Reaganomics

I. The Reagan Era

A)     Election of Ronald Reagan – two bit actor, former president of the Screen Actors Guild, became spokesman for the vehemently anti-union General Electric Company in the 1950s, and began a rapid rightward descent.

1)      Presidential policies

(a)    Cut taxes – for the rich, anyway; Reagan got Congress to cut taxes for the rich from 73% to 28%,  but taxes for the poor actually went up, because they were hit with an increase in state and local taxes to make up for the shortfall as a result from the decline in federal tax revenue

(b)   Cut social programs – Reagan cut much spending on social programs, like welfare

(c)    Increase defense spending – corporate welfare for selected industries, fed boom on the West and East coasts (see below)

(d)   Results – federal tax revenues plummeted  by $750 billion, and generated staggering federal deficits of $150 billion and $200 billion, which kept the prime interest rate in double digits.

B) Reagan the Cold Warrior--Reagan's foreign policy during his first administration was almost entirely shaped by his view of the necessity to continue the Cold War. To that end, he increased the size of the military budget, and moved the military swiftly into conflicts abroad.

1. The Evil Empire--in one of Reagan's first presidential addresses, he referred to the Soviet Unions as "the evil empire"--a perjorative term the Soviets (naturally), and resulted in increased tensions between the Soviet Union and the United States for much of Reagan's first term in office.

2. Support of Anti-communism--the Reagan administration supported several movement that they saw combating the spread of communism in the western hemishpere.

a. The invasion of Grenada

b. Support for the Contras--after the Sandinista revolution in Nicaraugua, the communist element came to power through an election. Believing that only a counter-revolution could effect regime change, the Reagan administration supported a disaffected Sandinista faction known as the "contras"--secretly, because Congress had passed an act forbidding direct US aid to this group.

3. "The enemy of my enemy..."--under Reagan, support was also given to a group in Afghanistan fighting against the Afghan government and the Soviet Army, the muhahideen, who attract Islamic fighter from around the globe, including a scion of a weathy Saudi Arabian family by the name of Osama bin Laden, to fight in a "jihad" against the "infidels" in that country. After their victory over the Soviets, they re-constiture themselves as the Taliban.



C)     Reagan boom – the Reagan years were beneficial for a small, select group of people, but the era was one of increasing disparity between the few rich, and the increasing number of poor

1)      Growing disparity – between 1977 and 1990, the income of the richest fifth of the population grew by one-third, and that of the top one percent almost doubled; but the total income of the bottom 60 percent of Americans actually fell, and the incomes of the poorest Americans fell most sharply.

II)    Reaganomics and its Effects on Working People

A)    Undermining of Unions – perhaps the greatest effect of Reaganomics was that it undermined the financial security of working-class people, by undermining the unions that represented their unions.

1)      The Reagan Recession (1981-1983) – one of the first effects of supply-side economics, or “Reaganonimics,” as it came to be called, was one of the worst recessions of the post-war era.

(a)    Demand from corporations for give-backs – corporations in financial trouble went to unions and its workers, and demanded concessions to remain in business.  Competitors then went to their unions and workers, to demand concessions to remain competitive.  The cumulative effect of this was at best to freeze the wages of working-class, and at worst to undermine the wage structure.

2) Professional Air Traffic Contollers Association (PATCO)--complaining of overwork that PATCO argues endangered air safety, the union went on strike, illegally. Reagan responded by firing all PATCO members who refused to return to work, and using military air traffic controllers as scabs (replacement workers). Although there were numerous unreported near misses, the fact that a major air accident did not occur meant that the Federal Aviation Administration was able to hire permanent replacement workers and break the union. The larger consequence for American workers was that companies, emboldened by Reagan's action, moved against their own unions. 

B)    Workers in Decatur, Illinois – Decatur is a small town in central Illinois, rising out of the prairie, which had a diversified (for the Midwest) manufacturing base, but which witnessed the full aftereffects (or aftershock, to use a nuclear analogy) of Reaganomics.

1)      A.E. Staley – locally-owned agricultural goods manufacturer, manufactured corn starch, corn syrup, soy products.  This company resisted buyouts through the early 1980s, but by the end of the decade was bought out by a London-based food processor.

(a)    Demand for 12 hour, rotating shifts – in order to more “efficiently” use its workers, management wants its workers to work twelve hour shifts, and do away with shift pay differentials; it also wants workers to move from one shift to another every other month (describe havoc this plays with lives of workers with families)

2)      Firestone – the tire industry was one of the largest casualties of the merger-mania of the 1980s, and Firestone was bought by Japanese manufacturer Bridgestone.

(a)    Demand for twelve-hour, rotating shifts; do away with annual pay increases—instead, have cost of living increases and productivity incentives.

(b)   Provoked strike – this strike proved costly not only to many workers (who lost their jobs, some temporarily, to strikebreakers), but ultimately to the company, as well—the replacement workers manufactured the AT Wilderness tires that went on Ford Explorers.

3)      Caterpillar – the industry leader in the production of heavy equipment at the time it provoked a strike by UAW members over concessions that it wanted in its contract—namely, a six-year contract, complete control over production decisions.  In the end, this company handed the UAW the worst defeat in its history.

III) Conclusion