A Rising Tide Lifts All Yachts

September 23, 2010 § 6 Comments

Ronald Reagan said that “a rising tide lifts all boats”.  That was his justification for using the taxing power and other federal weapons  to facilitate the transfer a lion’s share of  American wealth and income to the richest people in the country.  He  beguiled a hefty percentage of Americans into believing this cover story for creating an oligarchy of the rich at the expense of the working class and the poor.  There was more to his bag of tricks, and I’ll discuss some of them later.

For now, however, I want to  show you a graph that reflects an interesting pair of facts.  Enough time has past since “The Great Communicator” made his pitch to compare his claim to what actually happened. The Republican Party has slavishly and relentlessly implemented Reagan’s doctrine every time they gained power.  The Democrats have followed a different plan when they were in power.   The following graph shows that the Reagan policy did enrich the rich, but it did not result in commensurate benefit to any other segment of the population.  The Democratic Party policies, by contrast, resulted in significant increase in the wealth and incomes of the lower and middle classes as well as the wealthy.  Here is the graph:
Reagan’s rising tides lift only yachts.  The Democrats’ ‘tides” truly lift all boats.

I believe too little attention is being paid to the gross and growing degree of wealth and income inequality in America.  There is plenty of information.  Magazines, newspapers, scholarly journals and foundation-funded studies have well documented what is, and has been occurring.  Liberal  politicians and middle-class Americans, however, have expressed little or no  interest in this phenomenon.

A conventional explanation for the working class’s indifference to this matter is that our American culture encourages the expectation that everyone, regardless of his or her present situation, can realistically hope to join the ranks of the rich and famous.  Rail-splitter to Whitehouse; rags to riches, and as every mother tells her son (and now, even her daughter), “You can be anything you want to be.”  Since everyone wants to be rich, that extravagant hope extinguishes any wish to interfere with the advantages of being rich.

The fact that this is roughly equivalent to buying lottery tickets does not detract from its appeal.  Just observe how many lottery tickets are sold every day.  [A friend of mine, years ago, the first day that sale of lottery tickets was permitted in Texas, bought one ticket, did not win, and told me that  established, for him, the fact that his “higher power” did not choose him as a lottery winner and, given that evidence, he would never buy another ticket.  He regarded the lottery as a “tax on the stupid”.]

Despite this cultural myth, I hope  our politicians will begin talking about the immorality of this inequality.  I use the word, “immorality” because I think it is immoral for rich people in this country to insist on perpetuating and accelerating the extent of  this inequality, while simultaneously calling for diminished spending on measures designed to stave off poverty for a substantial segment of our citizens.  How can a man making more than a million dollars a year confront himself in a mirror when he is financing efforts to deprive suffering people of health care, housing and a decent standard of living?   Is it really sufficient that he tithes to the church?  How can he justify his outrage at the possibility that his taxes might be increased to their levels in 1994 (when, incidentally, he and the country were doing very, very well financially), an increase that would leave him with more spendable money in a year than most of his fellow citizens earn in a lifetime?  Haven’t the preachers he listens to each Sunday ever mentioned the Sermon on the Mount?  Didn’t his mother install in his brain some form of shame triggered by his selfishness?  And, more to my point, why aren’t these questions being asked by our President, our Congressional leaders and our Texas liberal politicians?  [For Krugman’s take on this point, see http://www.nytimes.com/2010/09/20/opinion/20krugman.html?_r=1&th=&emc=th&pagewanted=print.]

I blame Ronald Reagan and the acolytes who accompanied and succeeded him for much of my frustration on this issue.  Reagan preached the doctrine that “rising tides raise all boats”.  He cleverly played into the cultural mythology mentioned earlier.  He had two tunes that he played over and over and over.  The first was that “freedom” was equivalent to unfettered free-market capitalism.  A whole academic chorus, centered in the University of Chicago, was organized to mask this grotesque ideology with scholarly credentials.  Milton Friedman was its high priest.  [One unfortunate result: David Brooks went to school at Chicago and, although he seems to be a decent person, cannot free himself from the nonsense implanted in his brain there.]

The real authors of the fairy tale were Frederich Von Hayek and his stupid book, “The Road to Serfdom” and the so-called “Austrian School” of economics.  The die-hard anti-Keynesians of that “school” are still around and, oblivious to contrary evidence, are still arguing that market fluctuations and the “useful destruction” that results should be left unimpeded.  Alan Greenspan, a longtime worshiper of that nonsense as well as its fictional contributor, Ayn Rand,  has recently acknowledged that he may have been mistaken for about the past forty or fifty years; that perhaps the market needs regulation and tax cuts do not result in increased tax revenue.  I don’t know whether his conscience has finally kicked in as he glimpses the Grim Reaper over the horizon or whether he has, indeed, finally waked up and smelled the coffee.  I just wish he had had this epiphany when he headed the Fed and was listened to with so much deference.

Reagan’s second tune was faux outrage at what he claimed were the undeserving, irresponsible and dishonest feeders at the welfare trough.  That evil lie gave every greedy person a handy remedy for a guilty conscience.  They could all  say, in interior dialogues with their mothers, “You don’t understand, Mom.  These people don’t need or appreciate our tax money.  It just encourages them to have more babies so they don’t have to work for a living.  Lots of them are living high on the hog with the money they scrounge from the government.  Besides, the Democrats are just buying their votes with our tax money.”    The “Welfare Cadillac” and the “Welfare Queen” became household phrases and conventional wisdom.

The word “radical” is based on the word “root”.  It means that a radical proposes to destroy something at the root.  The decent people in this country must find leaders who will be “radicals”; who will expose these ideas and their authors as frauds and merchants of selfishness.  This will take a long time and require hundreds of thousands of repetitions from many, many sources.  As George Lakoff has convinced me, to win this struggle, we must change the brains of millions of our fellow citizens.

I have been prompted to produce this rant after reading several descriptions of how our income and wealth inequality has been accomplished.  Here are some links to some interesting websites.

Slate, an emag, ran a series of articles on this subject.  They are well written and illustrated by a series of ten charts.  If you don’t have time to read the articles, you can benefit from the charts.  Go to the last page of the last article and click on the visuals.  There are ten of them.   There are ten radio buttons at the beginning of the series that permit you to access any one of the articles without scrolling through them.

Here is one more graph.  It shows that the unequal distribution of American wealth sharply increased during the Reagan administration and continued thereafter in a steep upward trend.

Ronald Reagan is often referred to admiringly as a “transformative President”.  This graph shows what he “transformed”:  A reasonably fair distribution of American wealth into what could be visually depicted as an inverted triangle, with the rich few at the broad top, the middle class shrinking and sinking closer and closer to the bottom, and the poor lodged near the bottom tip.  Why this “transformation” is regarded as admirable is, to me, bizarre.

Here is a link to the series.  http://www.slate.com/id/2266025/entry/2266026/

I’ll give you one more link to well written information about income inequality and the resulting gradual disappearance of the American middle class.  Professor Krugman wrote an article entitled “For Richer” in the October 20, 2002 issue of the New York Times Magazine.  The article is full of statistics and facts.  The sources listed in footnotes amount to a compendium of information about this subject.  Here is the link:
http://www.pkarchive.org/economy/ForRicher.html.

Bob

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§ 6 Responses to A Rising Tide Lifts All Yachts

  • Ian Serlin says:

    It would be interesting to see a breakdown of income bracket growth rates under Democrats and Republicans both pre- and post-Nixon shock when the US moved off the gold standard. The second graph gives some hint but I wonder how the first graph would look in two parts: 1948-1971, 1972-present?

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    • Bob Hall says:

      First, full disclosure. Until I looked it up in Wikipedia, I did not know anything about the “Nixon-shock”. I probably had known about it at some time in the past, but I had forgotten whatever I knew. As I understand it, the result of it was to empower the Fed to create money without regard to our gold reserves. It thus left the dollar to “float” according to the international community’s perception of the financial soundness of the United States.

      I suppose it follows that Fed policy, after the Nixon-shock, probably had a greater impact on domestic economic policy than before. If that is true, then I suspect that the result was to reinforce conservative policy of favoring the richest segment of the population with much less care for the middle and lower income segments. My suspicion is based on the fact that for 19 years, from 1987, when he was appointed by Reagan, until 2006, when he retired, Alan Greenspan was the powerful head of the Federal Reserve and a reigning financial guru with great influence on governmental economic policy.
      Greenspan regarded any significant increase in wage levels as inflationary and he regarded the Fed’s principal purpose to be the prevention of inflation. Between 1971 and 2005, the only two Democratic Party administrations were presided over by Jimmy Carter and Bill Clinton. Neither of them did anything to strengthen organized labor. Clinton was totally dedicated to free trade and he muscled NAFTA through the Congress. It did have benefits, but those benefits did not strengthen the bargaining power of the workers. The tech explosion during Clinton’s presidency did spread wealth to all classes and, as a result his administration probably did contribute to the figures in the first graph.

      Paul Krugman wrote an article in the NY Times in 2005 called “Losing Our Country” which mentions some of these events. Here is a link to that article. http://www.nytimes.com/2005/06/10/opinion/10krugman.html.

      Ian, I know I’m too biased to be a reliable source of information about this. I don’t really trust government to take care of the working class by doles and tax policy. I don’t think the wealth will be fairly distributed until the government changes our laws to empower the working class to organize and bargain effectively for their share of the wealth.

      I really would like for you to elaborate some on your implication that the Nixon-shock might have had a significant impact on the distribution of wealth among the different classes of Americans. I don’t disagree. I just don’t know enough to understand the connection.

      Thank you for your comment.

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  • Steve says:

    You can tell you’re dealing with a Progressive Leftist by their choice of words. “Transfer of wealth to the richest!” Translation: Allowing producers to keep more of what they earn. Mr. Hall assumes–as do all Liberals–that everything anybody earns, but especially the rich, belongs first and foremost to the Federal government. It is THEY who then decide what portion of our earnings we are “allowed” to keep. With 70% of taxes paid by the top 10% of wage earners–perhaps the bottom 50% who pay NO taxes should merely say “thank you” and move along. Calling allowing people to KEEP more of what they earn a “transfer of wealth” to the rich is morally reprehensible, factually inaccurate, and is what Communism and Socialism are based upon–redistribution of wealth. At least display a modicum of journalistic integrity and call this confiscation what it IS!

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    • Bob Hall says:

      I have approved this comment because I believe that, as Justice Holmes wrote long ago, the solution to mistaken public expression is more public expression, not censorship. So, rather than suppressing this comment, which I regard as dishonest nonsense, I will respond to it with some facts and a suggestion.

      First, this comment is submitted by Stephen Dogherty, who markets himself as a “motivational speaker” and gives advice on how to raise children, so I am hopeful that one item of his advice includes a suggestion that children should be trained not to lie and their adviser should teach by example.

      It is not true that the “bottom 50% pay NO taxes”. Their taxes are deducted from their paychecks as FICA and the taxes thus collected pay for Social Security, Medicare and Medicaid. Their taxes are regressive. They do not have the advantage of the thousands of tax loopholes inserted in the Tax Code by an army of lobbyists, so they cannot benefit from the corporate welfare that feeds on those loopholes. So, I hope you will stop repeating this lie that treats millions of hard working Americans with unwarranted disdain.

      Second, I hope you will read the front page story in today’s (07/21/2013) New York Times that describes how Goldman Sachs and other Wall Street banks skim millions of dollars in profits by delaying the shipment of aluminum from a complex of warehouses they own in Detroit. They charge rent by the day for storage in those warehouses. The London Metal Exchange, the agency that regulates the marketing practices of aluminum and other commodity metals, limits the amount of aluminum that must be removed from a warehouse during a specified period of time. The Wall Street banks manipulate this rule by merely moving the aluminum from one of their warehouses to another, instead of shipping it to a purchaser. This process results in millions of dollars of profit for the banks. Those costs are passed along to the consumers, who pay more for every can of soda or beer consumed in America. In other words, these “producers” are sabotaging the marketing of aluminum, reaping profits, and costing consumers more for the items they buy. Because aluminum is also a major component in the manufacture of cars, their manipulation also increases the costs of cars.

      This is only an example of the way that modern capitalism actually works. Thorstein Veblen described this process about ninety years ago in his book,”Absentee Ownership in Recent Times: The Case of America” (1923). He wrote a chapter on “The Captain of Industry”. “And when the Captain of Industry then made the passage from industrial adventurer to corporate financier it became the ordinary care of his office as Captain to keep a restraining hand on employment and output, and so administer a salutary running margin of sabotage on production at the cost of the underlying population.”

      Your comparison of the wealthy financiers you call “producers” with working class Americans is so skewed as to be absurd. Surely you have not forgotten what they “produced” in 2008: A recession from which we are only now recovering.

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  • Steve says:

    Even my kids could see through your claptrap explanations and recognize Leftist propaganda for what it is–propaganda! I meant “income” taxes above and my point remains the same. The word disdain was YOUR word–I was merely pointing out the fallacy of your notion that America’s Producers don’t pay their fair share. Your example of the aluminum “shifting” and follow-up sentence “This is only an example of how Capitalism works” even had my 15 year old son laughing at your sheer bias through selective outliers. And finally, you never even attempted (I don’t blame you) at explaining how allowing American workers to keep more of what they earn is a “Massive transfer of wealth.” My daughter asked–“Isn’t that OUR money, dad? Don’t WE fund the government through our voluntary tax system?” I told her, “Yes honey–that’s in “normal” land. Liberals believe that every cent you make belongs first an d foremost to the government–and that it is THEY who shall determine how much or how little they “transfer” to individual Americans. It is called Socialism and it is in your current textbooks–obscurely–as Liberal secular progressive Democracy.” And even with the “tax loopholes” you so disdainfully mention–the top 10% of American “producers” STILL pay 70% of the income tax burden. I know that’s an “Inconvenient Truth” to Progressives who love to prattle on about “paying their fair share” while never identifying what that “fair share” is. And with the highest corporate taxes in the world–our rich lobbyists aren’t doing a very good job. So your snarky, condescending comments about how I teach my kids not withstanding–the one thing I AM teaching them is how in 50 short years we’ve gone from a DEMOCRAT President extolling Americans, “Ask NOT what your country can do for you…..” to the current DEMOCRAT President extolling proudly, “Where’s MINE?” He then proudly replies–and you too–that “It’s in the pocket of your NEIGHBOR! My kids also understand Lady Thatcher’s warning, “The problem with Socialism is that eventually you run out of other people’s money!”

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    • Bob Hall says:

      I have approved this second comment from Steve Dogherty. I will not continue this exchange nor will I approve any further comment from Mr. Dogherty on this subject because it is apparent that I have encountered a perfect example of Derp. If readers are unfamiliar with this technical term they can take a look at an item posted on this blog entitled “Derp and Man Parts” in which I explain and describe “Derp”.

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