The Voice of the People

... or at least my own

August 8, 2002
Open letter to Mr. Jeff Jacoby, op-ed columnist of the Boston Globe
in re: Bring back Reagan's Rx, 7/25/2002
http://www.boston.com/dailyglobe2/206/oped/Bring_back_Reagan_s_Rx+.shtml

Sir, you are either really foolish or you purposely distort to achieve a pre-existing goal.

The statistics you state are out of context, and of such narrow scope that you could say murder did not occur because you wore a suit to the trial. Anyone can dress in a suit. Your statistics are window dressing for a political purpose.

Below is a catelog of your typo-graphical "errors" :

Mr. Jacoby says:

...Congress and President Carter rejected their idea(that chopping tax rates would lead to a great surge of productivity and growth and revive the country's listless economy), and the economy worsened. By 1980, inflation was running at 13.5 percent, mortgage rates hit 20 percent, and unemployment was at a postwar high. America found itself, said Newsweek, in ''the most dangerous economic crisis since Franklin Roosevelt took office 48 years ago.''

** Well, no. Mr. Carter did not cause inflation, nor did Mr. Carter's policies contribute to inflation. Any president at that time would have suffered the same results. According to respected economists (as opposed to political pundits) the inflation of the 1970s and early 1980s resulted from the economic pressures of the unsatisfactory funding of the Vietnam war and spikes in the Oil prices. Your reference to 1980 (instead of 1981or 1982, when inflation of equal and higher magnitudes occurred) is deceptive, simplistic, unsophisticated, and is possibly meant to continue this myth of Carter being the fall guy. A knowledge of the complete history between 1978 and 1984 would provide a more accurate observation. It is interesting that you do not even mention the actions of the Federal Reserve ( which the public at the time blamed for the reagan recession) nor did you point out legislation which ended the old interest rate caps that was passed in 1979 by Congress at the behest of the Banking Industry. This legislation also ended the Savings and Loans difference in interest rates, which used to have the highest rates, and thus propelled the S&L crisis. How could you avoid these major details?

**You state this was a "dangerous economic crisis" without mentioning the wave of Third World debts which threatened to ruin the portfolios of the major American banks at the time.There was a lot going on at this time that you ignored.

**You say the 1981 tax law launched a revolution because of a ... Stock boom. You introduce a few statistics to lend credit to your desired end. The plethora of statistics you left out (and there is plenty) indicates that you may have been little concerned with scholarly analysis.

** Between 1979 and 1989, the top 1% share of wealth almost doubled, from 22% to 39%. These Statistics include portfolios. Statistics that exclude portfolio wealth and count only income do list the 14% value. Does your 14% ignore portfolios? Why is this important? Unlike the lower 99%, a majority of the wealth of the top 1% is in portfolios. Mind you that, we are not talking about million dollar-a-year people in the top1%. These are people who have portfolio funds managed for them that are in the 100s of millions. These are the people who get to talk directly with their Congress leaders, not the regional millionaires who get to buy $1,000 lunches and feel like they are a part of the party. To use a 14% statistic that ignores portfolio wealth is like counting only a persons car on their tax return.

** Of the so called profits made during the 80s and 90s, 64% of the gains went to the top 1%, not because they were entrepreneurial or because they were natural-born leaders, but because the top 1% have their wealth fluidly diversified. They own large controling blocks of stocks, and have portfolios replete with bonds, treasury notes, land trusts, corporate paper, et cetera. Much of the 1% wealth is also group into an interlocking network of investor groups, memberships of different boards, and Vice Presidents or Secretarys of company director committees. If most wealth gains went to the 1%, this was because of the position the 1% has in the business environment called the economy.

**You cry out that creating 18 million jobs is laudable, but you neglect to mention the 40 million jobs lost or displaced ( high salaried workers displaced into lower salary, lower benefit occupation.) The services industry sectors could have risen because money was being spent lavishly at restaurants, vacation spots, for personal lawyers and accountants to keep track of the 39% owned by the top 1%. Many companies spun off different services throughout the 1980s and 1990s. But these jobs replaced original jobs. Tooting about job growth is not evidence of robust economic policy. If your two legs are amputated but you still have your buttocks, would it be more comforting to at least be able to sit down on something? But this is the result of the Reagan "revolution."

**To indicate that increased revenue is an indication of success means nothing. Population growth will always necessitate an upward growth in items sold and tax revenues in the long term. What is important is the shape and context of the growth. Society can grow cancers all across the body politic that would register a plus in the money totals. What matters is what the money bought and how it was spent.

**Unfortunately 65% of the wealth of the 1980s and 1990s was not invested in any productive activity. The profits came from overpriced stocks, from fees earned from corporate mergers, from corporations moving jobs overseas to cheaper labor markets. 40% of the nations productive capacity (capital invested in plants and producing goods) has shrank since 1980.


Finally ...

Mr. Jacoby concludes:

...What worked in the 1980s would work today. Last year's tax cut, which slowly lowers rates a few percentage points over the course of a decade, then jacks them all back up overnight, will do little to stimulate the economy. But accelerate those cuts, deepen them, and make them permanent, and the economy would charge forward once more. If you yearn to see the bulls back on Wall Street, call for another injection of Kemp-Roth. For turning a 97-pound weakling of an economy into Charles Atlas, there's nothing better.

**Assuming that anything "worked" at all, you insist that tax cuts will stimulate the economy. The tax cuts of the Reagan years stimulated the pocket books of the 1%, enabling a vast destruction of the American Economy to increase that wealth even further, and there is no evidence that the scheme did anything positive for the economy at all. Again, what matters is what the money bought and how it was spent. The tax cuts increased the volume of reserve cash and caused stocks to soar, but buying stocks is not "stimulating" the economy. The so-called great booms of the 80s and 90s were an illusion. The American middle class is in the same economic position as in 1970, poverty has become worse not better, and meanwhile health-care and educational costs keep rising.

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If you want to justify making the tax cut permanent, you can be more honest, rather then purge history of its truth and continue the myth of the Great Reagan decade. Reagan was a modern day US Grant, a figurehead for the greed and selfishness of the rich and powerful. Gino Napoli
490 31st Avenue # 204
San Francisco, California 94121
High School Math Teacher
Terra Nova High School Pacifica, California

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