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Still, the underlying American economy was sound. Federal deficits were steadily declining after a brief spike during the oil embargo. Government debt was at its lowest level since before the Great Depression. Most industries were strong. America was still the world’s economic powerhouse.
Reagan shared Thatcher’s ideology, but not her wisdom. He responded to America’s downturn with the medicine that Thatcher had applied to Britain’s long-term structural decline: high-end tax cuts, union busting, deregulating finance, letting industry float off-shore unhindered. Unemployment soared in Reagan’s first years, then settled down as a middle-class nation gradually transformed itself into a society of financial speculators and burger-flippers. All that, plus a national debt that nearly tripled in the space of eight years and continued climbing unchecked for the next two decades, thanks to the anti-tax political culture of the movement Reagan brought to Washington.
Drastic medicine for a patient that didn’t need it. The America that Ronald Reagan took over in 1981 bore no resemblance, in its fundamental economics, to the threadbare manor house that Margaret Thatcher inherited in 1979. By the time he and his heirs were done with it, it bore a remarkable resemblance. Reagan’s adoption of Thatcherism had the perverse effect of introducing the very sort of structural malaise here that Thatcher was trying to cure over there.
Today, after three decades of Reaganomics — and, to be fair, Clintonomics and the Washington Consensus and the Chicago School and the whole prolonged crowd hysteria known as neoliberal economic wisdom — America is approaching the same sorry crossroads that Britain reached in 1979. A deindustrialized heartland, steadily declining average incomes and soaring inequality, high household and national debt, overextended military obligations paid for on the national credit card. Dangerous dependence on foreign creditors. False confidence that whatever happens, we’ll be safe because our currency is the world’s trading standard. We’re now in a very precarious spot.
We didn’t have to go down this road. We prospered for 30 years after World War II with a top marginal income tax rate of between 70% and 91% on the very wealthiest Americans. We didn’t have to cut it in half and spend the last 30 years watching inequality grow and debts pile up. We had a secure middle class when we had labor laws that protected unions’ ability to bargain for decent wages and pensions. We could have developed tax laws that discouraged companies from skipping town and bankrupting whole communities. We could still do all that.
The reality is, of course, that none of that is likely in today’s political culture. Right now, the best we can hope for is to slow the hollowing out of the economy and take baby steps toward reform. We can fight to restore procedural sanity in Washington so that other nations don’t lose confidence in Washington and abandon the dollar, as China has begun to do. And we can hope like hell that our politicians don’t launch some hare-brained attack somewhere in the Middle East that alienates our allies and provokes our creditors.
Contact J.J. Goldberg at firstname.lastname@example.org