan into office in 1980 with a new surge of the Cold War. Reagan helped things along with his anti-union policies as mergers and acquisitions pushed the stock market up 1981-1984. However, Reagan stalled the 2% growth of 1981 with the biggest peacetime increase in military spending ever in 1982, causing the 10.8% unemployment recession before the full phasing in of the three-year tax cuts lead to 6.4% economic growth in the 1984 re-election year. People voted with their feet to join the military economy of the Eastern Seaboard and California at the expense of the manufacturing heartland of the Great Lakes region. Nevertheless, Reagan had to increase the deficit twice as much (3.0% GDP) compared to the military spending increase (1.5% GDP) to lift the economy up with classic Keynesian stimulus. Reagan would never give Keynes the credit, however. Productivity increased just as much after Reagan as before, but now the newly empowered and under-taxed rich refused to share the wealth with the 99%. Yes, it is the 99% because in the 1979-2007 congressional study, if you take out the top 1% from the top 5%, there is minimal change over the thirty years for the next 4%, so the rich did not share the wealth with even their top managers just outside the top 1%. Greed was good according to Ayn Rand and the movie “Wall Street.”
SAGE Military Keynesianism
This article starts with a discussion of classical Keynesian theory about military spending. The theory treats military spending like all other government spending, treating it as putting money into the economy. The big difference with military spending is that it overpays and gets the best and brightest scientists and engineers and then does not give a product back into the economic mainstream. Military resources deplete investment capital reducing the economic growth rate. Military resources sit idle in peacetime and destroy things in wartime; they do not create goods to distribute around the rest of the economy like manufacturing does. The military is dependent on politicians instead of the free market place. Military engineers make things expensive and more complex; market place engineers make things efficient and low cost. Most defense contractors are forced to specialize in the military because one-third higher paid military engineers cannot function well in the civilian economy and would have to take a pay cut. I think of the military sector as socialism for the upper middle class.
This links to one of two 2000 word peer reviewed listings coming out in the SAGE Encyclopedia of War in October 12, 2016, one on “Political Economy of War” and this on “Military Keynesianism” https://www.academia.edu/29175791/SAGE_Military_Keynesianism_October_12_2016_5_p
Dr. Robert Reuschlein, Dr. Peace,
Nominated and vetted for the Nobel Peace Prize 2016,
To be announced October 7, in Oslo Norway.
Real Economy Institute,