21 November 2010


The Reagan administration's campaign to weaken unions was part of its conscious policy changes to redistribute income upwards. The anti-union (and anti-worker) campaign took several steps: pro-management appointments to the NLRB; reduced funding to the NLRB, so that it developed a backlog of cases and a long waiting period for cases to be heard; the firing of air-traffic controllers, which encouraged other employers to fire striking workers or to threaten to. As a result, unions lost much of their bargaining power, which put downward pressure on everyone's wages. Trickle-up economics was well on its way.

Other conscious policies of the Reagan administration led to the progressive impoverishment of middle-class workers: Reagan blocked increases in the minimum wage, which in real terms was 26% less when Reagan left office than when he entered. The large federal budget deficits of the Reagan years (you do remember those?), coupled with high interest rates of the Federal Reserve, led to a rise in the value of the dollar, making imports cheaper and loss of many high-wage jobs in manufacturing. Then, there were the trade agreements--NAFTA and others--placing U.S. manufacturing workers in direct competition with low-wage workers overseas.

All of this was the result of conscious policy decisions. Between 1980 and 1995, real wages declined 0.9% overall; workers at the lower percentiles declined even further. This was taking place while pay of CEOs went from 24 times the pay of the average worker to 300 times. Wall Street fund managers did even better, with some earning hundreds of millions in a good year. Reagan's policies and the "advancement" of the capitalist system at that time meant the creation of more millionaires than ever before. The professional classes and the rich loved Reagan. Others bought into Uncle Ronnie's "Morning in America" with patriotic emotions while their income dropped.

All this changed the economic system that had previously worked in the U.S. in a virtuous circle: rising productivity, wages, consumption, and investment.

During the Clinton years, in spite of the first sustained prosperity in two decades--with productivity gains, job creation, decreasing unemployment, rising wages and broad prosperity, and containment of inflation--the U.S economy saw the beginnings of the bubble economy, which has shifted unimaginable wealth further upward.

Bush's tax cuts added to the trickle-up economics by placing more money into the hands of the rich who, in their incarnations as Wall Street financial managers, Federal Reserve board members, and Treasury Dept. officials, would have us believe they did not understand the stock bubble, the housing bubble, the derivatives market, and sub-prime lending. They will be happy for you to believe that "higher taxes" (Obama has CUT your taxes) and government spending is servitude/slavery. They are laughing all the way to their banks, which have a photo of Uncle Ronnie on their board-room walls.

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