A Student's Reading of The Politics of Rich and Poor
Often times, a political analyst/scientist will write a book on the politics and
economics of the time. This writer may also create a work which emanates views contrary
to the opinion of the governing body. Rarely, however, does one find an analyst who will
clearly undermine his own political party by, in effect, saying, "I told you so."
Kevin Phillips, editor-publisher of The American Political Report, columnist for the
Los Angeles Times, and chief political analyst for the 1968 Republican presidential
campaign, describes in his book, The Politics of Rich and Poor: Wealth and the
American Electorate in the Regan Aftermath, the consequences of the decisions made by
the United States government while under the presidency of Republican Ronald Regan.
Phillips' theme of the widening gap between the upper twenty percent of the population,
in respect to annual income in actual dollars, with the lower twenty percent of the
population coincides with the belief of the typical American avarice, during the
eighties, leading the country on a rollercoaster ride of economic instability and shaky
ground. These ideas remain constant and prevalant throughout the seven chapters. His
views, though somewhat repetitive in the text, strike the reader with astonishment,
especially when considering Phillips' Republican party affiliation.
With his thesis in mind, Phillips discusses three major factors that escalate and at
the same time submerge the state of the economy in America. These factors include:
the sudden shift in tax rates, the diminishing "global wealth" of America, and the
inability of the government under Regan to satisfy a "happy medium" for economic growth.
All of these factors support Phillips' theme and prove his argument of an up and down
cycle of economic stability.
From 1921 to 1925 the top one percent of the population's tax rate was gradually
decreased from the marginally high rate of seventy-three percent all the way to just
twenty-five percent. Over four years this elite group of Americans received a
forty-eight percent reduction in taxes. This decrease opened the door for the super-rich
Americans to capitalize and increase their current wealth.
As the taxes decreased for this group of the population, others also benefited. A
surge in real estate investments occured, the stock market values rose dramatically, and
new technology such as radios and automobiles were surfacing every day. This bull
economy lasted only a few short years. By 1929, the situation was reversed entirely.
The economy crashed with unequaled consequences. The rich citizens who were living "the
good life" four years ago were now stuck with paying seventy-three percent of the entire
population's taxes. The stock market was on the down side, to say the least, the real
estate and technological markets were also paralell to the stocks. The solution from
the new democrats was to bring the economy back by forcing the affluent to carry the
burden. The highest tax rate eventually reached ninety-one percent. After about
twenty-five years, the economy was finally stable enough to lower this absurd rate. In
the mid seventies, the rates were gradually lowered to a mediocre seventy percent.
Starting in 1980 the republican machine decided to again lower the rates, thereby
lessening the gap between rich and poor. What actually happened was the high income
brackets had more of a decrease than anyone. The rates at one point reached a low fifty
percent. This cut, once again opened the door for the elite to become super-elite.
The cycle had surfaced again. Just like in the early 1920s, the rich were gradually
getting richer at the expense of everyone. The technology markets boomed once again,
real estate sales increased dramatically, and the stock market rose by leaps and bounds.
It seemed like just what the economy needed. Regan's reelection thrived on the fact
that the entire country was caught up in a whirlwind of the seemingly perfect economy.
The cycle continued just like economists predicted; the perfect economy suddenly had a
recession to deal with.
Another one of Phillips' reasons for the downfall of the United States' economy after
Ronald Regan is the diminishing "global wealth" of the country. The stock market crash
of 1987 opened Regan's eyes to the fact that his efforts to heal the economic woes of
America were failing. The huge amounts of money borrowed to fund the tax cuts of the
early eighties were borrowed at high interst rates. The republican party decided to
raise the United States interest rates to a high level in order to fight inflation on
the borrowed money. This surge in interest rates increased the value of the dollar
significantly. This increase almost crashed American manufacturing because the products
made in the states were not selling overseas due to a high dollar value. The interest
rates were slowly forced down, and the dollar lost value like never before. By 1988,
other countries were shopping in the states like it was a flea market. Their currency
could buy so much more than ours in our own country. Soon, the trade deficit was
increasing, the selling of American companies to overseas investors was a daily
occurrence, and foreigners were looking at our millions as "pocket change." Japan began
to buy our businesses and real estate more than any other country. In 1985 the total
net worth of America and Japan was respectively 30.6 trillion US dollars and 19.6
trillion US dollars. In as little as two years, the Japanese had capitalized on the
slouch in the value of the dollar and reversed the ratio. By 1987, the United States had
36.2 trillion dollars in assests compared to Japan's 43.7 trillion dollars. Most of
Japan's new capital was formerly American owned companies and property. This trend in
foreign ownership was a leading factor in the decline of our economic system during the
eighties.
Clearly, the Japanese were not the only reason for the slip in American economic
history. Phillips' other reason for the downfall was the lack of Ronald Regan's party
to control a "happy medium" for everyone
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