By Greg O’Brien, Codfish Press
Deep impact, as they say in the movies! Millions of years ago, scientists suspect, a giant meteor hit the earth, knocking the planet off its axis and wiping out much of life (as was known then). With far less hype, but perhaps with equal impact, historians in the future might record that the “trickle down theory” of the Reagan Administration—a policy of lowering taxes on high incomes and business activity—walloped the planet more than two decades ago and slowly brought about the extinction of the middle class. In the 1980s, Ronald Reagan initiated a new era of American economics by axing the top tax bracket on the theory that what’s good for business and the rich is good for the country. Or as Gordon Gekko, the Teldar Paper tycoon in “Wall Street” would put it: “Greed is right. Greed Works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit.”
David Stockman, then Reagan’s budget director and once the essence of the evolutionary spirit (who happened to be indicted Monday on unrelated fraud charges), later termed trickle down economics “a Trojan Horse.” Stockman conceded that “when one stripped away the new rhetoric emphasizing across-the-board cuts, the supply-side theory was really new clothes for the unpopular doctrine of the old Republican orthodoxy.” And former House Speaker Jim Wright, a Democrat, asserted at the time that tax increases fell instead on low and middle-income individuals in the form of “user fees” and “revenue-enhancers.”
Earlier this month, economist and New York Times columnist Paul Krugman noted in a speech posted on the web that “the American economy went from having the world’s most dynamic middle class to being on the verge of a rich-poor state in only 30 years.” Krugman, reflecting on the widening gap in the U.S. between the rich and poor, and predicting the gap would expand, wrote several years ago in a New York Times Magazine piece, “Even my liberal friends tell me not to worry, that our system has great resilience, that the center will hold. I hope they’re right, but they may be looking in the rearview mirror. Our optimism about America, our belief that in the end our nation always finds its way, comes from a past—a past in which we were a middle-class society. But that was another country.”
Krugman’s friends were wrong. The breach between the rich and poor in New England, for example, has now grown at a faster pace than any region in the country, according to a newly released University of New Hampshire study, presaging similar trends in the Northeast and beyond with the loss of manufacturing jobs and the displacement of these jobs over seas. “The changes,” the report states,” are not simply the ‘rich getting richer,’ rather they reflect the hollowing out of the middle caused by significant changes in the nation’s economy.”
Wrote Krugman almost five years ago, “You might think that 1987, the year Tom Wolfe published his novel “The Bonfire of the Vanities” and Oliver Stone released his movie “Wall Street,” marked the high tide of America’s new money culture, But in 1987 the top 0.01 percent earned only about 40 percent of what they do today, and top executives less than a fifth as much. The America of “Wall Street” and “The Bonfires of the Vanities” was positively egalitarian compared with the country we live in today.”
Corporate profits and executive salaries in 2007 have hit new nosebleed highs, with CEO’s earning the equivalent of the gross national product of some third world nations. The “trickle down” seems to have slowed to a dribble at best; more likely the faucet has been shut off.
And why not? “Greed for life, for money, for love, for knowledge—has marked the upward surge of mankind,” as the spruce Gekko preached.
Looks like most of us won’t be making the trip. The middle class—an apparent dinosaur of society with its teachers, assembly line workers, fire fighters, police, nurses and the like—is fast on its way to extinction, and the lower class in slipping deeper into the abyss. This is one deep impact that could and should be avoided. Without a firm backbone, our society is spineless.