Exclusive: The U.S. political climate might change if Americans understood how much the federal government did to create the infrastructure behind many business fortunes, including the Internet and computer technology. That narrative would justify higher taxes on the rich to repay the nation and allow for future R&D, writes Robert Parry.
By Robert Parry
If the Republican presidential race has made one thing clear, it is that the GOP narrative for 2012 will be that the federal government is the “problem” – as Ronald Reagan once said – if not worse, an internal enemy that must be defeated. So far, the Democrats lack a counter-narrative with similar appeal to a deeply alienated public.
The Republican narrative holds that the route to freedom and prosperity lies in the twin principles of states’ rights and free markets. GOP frontrunner Rick Perry has even taken aim at Social Security and Medicare, two longtime bastions of federal social policy for the elderly.
It also has become Republican dogma that the wealthy “job creators” must be freed up from taxes and regulations. Supposed “moderate” Mitt Romney says he would slash taxes for corporations, make their overseas earnings tax-free, and eliminate the estate tax. Let Ayn Rand’s vision of unchained corporate supermen lead America to some brighter day, the Republicans say.
The only way to counter this ascendant GOP narrative is to supply a counter-narrative, one that appeals to American values and makes sense.
Right now, the principal Democratic narrative is that the American people must work together as a community to solve the nation’s problems – with the government collaborating with the private sector as part of that effort.
However, the “community narrative” may not fit today’s angry mood, especially when many white middle-class Americans feel they are being pushed down the economic ladder and are thus open to propaganda blaming scapegoats, whether dark-skinned people or the “guv-mint.”
A different narrative would note that many of today’s rich made their wealth because of taxpayer-funded projects which created lucrative opportunities. This narrative would stress the fairness of expecting the rich to reimburse the taxpayers for both these past projects and to make possible new research and development aimed at keeping the nation competitive.
For instance, where would Facebook founder Mark Zuckerberg or other online billionaires be today if the federal government had not built the Internet? Their wealth was made possible by government engineers, mostly working for middle-class salaries, who devised the Internet as part of a Defense Department project.
Shouldn’t Zuckerberg and the others be expected to give a chunk of their money back to the country which made their fortunes possible – and isn’t the tax structure the most efficient way of ensuring that they do?
The same is true for Silicon Valley tycoons who made their money from personal computers, software and other technological advances. But the miniaturization of electronics behind modern computers was spurred by the space program in the 1960s, again sponsored by the taxpayers and developed by government engineers.
The federal government has played key roles, too, in the development of other industries, such as biochemistry. The government also built the nation’s transportation system, including the Interstate Highway system, creating opportunities for businesses to expand nationally while also opening vast new tracts of land for home construction.
Government – federal, state and local – also is responsible for educating the American work force, thus saving companies untold billions that otherwise would have to be spent on job training. And, by protecting commerce around the globe, the U.S. military has enabled American corporations to expand without many of the risks from earlier eras.
Earlier generations of Americans understood and appreciated this government role in helping people and making the country stronger. Not only did Franklin Roosevelt’s New Deal put millions of Americans to work during the Great Depression, those programs built lasting improvements to the national infrastructure, from still-operational bridges to rural electrification.
The post-World War II era also recognized the wisdom of having the rich tamp down their personal greed for the good of all. That was why, during Dwight Eisenhower’s presidency, the top marginal income tax rate was about 90 percent. That meant that for the top tranche of income for the rich, they got to keep only 10 percent.
While that high a marginal tax rate may seem unfair by today’s standards, it achieved some important goals. Not only did the tax money help the government pay off the debts from World War II, those taxes provided the means for the post-war expansion of America – and the high tax rate represented a disincentive for destructive greed.
Back then, the pay gap between corporate CEOs and their workers was much smaller than today, meaning that there was more unity within companies. There was also less of a motive for Wall Street sharpies to exploit companies seeking public capital to build new plants and investors looking for a reasonable return on their money.
The U.S. economic system worked pretty well when the tax structure held greed in check.
However, as the top marginal tax rates came down – to the 70 percentiles in the 1960s and then to 28 percent under Ronald Reagan – the rich not only got richer but they were incentivized to be greedy, even unscrupulous. Since they could keep so much more of the money, some began taking whatever they could.
The biggest change in the tax structure — and in attitudes toward government — occurred under Reagan after the pivotal election of 1980.
Ironically, the American people were at a point where they might have expected their lives to start getting a whole lot easier and more rewarding. The government’s investments in infrastructure in the 1950s and in technology in the 1960s were bearing fruit, expanding productivity, generating wealth – and leaving the Soviet Union in the dust.
Granted, the 1970s appeared on the surface to be a grim decade, with the Middle East oil shocks and the inflationary hangover from the Vietnam War. But those short-term problems were masking a promising future. The bounty from the wise investments of the post-World War II era was just over the horizon.
However, instead of sharing in that bounty – and reinvesting some of it in an even brighter American future – a majority of voters followed Reagan, the charming Pied Piper of corporate power and wealth.
In his Inaugural Address, Reagan told the country that “government is the problem.” He slashed taxes for the rich claiming that the result would be more revenue. He rolled back government regulations. He mocked ideas like energy conservation. He savaged labor unions. He pushed “free trade” agreements that shipped American jobs overseas.
Globally, Reagan reenergized the Cold War with a massive military build-up under the false premise that the Soviet Union was on the rise and on the march – when in reality it was crumbling, unable to keep pace with America’s technological advancements.
Reagan also brought the Washington press corps to heel or — as author Mark Hertsgaard put it – left them “on bended knee” by the end of his presidency. In another far-reaching move, Reagan credentialed a new generation of right-wing intellectuals known as neoconservatives to reframe the Washington debate on national security issues.
In short, Reagan and his team paved the way for the America that exists today. Incentivized greed (from lower marginal tax rates) encouraged corporate execs to ascend into a world far distant from their beleaguered workers – and taught Wall Street bankers the lesson that “the closer you are to the money, the more you get to keep.”
Reagan’s “supply-side” promises of more revenue and “trickle-down” benefits didn’t materialize. A sea of red ink opened for the federal budget and the rich did little in using their new-found wealth for job creation. Income levels for the middle class stagnated.
Reagan’s “free-trade” policies did reduce the cost of imported goods but failed to generate a commensurate level of new manufacturing jobs in the United States. America experienced a devastating deindustrialization amid airy promises about a new “information economy.”
Even as genuine national security threats waned, the neocons kept Americans on edge about all manner of unlikely villains – the Nicaraguan Sandinistas, the Soviet-backed Afghan government, the socialist regime in Angola, the nutmeg-producing island of Grenada – whatever it took to keep the military budget high.
Under this political battering, Democrats grew increasingly timid. Even when massive deception and criminality were revealed in the Iran-Contra scandal, the Democrats shied away from a direct confrontation with the great and powerful Reagan. Instead of demanding the full truth, the Democrats and the Washington press settled for much less.
By the end of Reagan’s reign, the patterns had been set and were only mildly challenged by Bill Clinton’s presidency. Clinton and the Democrats enacted a modest increase in marginal tax rates (to 39.6 percent). Their commitment to modernizing government recalled the value of having an engaged and reasonably smart government. With the help of the economic bonanza around the Internet’s emergence, there was even a budget surplus by 2000.
If Al Gore had been allowed to succeed Clinton – and continue demonstrating the benefits of wise governance – the Reagan legacy might have faded. However, that was not to be, due to a combination of biased media attacks on Gore, an ill-timed third-party challenge from Ralph Nader, and the Republican theft of Florida’s electoral votes. [For details, see Neck Deep.]
Reaganism returned with a vengeance under George W. Bush, more tax cuts, more deregulation and – after the 9/11 attacks – another splurge of military spending. Reagan’s neocons reprised their fear-mongering role regarding Iraq’s non-existent WMD to get a war against Israel’s longtime nemesis Saddam Hussein. Soon, the massive deficits were back, too.
Then, the effects of a deregulated Wall Street and the out-of-control greed at investment banks nearly brought the financial house of cards down. Only massive federal intervention, totaling trillions of dollars, saved the too-big-to-fail financial institutions, but millions of ordinary Americans were thrown out of work and often out of their homes.
Though Barack Obama came into office explaining the need for government to help get America back on track, his timid policies and his key appointments amounted to concessions to Reaganism as the nation’s dominant ideology. The political/media elite surely had absorbed Reagan’s anti-government orthodoxy over three decades.
Economists now widely agree that Obama’s $787 billion stimulus plan (which was larded with tax cuts to entice a few Republican votes) was way too modest for the severity of the recession that the Wall Street collapse had caused. Though it may have stopped a full-scale depression, the plan’s modest achievements were readily labeled as “failures” by Republicans.
Republicans made clear, too, that they were determined to destroy Obama’s presidency so the White House could be reclaimed for the GOP in 2012. Nearly every move he made was opposed by congressional Republicans almost unanimously and was met with Senate obstructionism.
Outside Washington, the Republicans rallied their right-wing base, rebranded as the Tea Party, to create a national sense of disorder and chaos.
The Tea Partiers wrapped themselves in the trappings of the American Revolutionary and propounded the myth that the Constitution was written to constrain federal power – when it actually created a strong federal government after the failure of the Articles of Confederation, which had treated the states as “sovereign” entities.
But the know-nothingism of the Tea Party – and the latent racism in the smears against Obama, such as false claims about his Kenyan birth – found traction inside the tilted American media framework that Reagan had left behind.
After less than two years of Obama’s presidency, American voters returned Republicans to control of the House and narrowed the Democratic majority in the Senate. The election essentially ended any hope of further government action by Obama to address America’s economic and social problems.
The new watchword was austerity, at least for the government and struggling Americans if not for the rich; Reagan’s ideology blaming government for the problems was back in vogue.
Now, as Obama trails a generic (unnamed) Republican in the polls and Washington’s focus is on more budget cuts, Americans seem ready to plunge further down the path marked by Ronald Reagan – even if it is over a cliff.
[For more on these topics, see Robert Parry’s Secrecy & Privilege and Neck Deep, now available in a two-book set for the discount price of only $19. For details, click here.]
Robert Parry broke many of the Iran-Contra stories in the 1980s for the Associated Press and Newsweek. His latest book,Neck Deep: The Disastrous Presidency of George W. Bush, was written with two of his sons, Sam and Nat, and can be ordered at neckdeepbook.com. His two previous books, Secrecy & Privilege: The Rise of the Bush Dynasty from Watergate to Iraq and Lost History: Contras, Cocaine, the Press & ‘Project Truth’ are also available there.