Real Legacy of Reaganomics

Hindsight is twenty-twenty; unless you’re an economist. Arthur Laffer, member of the Economic Policy Advisory Board during the Reagan Administration, recently wrote an editorial on the 100th anniversary of Reagan’s birth that that looked back on the administration with rose colored glasses. The policies of the Reagan Administration, Laffer claims, were responsible

lowering the “misery index,” and for creating unprecedented job growth. Laffer lays claim that the Reagan Revolution lead to economic prosperity not only during the 1980’s but well into the 1990’s.

Reaganomics to Laffer was moving America “toward lower, flatter tax rates, sound money, freer trade and less regulation.” These policies, Laffer claims, lead to the creation of those jobs and a stronger economy. What policies did Reaganomics include? Reducing the top income tax rate to 50% from 70% and the lowest rate to 11% from 14%; reducing the number of pages in the Federal Register to less than 48,000 in 1986 from over 80,000 in 1980. What does Laffer claim are the results from the birth of Reaganomics. “From December 1982 to June 1990, Reaganomics created over 21 million jobs—more jobs than have been added since.” But what was the real affect of Reaganomics?

First of all, Laffer’s job numbers are based on not-seasonally adjusted employment, and December of 1982 happened to be the low point of employment during the Reagan Administration. By Laffer’s math, about 120 million jobs in June of 1990 is over 21 million more than 98 million jobs in December of 1982. Of course when you look at the seasonal adjusted numbers, 118 million in June of 1990 jobs is under 20 million more jobs than 99 million in December of 1982. But, that is really just a technicality. But the claim that this was “more jobs than have been added since” isn’t true. The Clinton Administration created 22.7 million jobs, after raising the top margin tax rate from 31% to 39.6%.

What is the legacy of Reaganomics? It was a massive redistribution of wealth upwards, and the use of the government to intervene in the market when it benefited corporate America. There was no trickle down, and there was no free market. The top 1% has seen their income rise dramatically, while the rest of America has seen their income flat line. According to an analysis by the Center on Budget and Policy Priorities, the top 1% of wage earners have seen their after tax income increase 281% since 1979 while middle fifth and the bottom fifth have seen their income increase by just 25% and 16%. So, the real legacy of Reaganomics is that we have changed from democracy to a plutocracy.