All three of my kids were born during the Presidential term of Ronald Reagan. He was elected in the 1980 election and assumed office in 1981, the year of our first-born. Two more followed in 1983 and 1987. My wife and I were young, if you think we are not very smart now, you should have known us then. We had no idea what we were doing, but thankfully we had plenty of help and all three survived our incompetence.
I had been working in my Dad’s auto parts warehouse (otherwise known as Hell’s Half Acre) since I was 12 and consequently had almost no useful life experience. I could roll a tire with the best of them, but other than that my contact with rational humans was extraordinarily limited. Oh yes very bitter, very very bitter. This is the young family in our first house.
Under President Carter inflation was over 12%, gasoline prices were soaring to over $1.15 per gallon, milk was over $2.00 a gallon and a loaf of bread was $1.19. Our future and even the future of the country was in serious peril. Desperate times call for desperate measures. If life hands you lemons make lemonade, but we couldn’t even get lemons. We did have kids though.
No takers, a sign of the times I guess. What was to become of us?
But wait! Queue the trumpets!
Reagan had a vision, he saw a shining city on a hill and we all felt the tug of unabashed patriotism and like Lone Watie said in Outlaw Josie Wales, we endeavored to persevere. The government of the shining city realized that if rich people had lower taxes, they would have more money to create jobs and thus everyone would benefit. Because the rich would create many new jobs, revenue would increase, offsetting the effects of cutting the taxes of the rich. Reagan wanted to bring the tax policies of the shining city to America and his policies became known as Reaganomics. To others they were referred to as “trickle down economics”. A rising tide lifts all boats. I need a smoke.
In 1981, Regan succeeded in implementing sweeping tax reform measures based on his supply-side philosophy. The plan was, this would spur the economy and coupled with tightening the money supply and reducing government spending, the lower tax rates would actually increase government revenue. During his two terms inflation dropped to 4.4% and the economy was growing at average rate of 3.4% which is apparently very good. All that new revenue will then be applied to paying off the country’s debt. Problem solved.
Regan became an anti-tax hero and is widely considered to be one of the most effective Presidents of the modern era. Every major Republican candidate in the 2016 election compared himself to him at one point or another during the campaign including 45, despite having called Reagan a con man in his book Art of the Deal.
Thirty years later the jury is still out on whether or not trickle down economics works or not. One reason for this confusion is the fact that Regan raised various Federal taxes 11 times during his two terms effectively eliminating at least half of the 1981 tax cuts. The economy is too complex, too big and unpredictable for anyone to say with certainty what will occur given a single change in circumstances such as a tax cut. Supply side policy nevertheless remains a favorite of the Republican Party and one thing that is not in dispute is that the income and wealth gap between the rich and the rest of us has gotten worse not better since the Reagan years.
In 1986 the minimum wage was $3.35 today it is $7.25. That looks like a little more than a doubling. In 2013 dollars $3.35 is the same as $7.12. Is that really a rising tide? Feel your boat going up?
In 1986 Exxon CEO Clifton C. Garvin Jr. earned $1.34 million in salary. In 2016 Rex Tillerson’s salary was $24.3 million. His pension is valued at $69 million and his stock is worth over $200 million. The CEO salary at Exxon has increased 20 fold since 1986 while the effective minimum wage has remained flat. The average worker at Exxon in the US makes on average $100 per day. Tillerson made roughly $50,000 per workday depending on how many vacation days, sick days or personal days I guess Exxon policy allows.
People that start businesses, take risk and shoulder the responsibility and pressure of making payroll for their employees deserve to accumulate wealth and no one should think otherwise. I include 45 in this group of people that should be respected for what they have built, but does working for Exxon for 40 years deserve the same? I really have no idea, but I do think Rex never sweated payroll. Wonder if he lost sleep worrying about how a deal might go bad and he might have to lay people off?
Let’s not be judgmental. Remember the underlying idea is to create jobs to improve the lives of average Americans by giving the rich more money to spend and these large multi-national corporations have to pay these big packages to attract the talent needed to create all those jobs. Rex Tillerson is rich and therefore must be creating jobs both in his job as Exxon CEO and as a rich consumer.
In 2009 Exxon had 29,900 workers in the US and I assume that number includes Tillerson. By 2014 that number has ballooned to 31,300 an increase of 1400 or a whopping 280 jobs per year. Not bad for the world’s largest oil producer! Amazing! Glad they paid Rex to create those 1400 jobs in five years.
Like the good team player he is, 45 just released his comprehensive tax reform program. This is a big deal, you should take all the time needed to read thoroughly. Try not to skip ahead, this thing could impact your life for decades, you need to understand it. Here is a link where you can read this historic document.
http://www.cnn.com/2017/04/26/politics/white-house-donald-trump-tax-proposal/
When Regan was President, current Treasury Secretary Steve Mnuchin was a student at Yale. His father worked at Goldman Sachs and son Steve worked there for 17 years after graduating. He went on to found several hedge funds and in 2009 bought a bank that he renamed OneWest. The bank was criticized for its aggressive foreclosure practices during the housing crisis but became profitable after one year of Mnuchin’s ownership. In 2015 Mnuchin sold OneWest for $3.4 billion.
Gary Cohn is the Director of the National Economic Council in 45’s administration and he too worked at Goldman Sachs. Mr. Cohn was hired by Goldman in 1990 and in 2006 had risen to become President and Co-Chief Operating Officer. His compensation in 2015 was $21 million and when he left to join the Administration his severance package was worth $285 million.
These are the two guys (swamp monsters?) 45 sent out on Wednesday April 26 to explain to the world the intricacies of his bold and complex tax plan. Here is some of what they said.
Cohn:
“We are going to cut taxes and simplify the tax code by taking the current seven tax brackets we have today and reducing them to only three brackets — a 10 percent bracket, a 25 percent bracket, and a 35 percent bracket. We’re going to double the standard deduction…”
“As we all know, job creation and economic growth is the top priority of the administration. Nothing drives economic growth like capital investment. Therefore, we are going to return the top capital gains tax rate and dividend rate to 20 percent, repealing the harmful 3.8 percent Obamacare tax on dividends and capital gains.”
“We’re going to eliminate most of the tax breaks that are mainly benefits to high-income individuals. Homeownership, charitable giving and retirement savings will be protected.”
Mnuchin:
“Under the Trump plan, we will have a massive tax cut for businesses and massive tax reform and simplification.”
“The President’s objective is creating economic growth. The overall economic plan consists of massive tax cuts and tax reform, regulatory relief, and renegotiating trade deals. And with that, we will unlock the economic growth that’s been held back for too long in this country.”
According to these guys, massive tax cuts for business will stimulate the economy by increasing business investment which in turn spurs job growth and results in more money in the pockets of middle class workers. The new economic growth will then bring more revenue into the government that can be used to reduce the deficit.
This is classic supply-side, trickle-down, Reganomics. Here is my question. Where is the bottom? If reducing taxes results in more revenue how far can taxes be reduced? Under this logic, can you go to zero percent and still increase revenue? Of course not. I hope this works; nobody likes to pay taxes, but introducing something as important as a massive overhaul of the tax system on a one-page document does not exactly inspire confidence.
At Hell’s Half Acre, my dad used to say “If you can’t find something to do, I will find something for you, I don’t pay you to stand around.” Very Bitter! Very, Very Bitter! What I meant to say was he used to say, “You can’t get rich working for other people.” I think at one time this was probably true in America, but it is clearly not true now. It seems now that these large banks and other large corporations are run not for the benefit of their stakeholders but for the benefit of those running them. If that benefits their stakeholders, fine, if not these guys still get to keep theirs. (think housing crisis)
I am afraid our biggest problem is not our tax structure, or racial issues, religious issues or our place in the world. I am afraid the biggest threat to our democracy is the accumulation of too much money in too few hands. Money equals power and the only way for the middle and lower classes to maintain their voice and exercise their power is to recognize that whether they live in rural America or urban America they have a great deal in common with each other when it comes to economic issues. We need to ask ourselves if guys like Mnuchin, Cohn and Tillerson are part of the solution or are they in fact part of the problem?
That felt pretty good, thanks. I think we should calm down and have a libation
Love to All