Politics & Policy

Reagan & The Poor

Praying for the liberal punditocracy.

My wife got so angry at Mark Shields that she started to pull the car over to the side of the highway on our way out to Delaware, and made me promise to write a necessary correction.

It was the evening of the Reagan funeral, and we were listening to the The Newshour with Jim Lehrer. Shields was talking in the falsely caustic voice he reserves for conservative Republicans, and describing the “total disaster” that was Reaganomics. It was designed, he said, to toss tax-break goodies to Reagan’s rich pals, while making life miserable for the poor.

At times like this, the donkey seems to be the only adequate symbol for certain extreme Democrats. So stubborn, so set in their ways, incapable of learning. They cannot see facts right in front of their face. Their ideology is so powerful they see only what they want to see.

Now Mark Shields is a very nice guy. A graduate of Notre Dame, a great raconteur, deliciously full of Blarney; he is a lot of fun to be with–and during the McGovern campaign, I spent about ten weeks very close to Mark on the Shriver-for-Vice-President airplane. So do not think my present frustration with him is due to personal dislike; it’s exactly the opposite.

Sometimes, in Mark’s imagination, Republicans flit about as greedy, evil, mean people. Extreme Democrats can’t help thinking that way. In the unreal ideology of egalitarianism, there is an unreal division of the world into oppressors v. oppressed. Lefties, therefore, see the right as cruel and evil. Righties do not think that extreme Democrats are evil, only donkey-like stupid.

Mark is fun; he just never learns.

Nearly the whole world (not the extreme Left) grasped the main lesson of the Reagan/Thatcher economic revolution, viz., that cuts in tax rates for entrepreneurial people raise up the poor far more effectively than welfare programs. They also produce higher real tax revenues than ever, and create more new jobs (and even whole new industries) than ever. Welfare democracy is a regressive, reactionary idea. The truly progressive idea is enterprise–with its creativity, hope, growth, and opportunity.

The Shields blinders prevent him from looking up the Census Bureau records for the years 1981-1989, when Reaganomics transformed for the better the economic life of the poor in America, and of American blacks in particular. Just looking at the facts.

I know Mark pretty well. At this point, he is likely to change the subject to Reagan’s “deficits.” But supporters of Reaganomics rightly named them investments. Investments in a swift victory in the Cold War, saving tons on defense spending. Investments in high-enough economic growth that the deficits would disappear in a decade–as they did. The principle Mark regularly misses is this: Investments that bring high-enough returns more than pay for themselves. So back to the question of the poor.

When Jimmy Carter handed over the presidency to Ronald Reagan, the double-digit inflation he had presided over for three years hurt the poor most of all. Such high inflation swept an additional 4.3 million persons below the poverty line, by eroding the value of their incomes. Meanwhile, ideology prevented Democrats from seeing a way out of Keynesian inflation, along with high unemployment and no growth, i.e., “stagflation.”

When Jimmy Carter handed over the presidency, he also handed over a prime interest rate at 19 percent, inflation of nearly 14 percent, and an unemployment rate of seven percent–for a “misery index” of 40 percent. Reaganomics soon reduced this misery index to 17 percent. At the end of 1988, Reaganomics left the prime rate at 8, inflation less than four percent, and unemployment barely above 5 percent. A higher proportion of adults were employed than at any previous time in U.S. history.

Jobs, jobs, jobs: Altogether, Reaganomics created some 19 million new jobs. Between the end of 1980 and the end of 1988, black Americans alone got 2.4 million of these new jobs. The numbers of the black employed jumped from 9 million to 11.4 million in that short period–a jump of more than 25 percent.

Black income jumped, too. In constant 1988 dollars, the total annual income earned by all 30 million U.S. blacks together rose from $191 billion at the end of 1980, to $259 billion by the end of 1988. That sum was larger than the GDP of all but ten nations in the world.

The number of black families earning more than $50,000 per year much more than doubled, from 392,000 in 1982 to 936,000 in 1988. The median salary/wage of black males increased from $9,678 in 1980 to $14,537 in 1988 (in current dollars). Median means half earned more than that, half less, so more than half of all black males improved their income by more than 50 percent.

The bad news during the Reagan years was that the number of single-parent black families continued rising, as it had since 1960, this time from 1.9 million to 2.2 million families. Government, of course, does not mandate this most personal of choices, and except indirectly can do little to affect it. Nonetheless, single female-headed households have long been the fastest growing cause of poverty. In these years, they caused the measure of income inequality (the gini coefficient) to soar far higher (.450) among blacks than among whites (.382).

Correcting this growth of female-headed households awaited the next burst of progressive politics, once again on the part of Republicans. Democrats strove mightily to protect the status quo on this front until Bill Clinton, to his credit, at last supported Welfare Reform in 1996.

It should also be pointed out that under Reagan–Shields to the contrary–the top-five percent of all taxpayers paid both a higher proportion of all taxes than under Jimmy Carter, and a higher absolute number of tax dollars. Shields seems to become confused by a cut in tax rates, resulting in a rise in tax revenues, stripped from the rich by government. Reagan soaked the rich. The rich even paid at a significantly higher effective tax rate (22.4 percent of their adjusted gross incomes) than before. But they were earning plenty, and didn’t mind it.

The purpose of tax policy is not to be punitive, but to take in revenue in a way that does the most good for all. Shields would like it to be punitive to the rich–he really dislikes the #@$^@&*s!–even if that makes tax revenues come in lower.

The other thing Reagan did is shift the burden of income tax upward from the poor and lower middle class–indeed from the whole bottom half of income earners. By 1988, Reagan had the lower half paying less than 6 percent of income taxes. The top-five percent, which before Reagan had been paying under 38 percent of all income taxes, by 1988 were paying nearly 46 percent. He had the top-ten percent of income earners paying a whopping 57 percent of all income taxes.

That left the middle class, the 40 percent of people between the median and the top-ten percent, paying almost exactly their statistical share, a little less than 40 percent. To most people–even Democrats- this seemed pretty cool. But not to Mark.

As Clare Boothe Luce loved to say, No good deed goes unpunished. Left-wing ideology prevented Reagan’s real accomplishments for the poor to go unsung. (In America, the left-wing does most of the public singing.) But reality is eventually stronger than ideology. Every day, more and more Americans drop their leftish blinders. Those who do learn to see the world a little straighter, the facts a little more starkly. And they begin to understand the real relationships among the facts–why it is that certain actions have the effects they actually do.

In the normal course of events–if I may employ for political philosophy a metaphor taken from our literary habits–most Americans learn to read from left to right. Since the Left dominates the media, the schools, and the mainline churches, from left to right is the normal course of a maturing mind. Reality sooner or later trumps.

A neoconservative, for instance, is a leftist with two teenage daughters.

There is even hope for Mark. But I have been praying for him for a long time.

Michael Novak is the winner of the 1994 Templeton Prize for progress in religion and the George Frederick Jewett Scholar in Religion, Philosophy, and Public Policy at the American Enterprise Institute. Novak’s own website is www.michaelnovak.net.


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