Ronald Reagan, the Tea Party, and the Reasons for Recurrent Crises

A follow up on the last post. If FDR and his promise of the Economic Bill of Rights would have implied a completion of the New Deal, it is quite obvious that Reagan was the undoing of it. But that's often not recognized. Bill Maher's new rules last Friday got it right.

Yes Reagan was the original tea bagger, and income inequality, lower growth and more financial instability are the result of his administration. Dean Baker has said that, in a more technical way if you will, in his book The United States Since 1980.

Income Inequality in the US (1917-2010)

Atkinson, Piketty and Saez have a new website on income inequality that provides free access to a lot of data. Below a taste, showing the ratio of average income of the bottom 90% to the average income of the top 10% in the US from 1917 to 2010.

It is clear that the war, and the policies enacted during the 1930s, allowed a significant compression of the income of the top, which has been basically reverted in the last 3 decades, after Reagan and the rise of the Conservative movement. Nothing new, but good to see it this clearly.

Reagan was a pro-corporations Keynesian

Krugman notes today that Reagan was a Keynesian. And in a sense he is correct. The fact is that Republicans, at least since Ford, have been the Keynesians, or the party of Big Government if you prefer, while Dems since Carter have been the small government party. The problem is that Republicans are Big Government for the wealthy and corporations, and nobody wants government for the unions and the poor. See this debate between Barbara Bergmann, Jeff Frankel, Bill Niskanen, and Larry Seidman from 2004 (with a longish intro by Berglund and Vernengo) where the issue is raised. So if Obama wins you get sort of almost anti-Keynesian policies, between the Democratic timidity (let's call it that), and the Republican obstructionism (yeah, that's also a nice euphemism). And if you get Romney, you'll get conservative Keynesianism, tax cuts for the wealthy and spending benefiting certain corporations.