The Real Legacy of Reaganomics

Sunday marked the 100th anniversary of the birth of B-movie actor-turned-conservative president, Ronald Wilson Reagan. On the eve of the centennial, economist Yves Smith talked Reaganomics on the Real News Network. Smith argues that Reagan’s real legacy is the deregulation of the U.S. economy that set the stage for the economic meltdown of the late 2000s:

But [with] financial services, you have companies that have state guarantees. That’s the bottom line with the banking system. Ever since the 1930s, we in advanced economies have made the decision we’re not going to let the banking system fail. So if you don’t regulate banks, you have set up the situation that we have now, which is that you have socialized losses and privatized gains. And what have we seen come out of that? Financial crises. When we had a heavily regulated financial system, we had nearly 40 years of hardly any financial crises. When we started deregulating the banks, you saw increasing in frequency and increasing in significance financial crises directly resulting from that.

Spot of Tea?

Ordinary Britons are rallying to the defense of the welfare state. Faced with the deepest public spending cuts in living memory, citizens are taking to the streets to force deadbeat companies to pay their taxes, Johann Hari reports in The Nation. Their federal government has pledged to slash £7 billion in public spending. Cuts to subsidized housing alone will force 200,000 people out of their homes.

A group of friends in a local pub were galvanized by the news that Vodafone, one of the UK’s leading mobile phone companies, owed an astonishing £6 billion in back taxes. Calling themselves UK Uncut, the friends staged a protest outside Vodafone headquarters in London. The meme went viral. In the following days, several Vodafone stores were temporarily paralyzed by peaceful sit-ins.

Hari argues that the success of UK Uncut can teach American progressives a lot about how to build a grassroots counterpart to the Tea Party.

Persistent vegetative states

Big or small, liberal or conservative, state governments are screwed. That’s the upshot of Paul Starr’s latest essay in The American Prospect. Unemployment remains at recession levels and there is little political will to raise taxes. States can’t deficit spend like the feds do. So, the only option is public service cuts, which means firing teachers, doctors, firefighters, and other public workers.

Starr argues that the economic stimulus was a good start, but one that didn’t go far enough. As part of the stimulus, the federal government picked up a larger share of the states’ Medicaid costs. This was a good thing, in Starr’s view, because the extra federal dollars saved jobs while providing health care for the poor. Starr argues that state budget woes during recessions are so predictable, and the consequences so dire, that the Medicaid subsidy should kick in automatically whenever unemployment rises past a predetermined threshold.

Anti-union bill dead in CO

A bill to end collective bargaining for public employees in Colorado died in committee this week, according to Joseph Boven of the Colorado Independent. The bill would have abolished an executive order signed by former Gov. Bill Ritter, which gave state employees the right to organize. If the bill had been enacted, this kind of organizing would become illegal. This bill, sponsored by Sen. Shawn Mitchell (R-Broomfield), was just one of many attempts by Republicans to scapegoat public sector unions for what Mitchell calls the “financial Armageddon” facing state governments.

Smurfs rob Moms

“Smurfing” is money laundering slang for recruiting a lot of low-level accomplices to move money in untraceably small increments. But the word may soon have a new derogatory connotation.

Kevin Drum of Mother Jones reports that a kids’ video game, Smurfs’ Village, is depleting parents’ bank accounts, one wagon of Smurfberries at a time. Capcom’s game offers kids the chance to build the village from scratch. Along the way, they can pay real money for in-game resources. One mother was shocked to receive a $1,400 bill from Apple because her daughter bought innumerable imaginary props, such as $19 “buckets of snowflakes,” and a $100 “wagon of Smufberries.” The purchases require a password, but critics say it’s too easy for clever kids to circumvent the security. As Drum says, if adults want to waste their real dollars on virtual Farmville paraphernalia, that’s fine, but such a racket has no place in kids’ games.

This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint.

Photo credit: i_forbes via flickr

By Lindsay Beyerstein, Media Consortium blogger


Phillip I.
Phillip I6 years ago

@ Tom Y.:

What collapsed under its own weight was not Communism; it was totalitarianism - much as what we have is not Democracy, but Plutocracy....


Helen Delahunt-Avila
Helen Avila6 years ago

Individuals need to contact John Boehner and express your distress at the way the GOP is heading. Instead of Jobs they are attacking women's health issues, the unions and protecting the wealthy. Write your grievances to
Please spread this email address to your friends, ask them to write a polite but pointed letter to this guy. He won't care but he won't like emails pointing out the stupidity of their stance on everything and failure to act like responsible citizens and public employees. (we do pay their big fat wages, cadillac healthcare and bloated pensions)

Marsha Aronson
Marsha Aronson7 years ago

It was under Reagan that we first saw homeless FAMILIES instead of just a few homeless men.

It was also under Reagan that companies started seeing tax BENEFITS from outsourcing. That was the true beginning of the end for American manufacturing.

Diana S.
Diana S7 years ago

The failure of the banks was due more to the uber-liberal, fiscally disastrous policies of Carter and Clinton, which gave free rein to the banks to make lethal mortgage loans to people who could in no way afford to buy homes in the first place, then encouraged them to buy way more home than they could ever afford in their lives!

Carter first, and Clinton later, completely ignored that part of the American Dream rhetoric that went something like " hard, save up, LIVE WITHIN YOUR MEANS, buy only what you can AFFORD...."

Sorry, Jimmy and Bubba, not every American can afford to buy a McMansion on a McDonalds salary, no matter how much you pray to the Blue Fairy to make it so.

Reagan may have erred in deregulating the banks, but Carter and Clinton legislated away the remaining supports of the financial system with their bleeding-heart-liberal fantasies.

Nancy Dodson
Nancy Dodson7 years ago

When Reagon came in office he lowered taxes. When he discovered the country didn't have enough money to operate he actually raised taxes 11 times.

I've read several articles stating that in today's world Reagan wouldn't be at all acceptable to today's Conservatives. They would consider his record to be too liberal. Imagine that!

John L.
John L7 years ago

for all the people commenting on Regan, Carter and Bush you might consider looking at just how long Donald Rumsfeld and Dick Cheney have been sitting in the shadows of the American political system. No decision is solely made by any president...knowledge is ??? and Ignorance is Bliss.

John B.
John B7 years ago

Under Reagan the latest fiasco was conceived but no one since put a stop to it and then the supreme idiot of the US - W ensured that the financial framework of the country would collapse.

Lynnette Bower
Lynnette Bower7 years ago

Trust no one.

Sound Mind
Ronald E7 years ago

Reagan probably did mean well but was taken in by advisors harboring their own agendas. Reaganomics and "trickle down" was the beginning of the end for America. Dubya finished the job.

Donald MacDonald
don MacDonald7 years ago

" The Real Legacy of Reaganomics "

Hear what Cathy O'Brien has to say on youtube, of the legacy of Reagan, sans the 'onomics'.