Posted by: David Offutt | April 1, 2009

Plutocracy: The Trickle-Down Economics of Hoover, Reagan, and W. Bush

Bush-ReaganIn only two more months, we will begin voting for our next presidential nominees. While most Republican candidates support the President’s policies, they don’t mention his name: George W. Bush seems determined to continue being the worst chief executive in our history. Instead, they are invoking the mythological memory of Ronald Reagan. Republicans are hoping that voters are unaware that the policies of Reagan and Bush are virtually the same.

One evening in 1980, I heard President Jimmy Carter give a surprisingly commendable campaign speech in Jackson Square in New Orleans, where I was living. With his own economic problems – stemming from OPEC’s high oil prices – he still separated himself from his rival Ronald Reagan. He pointed out there were significant differences between the economic policies of his and FDR’s Democratic Party and that of Reagan and Herbert Hoover’s Republican Party. I looked around the mostly young and middle-aged crowd and wondered just how many of them understood what he was talking about.

The Republican Party was about to benefit from two fundamental changes in American society. First, voters who personally experienced the Great Depression of the 1930’s were becoming a much smaller part of the electorate. Second, in all probability, there were more voters than ever before who knew little to nothing about American history. Ever since the Soviets launched Sputnik into space in 1957, our public schools had deemphasized the teaching of history and good citizenship in favor of math and science. If you combine that with the longtime and continuing practice of many school systems using their coaching staffs as history teachers, you can see the problem.

The result was that we had begun to live in what Gore Vidal accurately described as “the United States of Amnesiacs.” If you have amnesia, you don’t remember anything about yourself before the present. Unless you know where you came from, you don’t know where you are, and you can’t wisely plan for the future. As George Santayana warned, “He who does not learn from history is condemned to repeat it.”

Ronald Reagan promised “a return to normalcy.” He borrowed that expression from Warren G. Harding, the Republican winner of the Election of 1920. What Harding wanted to return to was the “Gilded Age” (1869-1900) – the time before the Progressive Era (1901-1920). Harding and Reagan wanted to return the country to control by the Plutocracy, the few who were rich.  They each wanted to return to a time when there was no income tax, no regulation of business practices, and no protection for labor, the consumer, the unemployed, the elderly, or the environment.

Throughout the 1920s three Republican presidents (Harding, Calvin Coolidge, and Herbert Hoover) practiced trickle-down economics: help the rich instead of the common people. If the rich get richer, their investments supposedly will lead businesses to expand, and some of that money will trickle down to the people in the form of jobs and salaries. In October 1929, seven months after Hoover took office, the stock market crashed. The Great Depression that followed lasted over ten years. Surprisingly, Hoover has been defended by some because he was not solely responsible for the massive unemployment, hunger, foreclosures, and homelessness. Any president who followed the irresponsible and incompetent Harding and Coolidge had to walk into a national disaster.

However, Mr. Hoover should receive the full credit he deserves. Coolidge allegedly complained that even though Hoover was Secretary of Commerce, he thought he was undersecretary of everything else. But that was the deal. Hoover agreed to be Harding and Coolidge’s commerce secretary only if everything involving the economy went through him! Hoover was the architect of trickle-down economics and deserves to be held fully accountable for the tragic results.

Even though by 1980 most voters knew nothing of Hoover or the Great Depression, Mr. Reagan knew better than to refer to his own economic policy by its old name. Instead, it was called “supply-side economics.” When David Stockman, Reagan’s budget director, was asked about the difference between “supply-side” and “trickle-down,” he admitted they were identical. Stockman even warned Reagan and his advisors that cutting taxes on the very wealthy while drastically increasing spending on the military would lead to huge deficits and social insecurity. Nobody cared. Within four years, Reagan had tripled the federal debt that had been accumulated by all 39 previous presidents combined!

The real rationale behind “trickle-down Reaganomics” was that even if helping the rich get richer probably wouldn’t benefit the rest of society, it would increase the federal debt. That would make it impossible for the government to spend money regulating Big Business and providing services to the people. Less money would go to highway infrastructure, national parks, and safety-net programs like social security, Medicaid, and Medicare. Sadly, decreasing revenues and shifting money from domestic programs to the military created one of the largest spending programs in the government – paying the interest on borrowed money! Reagan exchanged pay-as-you-go (which he dubbed “tax-and-spend”) for borrow-and-spend.

Not surprisingly, there was an “epidemic” of homelessness, and much of the country was in a serious recession throughout the eighties. My father J. C. Offutt, an electrical contractor in El Dorado, said he was too old to wait for another president, closed his Electric Service Co., and retired. Amazingly, the Reagan stock market crash of October 1987 – the worst since ’29 – didn’t come until his second term. Ironically, what saved us were those Republican-hated safety-net programs set up by Democratic presidents and/or Democratic Congresses between 1933 and 1980.

I remember thinking that every president for the next fifty years would have to deal with the consequences of Ronald Reagan’s huge debt. I was wrong. In 1993, Bill Clinton initiated a huge tax increase on those in the upper 1½% income bracket, the wealthiest among us. He immediately got control over our fiscal policies. The economy boomed, and Clinton had a budget surplus in each of his last four years. Clinton’s economic policy was probably the primary reason for the Republican Party’s obsession to find a way to impeach him.

George W. Bush’s first priority (invading Iraq was his second) was to reinstate “Reaganomics,” or – as Bush’s father called it in 1980 – “voodoo economics.” He wanted to cut the taxes on the “haves and have mores,” and even Alan Greenspan endorsed the disastrous plan. Incredibly, the guru of the Federal Reserve said that he was afraid that if Clinton’s policies were continued, the entire federal debt might be paid off within six years! Now, we are saddled with Bush’s expensive war and his exorbitant debt, which has doubled that of all 42 previous presidents combined! So what improvement will we get if we elect another trickle-down Reagan Republican as president in 2008? None – that’s what we have now.

by David Offutt
A version of this essay was published November 8, 2007,
in the El Dorado News-Times as a letter to the editor.

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Responses

  1. [...] the meantime, the Republican plutocrats were confident this job-killing vote would not penetrate the skulls of the willfully-ignorant [...]

  2. I am appalled at your version of history. The real problem with your version of history is the lens in which you view it from. The lens your are looking through is of a leftist liberal point of view. I understand you are attempting to prove a point and in order to prove a point you need to instill perspective. However, your distortion of history is far from the truth especially when you are referring to Warren G. Harding and Calvin Coolidge. Here is my problem with your point of view. History left us with facts. It is up to us to interpret them but the facts are there. Here are the facts. Beginning in 1920 the US was in a depression. Look it up (depression of 1920). Warren G. Harding ran on the platform to “return to normalcy” because Wilson managed in two terms as president to slingshot the national debt to more than 20% of GDP. Wilson’s policy’s helped caused a depression. That is a fact. Warren G. Harding in 18 months turned the country around. That is also a fact. He did this by reducing taxes. By the time he passed away the country was out of a depression and well on its way to the infamous “roaring 20s”. Coolidge took off right where Harding left the presidency. The roaring 20s was a very prosperous decade. The only thing which was not prosperous was agriculture/farming. Which eventually lead to the Smoot- Hawley Tariff latter in the decade. I am over simplifying this matter because I have a job and a life. I want you to understand your version of historical events is misconstrued and inaccurate. Trickledown economics is debatable on its success however, if you look at past historical events it tells a brighter story. In our current downturn Obama’s plan of higher taxes does not seem to work well at all. The socialistic ideology of redistribution of wealth is not panning out so great. You are entitled to your own opinion however, I ask you to get your facts right and keep historical context within the realm of reality.

  3. David, this is a good summation of economic policy prior to 1992. I agree with everything you said.

    However, no discussion of current economic policies would be complete without mentioning the newest flavor of “voodoo economics,” NeoLiberalism. Wikipedia sums it up nicely as a policy “that stresses the efficiency of private enterprise, liberalized trade and relatively open markets, and therefore seeks to MAXIMIZE THE ROLE OF THE CORPORATE SECTOR in determining the political and economic priorities of the state.”

    In other words, NeoLiberals seek to roll back the New Deal redistribution of wealth, regulation of business, and support for unions. For the most part, NeoLiberalism is the same old laissez-faire trickle-down philosophy, and only the name is new.

    The point I wish to make is that Clinton and Obama are NeoLiberals. Today’s Democratic party is no longer the party of FDR, just as today’s Republican party is no longer the party of Lincoln and Teddy Roosevelt.

  4. [...] [...]


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