Apr 30, 1983
Conditions under the Reagan presidency have been a disaster for the workers and the other poor layers of the population, as the economic crisis has taken an increasingly harsh toll. In the more than two years that Ronald Reagan has been in the White House, the economic crisis has worsened considerably. We are in the worst recession in production since the 1930s.
The policy of the Reagan administration has been simply to protect the interests of the bourgeoisie at the expense of the other layers of the population. The last two years have shown to what an extent this was done. The government helped discipline the unions by breaking the PATCO strike, and along with it the air controllers’ union. The government reduced the cost of the bourgeoisie’s social obligations by eliminating enormous numbers of environmental, health and safety standards. Through government contracts and subsidies, the government increased tremendously the amount of money it made available to the bourgeoisie. And it has cut the taxes that both the corporations and the wealthy pay.
The effect of the tax cut was to shift still more of the burden of funding the government from the bourgeoisie to the rest of the population. Thus, the tax cuts for the corporations reduced the portion they paid of federal revenues from 12 per cent in 1980 to six per cent in 1982. The Reagan administration also slashed taxes for the most wealthy. The highest income bracket, 70 per cent, was cut to 50 per cent. On top of this, the government also increased the tax breaks available to the rich.
If the workers got something from the flat tax reductions, five per cent in the first year and ten per cent in the second and third years, these small reductions were outweighed by other factors which, when added up, meant that the poorer layers of the population paid much higher taxes. First, inflation continued to push people into higher tax brackets. Social Security taxes also continue to go up every year. Besides this, Reagan pushed through a series of tax increases, mainly on user taxes, such as gasoline, cigarettes and alcohol, that were worth 115 billion dollars over three years. And state and local taxes have increased by over 6.7 billion dollars per year over the last two years. All of these taxes are extremely regressive, since the poor and workers pay a much bigger share of their income to them.
Reagan has used the federal budget in order to make much more money available to the bourgeoisie. This is the primary reason behind the tremendous growth in military spending over the last two years. The bourgeoisie has relied on defense contracts to prop up an important sector of the economy. The defense industries, highly monopolized, get government contracts at high, guaranteed profits. If the total defense budget has grown spectacularly, the amount actually funneled to the corporations through procurements, that is, equipment and services bought from private industry, grew even faster. Procurements rose from 25 per cent to 35 per cent of the total in the last two years. And built in is an increase in procurements to 50 per cent of the defense budget by 1986.
This massive intervention on the part of the government was able to defend the profits of the bourgeoisie during the last two years. Some rough indication of this is shown by their steadily rising dividends, which have climbed from 58.1 billion dollars in 1980 to 70.3 billion dollars in 1982, despite the recession.
Part of this tremendous funneling of money to the corporations has come at the expense of social programs and entitlement programs which served as a kind of minimal cushion for the workers and other poor people. The government cut funding for these programs by 130 billion dollars over three years.
Reagan’s claim of supply-side economics was nothing more than an excuse to supply the bourgeoisie with money. In no way could it resolve the crisis. In fact, what it did was to reduce consumption by the poorer layers of the society, as the result of both tax increases and the decreases in social spending. This could serve only to inhibit production, certainly not to stimulate it. Moreover, just because the bourgeoisie got the money, it did not stimulate production. The bourgeoisie has no reason to invest when it doesn’t seem profitable enough for them, especially when they could make money elsewhere. They could make more money through speculation in the stock market, real estate, the money markets.
During all of this, the government has gone into deep debt in order to give the bourgeoisie money. This obviously did not stimulate production. But it did have certain negative consequences, resulting from the means by which the government finances the debt. Either it goes into the capital markets, driving up the demand for capital, and therefore also the cost of money, interest rates. Or else it prints up money, driving up inflation.
This has been the policy of the Republicans. But in no way would the policy of the government have been different if the Democrats were in power. This can be shown both by what the Democrats did when they were in power before 1981, and now, when they are in the opposition.
It has been fashionable to blame the last two years on Reagan and Reaganomics, and to forget what Jimmy Carter did in the four years of his presidency. The Carter government took several measures over the period of four years to improve corporate earnings. It speeded up depreciation on capital equipment, allowing the corporations to cut the amount of taxes they paid. Oil and gas prices were partially deregulated, giving the go-ahead to the oil companies to raise their prices. And Carter signaled for the government to infuse huge sums of cash to business, when he began to push for a substantially larger defense budget, despite his earlier campaign promise to cut military spending. It was Carter who first declared that the military had been neglected too long, that it was in terrible disrepair. It was Carter who set the course for the military budget to rise by five per cent a year in real terms. It was Carter who, during the Iranian crisis and the Soviet invasion of Afghanistan, unleashed the patriotic and anti-communist rhetoric that Reagan uses today, in order to justify these huge increases.
Who paid for these measures? The same people as during the Reagan administration. The big cuts in social spending were first initiated under Carter. During a period when tax revenues were going up rapidly, Carter nonetheless discovered that the Treasury did not have enough money to pay for all the programs for the workers and the poor. So their benefits were cut. Carter complained that the cost for maintaining the food stamp program was rising too fast, as if the inflation spiral in food prices was the poor’s fault, as if the high levels of unemployment and underemployment, despite the recovery, were the workers’ fault. So the Carter administration, along with the Democratic Congress, supposedly reformed the food stamp program by imposing a ceiling on spending for food stamps. Also, the Democratic administration did not renew the 26-week unemployment benefit extension, and made it much more difficult to obtain the first 13-week extension. So while in the 1974-75 recession workers were often eligible for extensions that brought their insurance to 65 weeks, during this latest recession, workers were lucky to get 39 weeks.
Certainly the measures that Carter took were not as severe as Reagan’s. But the reason for this has more to do with the recession which began in the last months of Carter’s term and still continues today. Both Carter and Reagan had the same basic policy, that is, to protect the capitalists’ profits; but in order to do this, given the worsening crisis, Reagan had to impose a still more harsh austerity on a population which was already suffering from long-term unemployment, inflation and a deteriorating standard of living.
Another indication that the policy of the Democrats is not different than the policy of Reagan is their action during the first two years of Reagan’s presidency. The Reagan policy could not have been implemented without the support of the Democrats, who held a margin in the House of Representatives of 76 votes. It was the votes of the Democrats that provided the margin to pass all of the major programs proposed by Reagan.
The Democrats agreed with Reagan that business needed even further tax cuts. In 1981, they fell all over themselves to support those cuts. The Democrats, not to be outdone by the Republicans in trying to prove their servility to business, engaged in a bidding war for different business groups’ support. This led to Congress passing more generous tax cuts for business and wealthy investors than initially proposed by Reagan.
The Democrats passed the Reagan 1982 defense appropriation with flying colors, despite publicly-declared misgivings about a too-large budget. The Senate passed the measure by a vote of 91-4, with such outspoken liberals as Cranston and Kennedy doing their patriotic duty and voting for the measure. The House of Representatives, dominated by the Democrats, voted for the defense budget 334-84.
Even the deep cuts in social spending that the Democrats pretend to oppose could not have been passed without the support of the Democrats. The omnibus appropriations bill under which the entitlement and other social programs were cut was passed, although by a smaller margin, both in the House and Senate. The Democratic Party leadership blamed this on the defection of the so-called Boll Weevils, the conservative representatives in the Democratic Party who allied with the Republican Party in order to pass the cuts. Of course if those same Boll Weevils had defected on an issue of importance to the Democratic Party, such as electoral support for Republican candidates, the Democratic Party would have imposed a discipline on those members. Apparently the cuts in the social programs were not an important issue because the mavericks were never called to account. Instead, the Democratic leadership threw up its hands and said there was nothing that it could do to stop Reagan from getting his way – unless the Democrats won more seats in the 1982 Congressional elections.
Well, the Democrats got their wish. They won 26 more seats in the House, bringing their majority to 103 out of 435 seats. And now we see what their promises mean; the Democrats offered their own proposals in the form of an alternative to Reagan’s budget. This budget shows clearly the meaning of the Democratic opposition to Reagan. The 1984 Democratic budget proposal, despite the hue and cry from both the liberals and conservatives, differs with the Republican budget only in small ways. And even on those small details, the Democrats made clear, they are ready to compromise with Reagan. That fact aside, let’s look at what they say they are proposing.
The Democrats say their budget cuts defense spending. In fact, they propose to increase defense spending by 21 billion dollars over last year. Of course this increase is less than Reagan’s, by a margin of four billion dollars – just about enough to give the Democrats the excuse to claim they are proposing less than Reagan.
The Democrats say that they want to restore social spending. This is a cruel joke at the expense of the poor people on social services. What the Democrats mean, when they say they want to restore something, is 1.5 billion dollars out of 5.6 billion in the new cuts that Reagan proposes to make. So, they propose to let stand three-quarters of Reagan’s new cuts, from programs like child nutrition, Medicaid, welfare and food stamps. Even worse, their budget would let stand all the old cuts, totaling 130 billion dollars. This is merely a way for the Democrats to make political hay at the expense of the poor, while going along with the Republicans’ cuts.
The biggest difference between the Democrats and the Republicans is that the Democrats are proposing to increase taxes by 30 billion dollars. But they coyly won’t say where the new tax will come from. Officially, they are saying that this will be proposed in the future. But individual Democrats, including those in the leadership of the party, are calling for rescinding the ten per cent tax reductions scheduled for July, and the tax indexing scheduled for 1984. The income tax reductions help limit, even though to a small extent, the amount of income taxes that the workers pay. And tax indexing will stop inflation from pushing workers into increasingly high tax brackets. While both of these measures are weighted to benefit the rich more, since it will cut the amount of taxes that they pay by more, at least they do contain some benefit for workers. And it’s exactly these tax cuts the Democrats propose to eliminate – while they don’t even mention rescinding any of the tax cuts enacted in 1981, especially targeted to the corporations and the most wealthy, tax reductions which the most wealthy got up front. Once again, the Democrats show whom they protect, and at whose expense.
Finally, the Democrats propose a budget deficit of 176 billion dollars, only slightly smaller than Reagan’s proposed budget deficit. The Democrats attack the Reagan budget deficits for forestalling a recovery. Alas, the Democrats offer no alternative, and therefore admit once again that they have no other policy to deal with the economic crisis.
Another indication of what kind of alternative the Democrats constitute is the compromise measures they have now worked out with the Republicans.
In the so-called Social Security Rescue plan, taxes will be increased still further, taxes which will weigh heaviest on the poorest workers. The Social Security tax is one of the most regressive taxes; income is taxed at a flat rate, and only the first 35,000 dollars of income is taxed. Also, benefits will be cut and postponed, both in terms of the cost of living and in terms of increasing retirement age. It was advertised as the way to save Social Security. In fact, it is simply another way the Congress has engineered to force the workers to foot the bill for unemployment. For much of the underfunding of Social Security is caused exactly by the unemployment, which means that there are fewer workers to pay into Social Security. If there had been unemployment less than four per cent, Social Security would have received 60 billion dollars more a year, and there would be no crisis of Social Security underfunding.
While jobs have been lost by the millions, the Democrats in Congress have done nothing. Actually, they have given themselves a lot of publicity by compromising with the Republicans to pass two supposed jobs bills which create, however, few jobs. The first bill, worked out by the Democrats and Republicans, for highway and bridge repair, in fact was the means to sell a nickel increase in gasoline taxes. This new tax will take money out of the consumer’s pocket and will therefore cut demand for consumer goods. It will, according to the Administration’s chief economist, Martin Feldstein, cost more jobs than it will create. But the highway construction industry will have a few more fat government contracts to help them out. The second jobs bill will actually create a couple hundred jobs – maybe. Many local governments have already applied to the federal government to use their money just to keep workers who might have been laid off, on the job. This is great for those few workers. But what about the 12 million unemployed? Where are the jobs for them? The Democrats have no answers. Neither do they touch the people responsible for the unemployment.
This is what the Democrats propose and do when they are in opposition, when they are more free to put on their best face, when they don’t have the direct responsibility for running the federal government during bad times. They call for a huge military budget. They call for tax breaks for the rich. They call for cuts in Social Security and social spending. They do nothing about jobs. Their only disagreements with Reagan now, as two years ago, have been very, very small. This is their policy when they are not in power. But if they were in power today, they would not act any different than Reagan. The policy of both parties corresponds to the needs of the bourgeoisie at this particular point. They can both be counted on by the bourgeoisie to serve its interests, no matter what the situation might become.