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The Politics of Rich and Poor: Wealth and the American Electorate in the Reagan Aftermath
Republican policies in the 1980s will produce a reversal of the public's political sympathies in the 1990s
288 pages, Paperback
First published June 16, 1990
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September 28, 2021
Kevin Phillips remains most famous for his 1969 book, The Emerging Republican Majority. At the time, he was an aide to Richard Nixon and his political predictions in that book proved to be mostly prescient, as the previously Democratic South turned Republican and an era of conservative dominance of our national politics began.
In the years following the Nixon administration, Phillips became disillusioned with conservatism and has penned a number of increasingly critical books. This one, the Politics of Rich and Poor, was published in 1990, and is focused on economic policies of the Reagan administration.
All these years later, it remains an enjoyable read, though it does not have the far-sighted accuracy of his 1969 book. It's full of interesting charts and observations on monetary and fiscal policy of the time, related the Fed's efforts to devalue the dollar to get inflation under control, the beginnings of our nation's reliance of deficit spending, and the 1986 tax reform law.
It suffers from the era's obsession with the supposed competition of the US with the Japanese economy and fears about foreign investment in the United States. Phillips also predicts the era of conservatism in US politics coming to an end, an observation that though I wish were true, turned out to not be the case. We can argue about whether we have emerged from the conservative paradigm even now, but we certainly did not in 1990.
In the years following the Nixon administration, Phillips became disillusioned with conservatism and has penned a number of increasingly critical books. This one, the Politics of Rich and Poor, was published in 1990, and is focused on economic policies of the Reagan administration.
All these years later, it remains an enjoyable read, though it does not have the far-sighted accuracy of his 1969 book. It's full of interesting charts and observations on monetary and fiscal policy of the time, related the Fed's efforts to devalue the dollar to get inflation under control, the beginnings of our nation's reliance of deficit spending, and the 1986 tax reform law.
It suffers from the era's obsession with the supposed competition of the US with the Japanese economy and fears about foreign investment in the United States. Phillips also predicts the era of conservatism in US politics coming to an end, an observation that though I wish were true, turned out to not be the case. We can argue about whether we have emerged from the conservative paradigm even now, but we certainly did not in 1990.
February 9, 2015
A really good deconstruction of how Reagan-era policies helped increase inequality in the US. Phillips was talking about the 1% more than 20 years before it became fashionable. The sad thing is that Phillips saw these things happening and was expecting the pendulum to begin swinging in a more populist direction shortly after this book was published. Instead the policies that Reagan started have only become more entrenched and inequality has spiraled to levels Phillips never could have imagined.
June 20, 2008
Kevin Phillips has a straight-forward style of prsenting conclusions and then backing them up with the evidence that led him there. Not strictly academic and certainly not fool proof, his method and his views are nevertheless thought-provoking. He is sincerely interested in presenting something useful. You can take his point of view and his analysis and build on them. Plus, his conclusions have a use. That is, he is not just trying to be right about the next thing; he presents a method and a set of conclusions anyone can use to understand current events and future likelihoods.
February 20, 2016
David, no doubt. But An importen critique, at the time, of Reaganomics
August 2, 2020
Good overview of the impacts of Reagan economic policies, 1980s business culture and the resulting income disparity on America in the 1980s
December 11, 2013
This is an informative book on the unintended consequences of Reaganomics in widening the income inequality between the rich and the poor at future American's expense via the federal deficit.
The book speaks to a known fact that middle classes wages have stagnated under Reaganomics while the rich have gotten richer. My own hypothesis of what has happen is that Reaganomics made capital global as never happened before and b/c of this the rich preferentially benefited from this capital while multi-national firms receiving that capital have outsourced the labor to cheaper places thus depriving good manufacturing jobs in the US. The question is can the US people compete in this increasingly competitive world. I think the key is really to invest a whole lot of dollars in education and if the Democrats want income distribution, it should be directed in proven methods of social mobility. That is, if there is a special tax for the rich to pool it's resources towards a special social mobility fund that can be competitively placed in people who will make social mobility at the top of their priority. While trickle down economics works globally, it does not work in a specific national context like the US.
The Progressive era was as much an attack on robber barons by the common man as it is the resentment of the old established wealth resentment towards new wealth. The one thing that the old rich had was a sense of giving back to the community they belonged to that is lacking in new rich.
Reaganomics copied Coolidge revival of Roaring 20's economics but with debt involved. While America the land of millionaires, it also became the land of large national debt, stagnant disposable income, and homelessness. Wealth concentrated @ the top in unprecedented levels due to unfettered unearned income like a cut in capital gains tax while wages stagnated. The wealth concentrated by the smart, well-educated, and highly motivated individuals.
Now for the downside:
During this period, a two income household become a necessity instead of a luxury. For middle America, there is a stagnant purchasing power in living wage since the late 1970's. Once a manufacturing blue-collared job with minimal education was the ticket to the middle class but no longer due to outsourcing globalization. Although American GNP was rising, real wages were decreasing across the US. Just like the end of Reagan’s term, today we continue to face wage stagnation in the face of immense corporate profits.
Reaganomics enlarged the upper middle class such as 2-earned professional families, entrepreneurs, and investors were the foot soldiers of the Reagan revolution. The reason why the richer get richer in our economy is b/c they are the ones who vote not the people who are economically dispossessed. The gap b/w rich and poor was a global phenomenon with Japan agreeing to buy US bonds to keep the economy humming just as China is buying bonds today.
Dukakis resisted charging Bush with the stereotypical rich vs poor charges b/c he himself belonged to the upper middle class. It is ironic that the coastal regions who benefited from Reaganomics the most are now Democrat bastions.
The reason why Capitalism survives in the US is that Democrats are much a fan of it as Republicans but whereas Democrats favor regulation in capitalism, Republican favor unfettered capitalism. When Republican's are in power the concentration of capital results b/c they emphasize national unity, dynamic capitalism, and market economics.
Was Nixon having market driven welfare due to the fact he came from a humble middle class background and did not identify himself with the rich? Kevin Phillips was part of Nixon "new majority" republicanism with its anti-establishment middle class (blue dog democrats) The Democrats became the party of intellectual knowledge-based elite.
Under Reagan, the establishment became once again the economic via businessmen, investment bankers, and entrepreneurs instead of the intellectual ones that were in the Democratic party. It turns out Carter started policies that Reagan enshrined as sacrosanct in cutting taxs for the rich and deregulation and placing Volcker as Federal Reserve Chief. What started out as Carter cranks became Reagan trailblazers. It turns out that Democrats as far as the capitalist economy goes are just Republican-lite.
"Accelerating economic inequality under the Republican was more often a policy objective than a coincidence; but greed was rarely the motive; it was more a matter of investment theory and free-market philosophy." The shift of economic capital was from the welfare state to Entrepreneurs and Investors. Just like Romney suggests, Reaganomics caused creative destruction that is the hallmark of modern capitalism. Phillips suggests that this used to be cyclic in which enterprise-oriented policies unleash latent capitalist energies followed by speculative excess and market crashes. Usually, unfettered capitalism follows community-minded or government activism and vice versa. Excessive inflation usually drives market driven reform combined with disenchantment with government and renewed attention to individual enterprises. Reaganomics had the evangelical fervor that their economic theory was the only American should be.
The 1st Republican age occurred during the Gilded Age guided by the theory of Social Darwanism and "laissez-faire" philosophy seeing that the economic fit will naturally rise to the top. The Roaring Twenties in contrast was the age of the "cult of prosperity" with Jesus being the greatest salesmen in the world. The idea is to be in Sales of anything. Reaganomics was characterized by a backlash against government overreach. Reaganomics framed in 5 central tenents: 1) importance of nurturing wealth, a successful economy depends on the proliferation of the rich. 2) individual investment and production are inherently creative, echoing the notion that supply creates demand (poster child of this is Steve Job's Apple when asked whether he does market research, he said "no, b/c the consumer does not know what it wants until we produce it and show it to them"). 3) the need to curb government b/c its regulation interferes with production which is the hallmark of supply-side economics 4) the essential role of entrepreneurialism in Reaganomics 5) cutting upper bracket taxes to help the middle class and the poor (trickle down economics)---> does not work.
Reaganomics was ripe for a take over b/c of inflation and inefficient government economic regulation.
The resurgence of Entrepreneurialism of outsiders crashing into remote corporate hierarchy was an appealing vision. Whereas older of Republicanism talked about inherited wealth, Reaganomics talked in terms self-made anti-elitist entrepreunerialism. Millioners were democratized. Entrepreneurs insisted that they were the key to change and growth. Immigrants and non-WASP entrepreneurs were central to Reagan's entrpreneurism and technological innovation.
The problem is the line between entrepreneurialism and debt manipulation became finer. That is, paper entrepreneurs proliferated people who did not make anything but instead made money off of money. The leverage buyout tycoons had taken the restructuring process beyond survival of the fittest to destructive profiteering, reckless expansion of corporate debt and rising bankruptcy rates. By doing this, all the reward goes to the leverage buyout tycoon while leaving all the risk to pension funds, saving loans, and banks all of which are insured by the government which leads to taxpayer-funded bailout. If it is true that immigration foster traditionally fosters entrepreneurism, why is Heritage Foundation so against it just b/c Obama is the one who suggest it?
1981 tax cuts lacked business investment in highering workers and hard capital. Phillips state that liberty and equality are antagonistic levers when one goes up the other goes down. Although tax cuts and high interests rates to protect creditors, bondholders, and financial institutions were part of traditional GOP policy, Reagan introduced running up peacetime deficits as a part of the framework as a private sector tool to fund tax cuts to the rich and military spending. While unearned income taxes were cut, Social Security taxes were raised disproportionately affecting middle class Americans. Although across the board tax cuts allowed the rich to pay a larger percentage of American taxes, it also was less than overall percentage of their income. Unlike previous Republican administrations, the fact that American military had replaced Britain as the preeminent world military might meant tax cuts would increase the deficit.
Aside from stagnant wages, the working poor lost federal assistance to the benefit of the defense industry.
Cutting taxes on estate and unearned income gave inherited wealth an upper hand
Reagan either defunded regulatory agencies or placed people in it who were hostile to it. Deregulation started under Carter with transportation that later spread wholesale towards all sectors. While deregulation helped consumers, it decreased safety and led to industries that were not safe such as food and drug services. As with everything educated, affluent were able to take advantage while uneducated poor people were not able to take advantage and favored populated areas over unpopulated areas. Deregulation policy also led to lax anti-trust enforcement thereby leading to increased mergers thus guaranteeing higher prices for consumers. Deregulation allowed S&L to spend money in risky ventures which was insured against loss by the tax payer.
Mundell combined loose fiscal policy (tax cuts and large budget deficits) with tight monetary policy. 1980's fiscal policy was different from other Republican administration b/c Money created money in other shores instead of products for the US for export to other places.
Interestingly, once regulation is established and companies adhere to it, they resist deregulation b/c it encourages market entry by entrepreneurial competition.
Starting in the '80's, wealth was moved globally via international US debt. Although there has been an increase in millionaires, there has also been an increase in foreign investment in the US from the Japanese in the 80's to the Chinese today. Reaganomics not only concentrated wealth to handful of people at the top but also shifted wealth outside the US this was due to Reagan needing to borrow huge sums of money @ high interest rates to fund the tax cuts, defense building, and recession spending. From Fed's high interest rates, that made foreigners buy US bonds to its devaluation of the dollar that made foreigners own more of the US assets. Although the foreign investment poured into the US, foreign companies sent the profits back home. Unlike prior periods of indebtedness to expand production, this era indebtedness fueled US consumption instead. During the Reagan era even though jobless rate decreased, the standard of living and the wage remain stagnant compared to other industrial nations thereby giving credence to the increase in wealth gap. As US debt increases, future US living standard would fall.
While there is historical precedent of declining empires decline due to debt to fund wars, Reaganomics was the first time in history in which a country would go into debt to cut taxes for the rich. What is worse instead of making debt go toward productive investments, the debt instead into "creative financial instruments" that fed a rise in consumption of the US economy via credit cards. Aside from financial sector, defense and aerospace contractors, and port cities like Boston where imports coming in were large beneficiaries of Reaganomics.
Japan blamed US decline on American imperial military global overreach. Japan was the beneficiary of Pax Americana. At the time, High tech industries are being overtaken by global competition. I wonder if that is still the case?
Phillips paints a picture of foreign companies taking over "american" firms of course underlies the fact that these companies with the exception of Chinese companies have become multi-national firms with no regard to country loyalties. Who cares what companies own what as long as American jobs are being produced! Financial services made LBO a key to their money cow to selling off American companies oversees.
Thatcher's conservative government while strengthening the wealthy also saw a rise in unemployment three times as it was when she took office.
Japan, Britain, and the US conservative governments made the transfer of wealth in favor of the rich possible.
The good thing with millionaires and the goods they produce is what one time period is shown as luxury the next is seen as necessity by its commoness and decrease in price. Only when times are bad does resentment of wealth start to show itself.
The biggest beneficiaries of Reaganomics was the service sector including finance at the expense of commodities such as manufacturing, construction, and oil, gas, and mining. Blue-collared manufacturing jobs were the entry way to the middle class by uneducated folks. The service sector had more education and talent. The billionaire class came from real estate, retailing, computers, food and drink, communications, health care, and the military. By this point, oil billionaires were diversifying their investments.
Financiers made money from restructuring and repackaging and dismantling Fortune 500 companies. CEO's were not paid to perform they were just paid a standard rate. Affordable housing was an issue where the number of homeless have increased b/c of expensive homes.
GEOGRAPHY: COASTAL WINNERS AND INTERIOR LOSERS
The East Coast and California gained during Reagan presidency b/c of service industry concentration such as finance, insurance, entertainment, defense, and US trade imports. Sophisticated military expenditures meant they had to be located in bicoastal high tech research areas. The strong dollar lost money for farm areas due to cheap imports from other countries. Beyond the cities, education and economics were more important than race. The rural economies were collapsing.
THE LOSERS:
The economy affected disproportionately women, young people, blacks, Hispanic though people who were well-educated, well-married, and well off did better than the national average. There was a significant divide between the rich and well-educated and the poor and uneducated even more prominent in minority communities. On the plus side there was now a stable Black middle class while the majority of those in poverty were still minorities.
Single-parent households increased which not only stressed families household incomes but also stressed the woman who was heading the household. While the elderly became richer due to increase in federal benefits, the children of the US became poorer.
Culturally, unemployable youth drove up crime rates and expanded the drug trade while unwed teenage mothers and broken families promised further welfare generations and expenses. Wealth correction only happens during periods of depression or deep recession.
George HW BUSH:
Phillips belonged to Nixon's middle American Republican party criticized Reagan's aggressive new money capitalism. Whereas Reagan fashioned himself to be a Coolidge Republican with an unfettered capitalism, Bush preferred Teddy Roosevelt brand of Republicanism with his commitment to conservation, patrician reform, and greater regulatory involvement. Reaganomics excessive commitment to private wealth worked against the national interest by running up the national deficit.
The book speaks to a known fact that middle classes wages have stagnated under Reaganomics while the rich have gotten richer. My own hypothesis of what has happen is that Reaganomics made capital global as never happened before and b/c of this the rich preferentially benefited from this capital while multi-national firms receiving that capital have outsourced the labor to cheaper places thus depriving good manufacturing jobs in the US. The question is can the US people compete in this increasingly competitive world. I think the key is really to invest a whole lot of dollars in education and if the Democrats want income distribution, it should be directed in proven methods of social mobility. That is, if there is a special tax for the rich to pool it's resources towards a special social mobility fund that can be competitively placed in people who will make social mobility at the top of their priority. While trickle down economics works globally, it does not work in a specific national context like the US.
The Progressive era was as much an attack on robber barons by the common man as it is the resentment of the old established wealth resentment towards new wealth. The one thing that the old rich had was a sense of giving back to the community they belonged to that is lacking in new rich.
Reaganomics copied Coolidge revival of Roaring 20's economics but with debt involved. While America the land of millionaires, it also became the land of large national debt, stagnant disposable income, and homelessness. Wealth concentrated @ the top in unprecedented levels due to unfettered unearned income like a cut in capital gains tax while wages stagnated. The wealth concentrated by the smart, well-educated, and highly motivated individuals.
Now for the downside:
During this period, a two income household become a necessity instead of a luxury. For middle America, there is a stagnant purchasing power in living wage since the late 1970's. Once a manufacturing blue-collared job with minimal education was the ticket to the middle class but no longer due to outsourcing globalization. Although American GNP was rising, real wages were decreasing across the US. Just like the end of Reagan’s term, today we continue to face wage stagnation in the face of immense corporate profits.
Reaganomics enlarged the upper middle class such as 2-earned professional families, entrepreneurs, and investors were the foot soldiers of the Reagan revolution. The reason why the richer get richer in our economy is b/c they are the ones who vote not the people who are economically dispossessed. The gap b/w rich and poor was a global phenomenon with Japan agreeing to buy US bonds to keep the economy humming just as China is buying bonds today.
Dukakis resisted charging Bush with the stereotypical rich vs poor charges b/c he himself belonged to the upper middle class. It is ironic that the coastal regions who benefited from Reaganomics the most are now Democrat bastions.
The reason why Capitalism survives in the US is that Democrats are much a fan of it as Republicans but whereas Democrats favor regulation in capitalism, Republican favor unfettered capitalism. When Republican's are in power the concentration of capital results b/c they emphasize national unity, dynamic capitalism, and market economics.
Was Nixon having market driven welfare due to the fact he came from a humble middle class background and did not identify himself with the rich? Kevin Phillips was part of Nixon "new majority" republicanism with its anti-establishment middle class (blue dog democrats) The Democrats became the party of intellectual knowledge-based elite.
Under Reagan, the establishment became once again the economic via businessmen, investment bankers, and entrepreneurs instead of the intellectual ones that were in the Democratic party. It turns out Carter started policies that Reagan enshrined as sacrosanct in cutting taxs for the rich and deregulation and placing Volcker as Federal Reserve Chief. What started out as Carter cranks became Reagan trailblazers. It turns out that Democrats as far as the capitalist economy goes are just Republican-lite.
"Accelerating economic inequality under the Republican was more often a policy objective than a coincidence; but greed was rarely the motive; it was more a matter of investment theory and free-market philosophy." The shift of economic capital was from the welfare state to Entrepreneurs and Investors. Just like Romney suggests, Reaganomics caused creative destruction that is the hallmark of modern capitalism. Phillips suggests that this used to be cyclic in which enterprise-oriented policies unleash latent capitalist energies followed by speculative excess and market crashes. Usually, unfettered capitalism follows community-minded or government activism and vice versa. Excessive inflation usually drives market driven reform combined with disenchantment with government and renewed attention to individual enterprises. Reaganomics had the evangelical fervor that their economic theory was the only American should be.
The 1st Republican age occurred during the Gilded Age guided by the theory of Social Darwanism and "laissez-faire" philosophy seeing that the economic fit will naturally rise to the top. The Roaring Twenties in contrast was the age of the "cult of prosperity" with Jesus being the greatest salesmen in the world. The idea is to be in Sales of anything. Reaganomics was characterized by a backlash against government overreach. Reaganomics framed in 5 central tenents: 1) importance of nurturing wealth, a successful economy depends on the proliferation of the rich. 2) individual investment and production are inherently creative, echoing the notion that supply creates demand (poster child of this is Steve Job's Apple when asked whether he does market research, he said "no, b/c the consumer does not know what it wants until we produce it and show it to them"). 3) the need to curb government b/c its regulation interferes with production which is the hallmark of supply-side economics 4) the essential role of entrepreneurialism in Reaganomics 5) cutting upper bracket taxes to help the middle class and the poor (trickle down economics)---> does not work.
Reaganomics was ripe for a take over b/c of inflation and inefficient government economic regulation.
The resurgence of Entrepreneurialism of outsiders crashing into remote corporate hierarchy was an appealing vision. Whereas older of Republicanism talked about inherited wealth, Reaganomics talked in terms self-made anti-elitist entrepreunerialism. Millioners were democratized. Entrepreneurs insisted that they were the key to change and growth. Immigrants and non-WASP entrepreneurs were central to Reagan's entrpreneurism and technological innovation.
The problem is the line between entrepreneurialism and debt manipulation became finer. That is, paper entrepreneurs proliferated people who did not make anything but instead made money off of money. The leverage buyout tycoons had taken the restructuring process beyond survival of the fittest to destructive profiteering, reckless expansion of corporate debt and rising bankruptcy rates. By doing this, all the reward goes to the leverage buyout tycoon while leaving all the risk to pension funds, saving loans, and banks all of which are insured by the government which leads to taxpayer-funded bailout. If it is true that immigration foster traditionally fosters entrepreneurism, why is Heritage Foundation so against it just b/c Obama is the one who suggest it?
1981 tax cuts lacked business investment in highering workers and hard capital. Phillips state that liberty and equality are antagonistic levers when one goes up the other goes down. Although tax cuts and high interests rates to protect creditors, bondholders, and financial institutions were part of traditional GOP policy, Reagan introduced running up peacetime deficits as a part of the framework as a private sector tool to fund tax cuts to the rich and military spending. While unearned income taxes were cut, Social Security taxes were raised disproportionately affecting middle class Americans. Although across the board tax cuts allowed the rich to pay a larger percentage of American taxes, it also was less than overall percentage of their income. Unlike previous Republican administrations, the fact that American military had replaced Britain as the preeminent world military might meant tax cuts would increase the deficit.
Aside from stagnant wages, the working poor lost federal assistance to the benefit of the defense industry.
Cutting taxes on estate and unearned income gave inherited wealth an upper hand
Reagan either defunded regulatory agencies or placed people in it who were hostile to it. Deregulation started under Carter with transportation that later spread wholesale towards all sectors. While deregulation helped consumers, it decreased safety and led to industries that were not safe such as food and drug services. As with everything educated, affluent were able to take advantage while uneducated poor people were not able to take advantage and favored populated areas over unpopulated areas. Deregulation policy also led to lax anti-trust enforcement thereby leading to increased mergers thus guaranteeing higher prices for consumers. Deregulation allowed S&L to spend money in risky ventures which was insured against loss by the tax payer.
Mundell combined loose fiscal policy (tax cuts and large budget deficits) with tight monetary policy. 1980's fiscal policy was different from other Republican administration b/c Money created money in other shores instead of products for the US for export to other places.
Interestingly, once regulation is established and companies adhere to it, they resist deregulation b/c it encourages market entry by entrepreneurial competition.
Starting in the '80's, wealth was moved globally via international US debt. Although there has been an increase in millionaires, there has also been an increase in foreign investment in the US from the Japanese in the 80's to the Chinese today. Reaganomics not only concentrated wealth to handful of people at the top but also shifted wealth outside the US this was due to Reagan needing to borrow huge sums of money @ high interest rates to fund the tax cuts, defense building, and recession spending. From Fed's high interest rates, that made foreigners buy US bonds to its devaluation of the dollar that made foreigners own more of the US assets. Although the foreign investment poured into the US, foreign companies sent the profits back home. Unlike prior periods of indebtedness to expand production, this era indebtedness fueled US consumption instead. During the Reagan era even though jobless rate decreased, the standard of living and the wage remain stagnant compared to other industrial nations thereby giving credence to the increase in wealth gap. As US debt increases, future US living standard would fall.
While there is historical precedent of declining empires decline due to debt to fund wars, Reaganomics was the first time in history in which a country would go into debt to cut taxes for the rich. What is worse instead of making debt go toward productive investments, the debt instead into "creative financial instruments" that fed a rise in consumption of the US economy via credit cards. Aside from financial sector, defense and aerospace contractors, and port cities like Boston where imports coming in were large beneficiaries of Reaganomics.
Japan blamed US decline on American imperial military global overreach. Japan was the beneficiary of Pax Americana. At the time, High tech industries are being overtaken by global competition. I wonder if that is still the case?
Phillips paints a picture of foreign companies taking over "american" firms of course underlies the fact that these companies with the exception of Chinese companies have become multi-national firms with no regard to country loyalties. Who cares what companies own what as long as American jobs are being produced! Financial services made LBO a key to their money cow to selling off American companies oversees.
Thatcher's conservative government while strengthening the wealthy also saw a rise in unemployment three times as it was when she took office.
Japan, Britain, and the US conservative governments made the transfer of wealth in favor of the rich possible.
The good thing with millionaires and the goods they produce is what one time period is shown as luxury the next is seen as necessity by its commoness and decrease in price. Only when times are bad does resentment of wealth start to show itself.
The biggest beneficiaries of Reaganomics was the service sector including finance at the expense of commodities such as manufacturing, construction, and oil, gas, and mining. Blue-collared manufacturing jobs were the entry way to the middle class by uneducated folks. The service sector had more education and talent. The billionaire class came from real estate, retailing, computers, food and drink, communications, health care, and the military. By this point, oil billionaires were diversifying their investments.
Financiers made money from restructuring and repackaging and dismantling Fortune 500 companies. CEO's were not paid to perform they were just paid a standard rate. Affordable housing was an issue where the number of homeless have increased b/c of expensive homes.
GEOGRAPHY: COASTAL WINNERS AND INTERIOR LOSERS
The East Coast and California gained during Reagan presidency b/c of service industry concentration such as finance, insurance, entertainment, defense, and US trade imports. Sophisticated military expenditures meant they had to be located in bicoastal high tech research areas. The strong dollar lost money for farm areas due to cheap imports from other countries. Beyond the cities, education and economics were more important than race. The rural economies were collapsing.
THE LOSERS:
The economy affected disproportionately women, young people, blacks, Hispanic though people who were well-educated, well-married, and well off did better than the national average. There was a significant divide between the rich and well-educated and the poor and uneducated even more prominent in minority communities. On the plus side there was now a stable Black middle class while the majority of those in poverty were still minorities.
Single-parent households increased which not only stressed families household incomes but also stressed the woman who was heading the household. While the elderly became richer due to increase in federal benefits, the children of the US became poorer.
Culturally, unemployable youth drove up crime rates and expanded the drug trade while unwed teenage mothers and broken families promised further welfare generations and expenses. Wealth correction only happens during periods of depression or deep recession.
George HW BUSH:
Phillips belonged to Nixon's middle American Republican party criticized Reagan's aggressive new money capitalism. Whereas Reagan fashioned himself to be a Coolidge Republican with an unfettered capitalism, Bush preferred Teddy Roosevelt brand of Republicanism with his commitment to conservation, patrician reform, and greater regulatory involvement. Reaganomics excessive commitment to private wealth worked against the national interest by running up the national deficit.
This entire review has been hidden because of spoilers.
April 23, 2020
How the Reagan “revolution” destroyed the middle and working classes.
June 6, 2020
This book was written 30+years ago. Unfortunately, it's even more relevant today. The only thing that has changed is how much worse income disparity between the haves and have-nots has become.
June 7, 2023
Not great how relevant this is to today's politics in America
December 9, 2010
Tax policy in America historically, with an emphasis on the 1980s. The book was published 1990 so you get some predictive elements too.
I am so afraid of the coming convergence of income inequality and climate change and resulting mass violence.
Tax policy is the primary mechanism to correct the divergence of wealth. Electing legislators with weaker ties to the wealthiest fraction of a percent is imperative to that end.
Secondary mechanisms are .. I don't know, mandatory service corps? Socially responsible investing? I fear those are all fairly cosmetic, even if sexier.
Finally a decent fact-based refutation to supply-side economics!
P.70 "Economist Robert Kuttner encapsulated the basic investment critique: "In 1981, before the supply-side cuts took effect, America invested about 12.2% of its total income in new plant and machinery. Since the big tax cut, new investment has fluctuated narrowly, from a low of 11% in the 1983 recession to a high of 12.6% in the 1985 recovery."*
Then from Benjamin Friedman's Day of Reckoning:
-"net business investment even during the 1983-86 recovery ran below the average for the nineteen fifties, sixties and seventies"
-"the misperception of business seriously "investing" when corporations were simply buying other companies, merging, taking on debt to go private, or otherwise reshuffling structure or assets. In the wake of the 1981 tax cuts, American business enjoyed rising profits and cash flow, but much of what they were spending it on was an ersatz enterprise- that apt phrase paper entrepreneurialism.
*citation: "Supply-Side Tax Tonic Has Been a Fantasy," LATimes, Dec 21, 1987
P 81-82 has important stuff on movement between brackets and gross amounts of $$ from wealthiest brackets increasing while rate/burden goes down since it coincided with economic turn-around (yes, slashing taxes on the wealthiest meant that they experienced soaring incomes and economic prosperity).
Interest rates is not something I pay much attention to, in my personal-finance-illiteracy. This is thought-provoking:
P.90 "William Greider, in his landmark 1987 study of the Federal Reserve, wrote:
'The 1981 tax legislation proved to be regressive in a more fundamental way, hardly noted at the time. It became the pretext for a vast redistribution of incomes, flowing upward on the income ladder, through another powerful channel- interest rates. The price of money determined how the fruits of capitalist enterprise would be apportioned- the division of shares between creditors and debtors, between investors and entrepreneurs, between the old and the young, between workers and owners. The immediate consequence of the 1981 tax bill, virtually from the moment it was enacted, was higher interest rater. Paul Volcker's warnings proved correct. The division of wealth was tilted towards the top - a larger share would flow to those who already had accumulated wealth. There would be less for everyone else.' "
Priceless- resistance to deregulation from the business community
P.100 "The Wall Street Journal had summed up the predicament in 1983 with a front-page story entitled "Federal Deregulation Runs into a Backlash, Even from Business." Well-established companies often supported the status quo for a good commercial reason: having invested heavily to satisfy existing regulatory requirements, they wanted their competitors equally burdened."
I am so afraid of the coming convergence of income inequality and climate change and resulting mass violence.
Tax policy is the primary mechanism to correct the divergence of wealth. Electing legislators with weaker ties to the wealthiest fraction of a percent is imperative to that end.
Secondary mechanisms are .. I don't know, mandatory service corps? Socially responsible investing? I fear those are all fairly cosmetic, even if sexier.
Finally a decent fact-based refutation to supply-side economics!
P.70 "Economist Robert Kuttner encapsulated the basic investment critique: "In 1981, before the supply-side cuts took effect, America invested about 12.2% of its total income in new plant and machinery. Since the big tax cut, new investment has fluctuated narrowly, from a low of 11% in the 1983 recession to a high of 12.6% in the 1985 recovery."*
Then from Benjamin Friedman's Day of Reckoning:
-"net business investment even during the 1983-86 recovery ran below the average for the nineteen fifties, sixties and seventies"
-"the misperception of business seriously "investing" when corporations were simply buying other companies, merging, taking on debt to go private, or otherwise reshuffling structure or assets. In the wake of the 1981 tax cuts, American business enjoyed rising profits and cash flow, but much of what they were spending it on was an ersatz enterprise- that apt phrase paper entrepreneurialism.
*citation: "Supply-Side Tax Tonic Has Been a Fantasy," LATimes, Dec 21, 1987
P 81-82 has important stuff on movement between brackets and gross amounts of $$ from wealthiest brackets increasing while rate/burden goes down since it coincided with economic turn-around (yes, slashing taxes on the wealthiest meant that they experienced soaring incomes and economic prosperity).
Interest rates is not something I pay much attention to, in my personal-finance-illiteracy. This is thought-provoking:
P.90 "William Greider, in his landmark 1987 study of the Federal Reserve, wrote:
'The 1981 tax legislation proved to be regressive in a more fundamental way, hardly noted at the time. It became the pretext for a vast redistribution of incomes, flowing upward on the income ladder, through another powerful channel- interest rates. The price of money determined how the fruits of capitalist enterprise would be apportioned- the division of shares between creditors and debtors, between investors and entrepreneurs, between the old and the young, between workers and owners. The immediate consequence of the 1981 tax bill, virtually from the moment it was enacted, was higher interest rater. Paul Volcker's warnings proved correct. The division of wealth was tilted towards the top - a larger share would flow to those who already had accumulated wealth. There would be less for everyone else.' "
Priceless- resistance to deregulation from the business community
P.100 "The Wall Street Journal had summed up the predicament in 1983 with a front-page story entitled "Federal Deregulation Runs into a Backlash, Even from Business." Well-established companies often supported the status quo for a good commercial reason: having invested heavily to satisfy existing regulatory requirements, they wanted their competitors equally burdened."
February 27, 2017
Not the first guy to examine the issue of the division of wealth in the country and the problems it might cause, but the Phillips book got a lot of traction in the 1980s, and the issue remains relevant today in 2017.
June 18, 2021
Intelligent & analytical but not surprising or revelatory. In esoteric, economic language does Phillips explain how actually the rich get richer. With graphs & charts does he illustrate the decline in fortune for the lower & middle classes. There are lots of numbers (percentages) employed to make sense of the downward trends that are consequent to profit-driven policies whose beneficiaries are corporations. He explains how mergers of two or more companies diminish the vibrant diversity of ingenuity; he makes the case for Japan's economic dominance; he distinguishes between earnings that are derived from production & service, and that are reaped from exchanges, buy-outs, trades, and all other means of lucrative transfers or relocations of capital; and he invests much into detailing the reasons behind the actions of the Reagan administration, their effects on America's position in international trade, and their grievous repercussions for the poor, the disaffected, the despondent, & the aspiring.
This is a challenging read. It's dense & technical at points. It's friendly to students of economics but cold & mechanical to the uninitiated. It's also rather dated to the 1980s. There's some U.S. history involved (the Gilded Age post Civil War, the Coolidge presidency of 1920s, and the Reagan admin), some references to Milton Friedman's theories alongside the viewpoints of William Jennings Bryan who ran on a third-party ticket against financial elites, and some lessons on the significant differences that formed at the outset of the Republic, namely between agricultural, rural interests and industrial, moneyed aims.
This is a challenging read. It's dense & technical at points. It's friendly to students of economics but cold & mechanical to the uninitiated. It's also rather dated to the 1980s. There's some U.S. history involved (the Gilded Age post Civil War, the Coolidge presidency of 1920s, and the Reagan admin), some references to Milton Friedman's theories alongside the viewpoints of William Jennings Bryan who ran on a third-party ticket against financial elites, and some lessons on the significant differences that formed at the outset of the Republic, namely between agricultural, rural interests and industrial, moneyed aims.
September 22, 2013
Kevin Phillips began as a Republican activist with the Reagan administration but as he began to see what these radical right-wing policies began to do to American society, he became an outspoken critic of conservative policies. This book when I first read it was a revelation because it demonstrated the destructive nature of Reaganomics so clearly. Phillips has continued to pound this message home with subsequent books over the years.
June 30, 2025
I had a sense about the impact of Reagan-era policies on poverty and the extreme accumulation of wealth. This was an exceptionally detailed and insightful account of so much that happened, written in the very early 1990s. We haven't really learned the lesson here so I'll be incorporating some of this great history in current writings on the topic.
June 27, 2008
Interesting book on the impact of conservative political policy on the American economy.
December 11, 2010
Describes what happened to the American middle class as a result of Reagan cutting the upper tax rate. Good refernce for what has been going on since.
May 16, 2014
A book about the increasing divide between rich and poor. The interesting thing is that it was written in 1990 by a conservative Republican. Worth reading.
May 18, 2009
dull.
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