|Reagan Era Policy and Keynes|
Reagan became President during an economic downturn that occurred with the first oil shock and the popular revolt in Iran. His policy to lower taxes at this moment in our economic history was consistent with Keynesian economics. When the economy recovered due to the increase in demand created by giving every American more money to spend, the economy quickly recovered.
Reagan's fatal economic mistake was to not restore tax rates to their previous levels once the economy had recovered. This was inconsistent with Keynesian economics which sets tax rates at levels required to pay for government programs on a long term basis. Keynesian economic policy only lowers taxes below these levels to boost demand when other factors such as the oil shock or revolts cause economic demand to drop when confidence in the future is shaken. Reagan raised taxes several times during his administration but never by enough to fully fund the programs all Americans want.
Reagan's tax policies favored the rich. Since his presidency conservatives have successfully pushed for even more policy changes, for example deregulation of financial markets and banks, and less enforcement of existing regulations on food, drugs, and consumer safety. All of these policy changes favor the special interests factions that support conservative political causes. These special interests are rewarded for their political donations with increased personal wealth.
A return to the laissez-faire policies of pre-Great Depression era is the goal of the radical right conservative movement today. They are aided by a populist movement, the Tea Party, that is sadly ignorant of economic history or American political history as comments from their primary leaders have amply demonstrated.
We are now facing a crisis in government equal to the run up to the Civil War. The telltale is the absolute unwillingness of the radical right in Congress today to consider raising taxes on the rich who get tax breaks for luxury benefits such as personal corporate jet airplanes or special tax treatments for hedge fund managers. The right wing radicals cannot explain why Bill Gates, Steve Jobs, Sergey Brin, or Larry Page, all men who have produced thousands of jobs, deserve a higher tax on earnings than a hedge fund manager. The answer undoubtedly lies in hidden self interests that are promoted by policies that enrich the few at the cost of the many. The hugh shifts in wealth, transferring wealth from a shrinking middle class to a small but growing in wealth monied aristocracy, is just one result of these foolish shortsighted polices.
Now is the time for progressives to speak up for balance in government. We need to pay for the programs we need and want, like social security, Medicare and a strong national defense, with taxes able to fund them in the long term. Financing wars with borrowing or paying for essential healthcare services that all Americans must have with borrowed money makes no sense. We need to raise taxes to pay for these programs and restore a fair graduated tax program that taxes individuals in proportion to the benefits they receive by the good fortune to live in a liberal democracy that equally protects the life, liberty and property of all Americans not just wealthy ones.