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Ronald Reagan, Our Most Demented President: a repost, plus the national debt. From ancient history: 2015.

2021-02-01

A new analysis of Ronald Reagan’s news conferences demonstrates that he showed evidence of dementia while he was still president, in fact during his campaign for a second term.  Everyone knows that Reagan wasn’t diagnosed with Alzheimer’s Disease until 1994, six years after he left the presidency.

The analysis, reported in the New York Times (NYT), shows that Reagan developed changes consistent with early Alzheimer’s Disease while he was still president.  He is not known to have displayed any clear loss of decision making ability or memory, but certain subtle changes were already obvious during his debates with Jimmy Carter and Walter Mondale in 1984.  Compared to the elder President Bush, Reagan showed signs of using words repetitively and substituting nonspecific words like “thing” for specific nouns.  He also showed a progressive impoverishment in his vocabulary.

Another telltale symptom is the routine that Reagan used when participating in Cabinet meetings.  He had a set of index cards that spelled out how he was to respond to each Cabinet member’s speech.  The cards were prepared by his staff to cue him what questions to ask of each member; at the end, he was given an exit line, just as if he were reading from a script.

Although the author of the NYT article, Lawrence K. Altman, MD, claims that there was no evidence of loss of decision making ability, we can confidently conclude that Reagan entered office with a weak grasp of politics and a superficial knowledge level in general.  Reagan’s decision to dramatically lower taxes, especially on wealthy people, led to a sudden deficit in current accounts, and he was later forced to raise taxes again to close the gap.  He was warned by his economic advisers of the likely result of his tax reductions, but he clung to the mistaken belief that lowering taxes would somehow increase collections.

At the same time (August 1981), Reagan suddenly fired all the striking air traffic controllers, ignoring their legitimate grievances about working conditions that had prompted the strike.   The controllers had actually supported his candidacy for president, based on promises his campaign made to the union about how negotiations would go after he was elected.  After Reagan won the presidency, his negotiators took a hard line with the union, basically going back on the promises he had made to get elected.

The controllers had been losing money to inflation for the past decade, and their demands included a large pay raise.  This was unpopular with the general public, and sympathy was on Reagan’s side.  Since civil service employees were forbidden by law to strike, they were taking an extreme risk.  Reagan fired all the striking workers (the majority of the workforce) and banned them from civil service jobs for life.  It took almost ten years (according to Wikipedia) for the air traffic control system to return to full operation; ironically, many of the changes that the union had demanded were instituted because of the shortage of controllers caused by the firing.

Many controllers were forced into poverty by this action, and only 800 of them got their jobs back when Clinton rescinded Reagan’s orders blacklisting them.  The cost to the airlines and the flying public was vastly greater than if Reagan had acquiesced to the controller’s demands, but to Reagan it was the principle of the thing (an extremely simplistic point of view, as opposed to a nuanced perception.)

Reagan’s action gave private employers a tremendous boost in confidence in dealing with their own workers.  They began to treat them as if they could be hired and fired at will, without giving any cause.  The result has been a steady erosion in the number of workers represented by unions and the rights of workers in general.  The most negative result, indirectly, was to force down the average wage despite dramatic increases in productivity.  The average wage is less now than it was forty years ago, in part because of how Reagan treated the air traffic controllers.

The end result of Reagan’s actions was to reverse the improvements in conditions for workers that had occurred since WW II.  The level of income and wealth inequality has returned to the unsustainable levels that prevailed just prior to the Great Depression.  This inequality is destabilizing to society; if current trends continue, democratic government will be lost, and the United States will be governed by a small oligarchy, with a large police force and many people in jail.  Such a situation is conducive to social unrest and possibly even civil war.

(Ronald Reagan courtesy of WikiImages)

How Ronald Reagan and George Bush increased the national debt to unheard-of levels. How about now?

Ronald Reagan campaigned partly on the assertions that the national debt was “the highest ever” and “out of control.”  The national debt at the time he was elected was about 33% of the gross domestic product (GDP); this was the lowest proportion of GDP in 50 years, and could only be described truthfully as “the highest ever” if one ignored inflation and the relationship of debt to GDP.  The national debt was not “out of control” until he got his hands on it.  He presided over a nearly 190% increase in the national debt as a proportion of GDP, from approximately $1 trillion to $2.9 trillion.

Reagan performed this magic by dramatically reducing taxes on the wealthy in his first year in office.  The deficit increased so rapidly that he was forced to slightly scale back his tax reductions later.  His excuse for this maneuver was the notion that cutting taxes on the wealthy would inspire them to increase their income so greatly that total tax collections would actually increase.  There was no sane precedent for this notion, and George HW Bush famously called it “voodoo economics” when he campaigned against Reagan (before he was selected as the vice presidential candidate.)

The notion that lowering taxes would increase tax receipts was based on the idea that the wealthy would work harder and produce more income if a larger percentage of their income was left to them after taxes.  This is known as the “Laffer curve.”  The notion that if you tax the wealthy too much, they will “goof off” (not work as hard), is essentially this: why bother to work as hard when you only get to keep 50% of your income after taxes than when you get to keep 85% of your income after taxes?  The problem is that the wealthy are struggling to spend even a fraction of the money they are getting, and usually add the surplus to their savings or brokerage accounts (instead of spending it, as a poor person would…)

Before Reagan, the national debt had been dramatically increased during WW II to allow for arming the rest of the free world and the Soviet Union against Nazi Germany and the Japanese Empire.  At the end of the war, the national debt was 120% of the GDP.  After the war, a booming economy and relatively high taxes allowed us to pay down the debt while at the same time increasing our GDP steadily.  Before the war, our economy had been in the doldrums and had not recovered from the Great Depression.  Deficit spending, on disposable items like bombs and bullets, primed maximum employment and increasing wages, with notable prosperity as a result.

Reagan’s deficit spending, by contrast to WW II spending, had only marginal beneficial effects on the economy.  This was because the deficit was created by tax cuts that resulted in a loss of government revenue rather than spending on tangible items which transferred revenue to the producers of those items.  After Reagan, GHW Bush continued the deficit spending by not raising taxes to previous levels; in his single term, the first Bush increased the deficit a further 54%, from $2.9 trillion to $4 trillion.  The economy continued to function marginally, and income inequality increased.

The next president, Clinton, took a different tack: he raised taxes and tried to balance the budget.  The total national debt increased 41% during his two terms.  By the end of his second term, the budget was nearly balanced.  If he had not had to pay interest on the new debt, it is estimated that he would have paid off all of the remaining debt from WW II; he paid about $2.2 trillion in interest on the debt accrued from before he assumed office.

The second President Bush increased the national debt by a further 72%, primarily by cutting taxes and pursuing an off-the-books war in Iraq.  He was also forced to pay some $800 billion to bail out the banks after the crash of 2007-8.  During his first campaign for office, he promised to “retire nearly $1 trillion in debt over the next four years.  This will be the largest debt reduction achieved by any nation at any time…”  He increased the debt by at least $6.1 trillion, starting in his first year in office.  Much of the increase in debt was interest paid on the previous deficits.

When Obama took office, he inherited an economy in free fall and a nearly $1 trillion yearly deficit.  This shortfall has been dramatically reduced, year by year, and is now estimated at $400 billion a year.  At the same time, jobs have increased every month since 2010, and the unemployment rate has decreased to below 6%.  Unfortunately, part of this percentage decrease has been a result of people dropping out of the workforce, despairing of finding work.  During his terms in office so far, Obama has increased the national debt by 23%.  The debt now represents between  72 and 80% of GDP, depending on how the terms are defined and whose figures you use (see Wikipedia.)

The inescapable conclusion is that Republican contenders for presidential office will lie to get elected (not that Democrats are necessarily any more truthful.)  We must also conclude that the Republican policy of reducing taxes results in deficit spending which does not stimulate the economy, in contrast to deficit spending that is used to produce something (even if that something is blown up or scrapped.)

Thus, we see that, in order to stimulate the economy and improve prosperity (meaning growing incomes and improving income equality), it is necessary to 1) raise taxes on the wealthy and 2) spend some of the money on producing something rather than just paying down the debt.  The obvious thing to produce (or repair) is, based on observation, infrastructure like roads and bridges.

Most of the information in this post was taken from a site called http://zfacts.com/ which has a segment on debt as a percent of GDP: http://zfacts.com/p/318.html as well as a lot of other material I haven’t dived into just yet.

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