Reagan’s Policy:
A Scenario for Workers’ Sacrifices

Mar 31, 1981

Hollywood came to Washington when Reagan delivered his Budget Message. His scriptwriters created a speech for him which conveyed the sense of an Administration seriously trying to come to grips with the economic problems facing the nation. Feelingly evoking the sense of an economic crisis almost as severe as that of the Great Depression, he called on everyone to make sacrifices today – temporary ones, of course – so that tomorrow the economy could be restored to health. Calling inflation the nation’s worst enemy, he admitted – and loudly at that – that it was the government deficit spending which had caused the inflation, and he spoke of his resolve to cut that spending – even if that must mean that everyone will be temporarily discomforted.

Underneath all the Hollywood veneer, there were some proposals, most of them vague, to be sure; but even these vague proposals allow us to see the outlines of his actual policy.

First, he is calling for cuts in the currently mandated government expenditures for 1982. These cuts will total nearly 49 billion dollars, with more than 40 billion of them coming directly out of the social programs. (Of course, we have to take all these figures with a large grain of salt; the budgets submitted by presidents have always been notoriously – and self-servingly – inaccurate.)

Second, he is calling for a total increase in direct military spending of almost 42 billion dollars, with additional funds to be directed toward activities which reinforce the military, such as Radio Free Europe and the maritime industry.

Third, he is calling for a roll-back of income taxes – totaling supposedly 44 billion a year to individuals, and 10 billion a year to the corporations.

Finally, he is proposing to deregulate much of industry, to let the so-called more efficient companies win out over the less efficient, to let the big corporations increase productivity by removing most of the regulations on consumer and worker safety and health, and on environmental standards.

These are the main lines of Reagan’s proposals – these are the tools he proposes to use to right the economy and get rid of inflation.

A Plan to Get Rid of Inflation – Or to Get Around It?

Reagan, himself, admits that stopping inflation isn’t really part of his “scenario” this year. Oh, certainly, he has promises for later on, but as far as the next 2 or 3 years are concerned, he says that all he can do is pick up the mess Carter has created. (Carter, of course, said the same thing about Ford’s budget.)

Even with Reagan’s rosiest “scenarios” of what next year’s budget will produce, he is forced to admit that there will be a deficit of 45 billion dollars. In fact, because of the way he estimates the result of the tax cut, this figure is undoubtedly grossly understated – for he assumes the tax cut will not really lower government revenues. In addition, some of the increase in military spending is to be included in this year’s current expenditures, and so while formally it may not show as a part of next year’s budget deficit, in fact, the money will be spent, and will add to the total growing deficit, no matter which year it appears in. But even assuming that all of Reagan’s figures were correct, what we see is a budget deficit which will continue to fuel the fires of inflation, over the next year or two.

And what about the more distant future, 3 or 4 years from now? In fact, Reagan says one of the main causes for inflation is that people now expect it to happen and act accordingly, in anticipation of it. This is why, he says, he proposes such severe sacrifices – they are a kind of shock therapy to destroy inflationary expectations. In other words, Reagan’s prescription for stopping the inflation is: Don’t expect it!

The fact that Reagan’s budget eliminated the government’s precise economic predictions, as rosy as they were, and replaced them with pleasant “scenarios” of how the budget ought to fare if people allow Doctor Reagan to work on their psychological expectations – this fact in itself is a tacit admission on Reagan’s part of the strong likelihood of inflation continuing on into the foreseeable future.

Certainly, up until now, the bourgeoisie has been able to avoid the worst effects of the inflation for itself by making others pay the cost of it. In the four years of Carter’s administration, the inflation was one of the primary means by which the bourgeoisie protected itself against the inroads of the economic crisis. In those 4 years, wages increased by only 31%, a good deal less than the 41% increase in consumer prices; while profits increased by 55%, significantly more than the rate of inflation. In fact, so long as it is manageable, the inflation is a useful tool for transferring resources to the bourgeoisie, at the expense of the laboring and other poor layers of the population. It was used that way during Carter’s administration, and it is clear that Reagan will continue policies which will allow the inflation to be used in the same way.

Of course, at a certain point, the inflation could become a problem for the bourgeoisie itself. And in fact, if all Reagan’s proposals for tax cuts and for budgetary increases in spending were enacted, there would be an enormously increased deficit which might easily push the inflation beyond the bourgeoisie’s reasonable bounds. It is to forestall this possibility that Reagan has been applying the broad ax to all the social programs. The cuts he is asking for are a partial means of compensating for the increases he wants.

In reality, Reagan’s cuts could in no way eliminate the inflation. They are only the means by which Reagan hopes to limit it, maintaining it at something like the current rate, preventing it from getting totally out of hand, and in this way, continuing to make the working class and other poor layers of the population pay for the current crisis, without there being too big a price paid by the big bourgeoisie.

If Not Inflation, Then What is Reagan Aiming at?

Reagan’s policy is marked by a single-minded purpose – to protect the bourgeoisie against the ravages of the current economic crisis. Above all, he is looking to protect the big monopolies.

First, the new Administration plans to spend more on the military-goods-producing industries. This is, apart from the role it plays in foreign policy considerations, primarily a plan to subsidize most of the big monopolies that dominate the country. For military contracts go not only to airplane, tanks and weapons manufacturers; they also go to the steel, the auto, the tin, the aluminum, the plastics, the chemical, the oil, the electronics, the data processing industries, etc.

Military spending may be the most spectacular and the most significant way by which subsidies are given to the large monopolies, but it is by no means the only way. Reagan proposes to continue many of the other typical means such as subsidies to highway construction, maritime, and even the oil industry.

Second, Reagan proposes tax cuts for everyone. In reality, under the guise of an across-the-board tax cut, he is proposing to shift the tax burden even more onto the working class. That is, he is proposing to take money from the poorer layers of the population and give it to the bourgeoisie and its corporations.

In the first place, although Reagan has proposed a tax cut for both business and for individuals, it is corporate taxes alone which have been cut so far, retroactive to January 1, in fact, while the individual tax cut has been postponed, supposedly only until June. Of course, this short postponement could always lengthen, if the Administration happens to notice the inflation.

But even if the individual cuts are enacted, they won’t mean the same thing for the wealthy and for those who work for a living. The last few decades of inflation have continued to push the workers into much higher tax brackets, with the result that they now pay a much higher rate of tax than before. The wealthy were already in the top bracket, so their income tax rates have not increased over the years. The result of course is that there is much less difference today in the tax rate paid by the wealthy and that paid by the workers, than there was, for example, 20 years ago. Reagan’s across-the-board cut does nothing to remedy the fact that the income tax is becoming more and more regressive.

Moreover, in reality the poor will see very little, if any, of this cut. Given the fact that this year also the poor will continue to be pushed into the higher tax brackets by the inflation, and given the fact of another social security tax increase, the taxes of the workers will remain relatively the same – if the individual tax cut is ever enacted. The wealthy, of course, are not affected in the same way by these changes, and so they will see the full 10%.

And, of course, the bourgeoisie will benefit twice – first as the owners of the big corporations, and second as individuals.

Third, Reagan proposes “deregulation.” The justification for this is that American business has become less and less productive, that it stands at more and more of a disadvantage to the other imperialisms, especially to the Japanese and the German, precisely because its natural bent for productivity has been strangled by government red tape and regulations. Reagan says that a removal of the red tape would be accompanied by greater competitiveness, and, he implies, lower prices.

And so Reagan is proposing to cut back on many inconvenient regulations which limit the bourgeoisie in certain areas. The health and safety of workers and consumers; environmental protection; the cushion for small businessmen and farmers against the weight of the big monopolies – all of the regulations which set limits as to how far the big monopolies could go in these areas are to be shaved away. In reality, the protections that were accorded because of government regulations were minimal; nonetheless, the elimination of even minimal standards will give to the big monopolies a not totally insignificant way to increase their profits. Certainly, no one can be so naïve as to expect that, just because the companies had used the imposing of these same regulations to justify price increases, now the removal of restrictions will be accompanied by a lowering of prices. We have already seen proof it doesn’t work this way with the deregulation of the airline industry over the past several years. What was supposed to be used to create greater competition and lower prices in fact was accompanied by increases of great magnitude in airline fares.

Is This a New Road for the Government?

In none of these programs is Reagan setting off on an entirely different course than Carter. It was Carter himself who began the cuts in the social programs at the same time that he increased military spending. It was Carter who deregulated the oil and trucking industries and the airlines – Reagan only advanced the date for final deregulation of oil. It was Carter who imposed the latest inflationary spiral on the working class. It was Carter who gave money to Chrysler while refusing unemployment extensions.

The new administration has the same goal as the old: to shift the burden of the continuing economic crisis onto the working class and the poorer layers of the population. Obviously, in times like these, the bourgeoisie and its politicians don’t willingly choose other roads. And up until now, the working class and other poor layers of the population have done nothing to cause the bourgeoisie to question this road.

If there is a difference in Reagan and Carter, it lies first in the fact the crisis continues, and even gets worse; given this, Reagan proposes a more radical version of Carter’s policy. Second, Reagan has taken a different tack toward the working class in imposing the policy. He makes a point of calling on the working class to sacrifice.

In fact, all of Reagan’s Hollywood flourishes have one important goal: to convince the workers to impose on themselves a real austerity program. He asks the American workers to believe that they can have no hopes for themselves unless American business can be revived.

And this has implications way beyond Reagan’s budgetary policy. For, in fact, he is calling on the workers to make whatever sacrifices are necessary in order to restore business to good health. He speaks of the need to make American business “competitive,” of the need to help it “re-industrialize.” Implied in this is that the workers must take actual wage cuts – not just those imposed by inflation – that they must tolerate the speed-up and accept unemployment, all in order to increase the “competitiveness” of the big American monopolies.

In dramatic fashion, Reagan has given notice to the workers that they can expect very little of their lives but sacrifice over the next several years.

The bourgeoisie certainly must hope that in the Hollywood actor, it has found a useful con man to front for it.

Whether the workers are fooled by him remains to be seen. Even if the continuing inflation disabuses them of any hope for improvement, it also remains to be seen if the workers are ready to take upon themselves the road of struggle against the bourgeoisie.