Reagan’s Economic Legacy
On the same day, Monday, August 1, 1988, two different views appeared in the Wall Street Journal and the New York Times about the state of the American economy.
First, here is political commentator, Mark Helprin, writing in the Journal: “after the longest peacetime economic expansion in American history, record employment and a two-point drop in the unemployment rate, a significant drop in the crime rate, a 12-point drop in the prime rate, and a 10-point drop in the rate of inflation, not to mention tax reform and an economy that has succeeded in making the stock market crash almost inconsequential…”
Then there is Peter Solomon, vice chairman of Shearson Lehman Hutton, writing in the Times to say: “Dependence on foreign oil is on the rise again. Wealth-generating industry is growing strongly in Japan, South Korea and Taiwan. Our trade deficit with those three countries alone was $77.6 billion in 1987. Our liabilities to all foreign countries will soon total half a trillion dollars… We will remain dependent on foreign buyers to purchase, among other things, the Treasury notes and bonds that fund the Federal budget deficit, thus keeping U.S. interest rates unacceptably high in order to attract foreign capital….
“A weak dollar is not simply an expensive inconvenience for American tourists. Rather, it signals a fire sale of United States assets. This loss of economic self-determination, left uncorrected, will become the legacy we leave our children…
“The legacy of trade and budget deficits that require foreign financing is a future of higher interest rates, higher inflation and more income earned by our children sent to foreign lands to pay for our spending today.”
Not surprisingly, Helprin is a supporter of Ronald Reagan and Solomon a fan of Michael Dukakis.
Who is right? That, of course, depends on your sense of fundamentals. Economists have known for decades that if the government spends more than it takes in, the economy gets stimulus and so do jobs. Reagan has spent over a trillion and a half dollars more then he has taken in, therefore an uneven economic expansion. Is this something to crow about?
Then there is the employment rate. There are more low paying jobs and it takes more members of a family to work now to earn a middle class standard of living than it did 40 years ago when one bread winner could own a mortgaged house and a car. What’s more, the government doesn’t count part-time workers or people who have given up officially looking for work after nine months, as part of the unemployed.
Inflation has dropped because of the sharp drop in oil prices, followed by natural gas and coal prices. The present world oil glut, and world economic slowdown caused this downward pressure on prices, not Reagan. Watch when the reverse starts to happen with oil and food prices.
Solomon is describing genuine trends toward our country being in massive hock to foreign financiers. Reagan has so depressed the value of the dollar compared to foreign hard currencies that the Japanese, Dutch, Britons and others are swarming over our country buying up factories, land, office buildings, shares in banks, securities firms and other firms at bargain basement prices.
Reagan, having weakened America with debts and debts and set the country up with a cheap dollar, refuses to speak out against this selling of America and its self-determination to external interests.
Reagan has also left the country less able to defend itself against environmental pollution, consumer fraud, corporate crime, workplace safety, the ravages of poverty, homelessness, and the largest waste, fraud and abuse in the military budget in American history.
Ernest Fitzgerald, a veteran cost-analyst working in the Pentagon, observed recently that Reagan has spent two and one half trillion dollars on defense with little but fraud, buck-passing and bureaucracy as a result. “There are fewer airforce fighter wings today than in 1980” he says. For good measure, Reagan has increased the number of civil servants over the level reached under Carter as well.
If you watch the Republicans beat their drums at their convention in New Orleans next week, keep in mind what they do not put in their speeches.