The Man Who Sold the World: Ronald Reagan and the Betrayal Of Main Street America Hardcover – Feb 13 2009
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"A seasoned crime reporter of the old school, William Kleinknecht has penetrated the showbiz curtain to expose the venality and cynicism of the Reagan era -- and tells us why the crimes of that time still matter so much today." --Joe Conason, best-selling author, "Big Lies: The Right-Wing Propaganda Machine and How It Distorts the Truth and It Can Happen Here: Authoritarian Peril in the Age of Bush " "Finally, a fact-filled, eminently readable book that punctures the hot air balloon that has buoyed the Reagan presidency for far too long. Kleinknecht strips the emperor's clothes from Ronald Reagan to finally reveal him for what he was, a dim bulb conservative who set the country on the road that led us to the sorry state in which we find ourselves today. A must read." --Peter Biskind, best-selling author, "Easy Riders, Raging Bulls: How the Sex, Drugs and Rock and Roll Generation Revolutionized Hollywood" Bill Kleinknecht knows that it is important to tear down false gods, which is what he does in this scathing reappraisal of Ronald Reagan. A book that will help usher in a brighter political era. --Frances Fox Piven, Distinguished Professor of Political science and Sociology at The Graduate Center, City University of New York, and co-author of "The New Class War: Reagan's Attack on the Welfare State and Its Consequences" "Makes a strong case that President Reagan's policies of massive deregulation, free-market capitalism, budget cuts and trickle-down economics were nothing less than a dismantling of New Deal reforms and a disaster for the country, particularly its poorest citizens... Kleinknecht's bare-knuckled journalistic prose makes this anengaging read.... His criticism of deregulation is especially timely, given the current economic climate, and Kleinknecht uses these stories effectively to connect the Reagan legacy to a contemporary culture of self-interest and a Republican Party he views as mired in shallowness and ignorance. "With Reaganism has come an abandonment of all faith in reason and progress," he writes, "and it has accrued manifestly to the detriment of the average American." Tough, well-argued criticism of a conservative icon." --"Kirkus Reviews"
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Once upon a time, in the middle decades of the last century, the United States had a government that was, more or less, "of the people, by the people and for the people," insofar as that ideal can be achieved. The combined sweep of Populism, Progressivism and the New Deal opened the way for a remarkably affluent and egalitarian society. A broad and prosperous middle class emerged because of the greatest redistribution of income downwards in our nation's history. A truly Golden Age had arrived. Unfortunately, it was not to last.
Ronald Reagan stood against everything that had been achieved in this remarkable age of reform. His constant attacks on the inefficiency of government, when he was doing everything he could to make it inefficient, became a self-fulfilling prophecy. The more money that was taken away from government programs, and he starved government as much as he could, the more ineffective they became. The more he made fun of government, the more ridiculous government bureaucrats came to be seen in the public eye. Gradually government, and the broader realm of public service has come to seem disreputable, disdained by the best and brightest college students planning their careers. Government was always the problem, never the solution.
The greatest tragedy of Ronald Reagan was his betrayal of the working people of America. The two periods of economic expansion that followed his election did little or nothing for Americans in the middle and lower income brackets., A study by the Economic Policy Institute in January, 2001 painted a picture of rising inequality. Expressed in constant 1998 dollars, households whose wealth placed them in the bottom 40 percent of the country had seen none of the benefits of two decades of economic growth. Between 1962 and 1983 the average household net worth of that group had grown from $800 to $4,700. But by the time Reagan was out of office in 1989 that group had a negative net worth of $4,100; that is they were in debt for that amount. Even during the unbridled prosperity of the 1990s that group has floundered, its household worth reaching only $1,000 in 1998. Such were the "blessings" of "trickle-down economics."
How has the middle class fared as a result of this Reagan Revolution? Between 1983 and 1989 the household net worth the the middle 20 percent grew modestly from $55,000 to $58,000 and then began declining reaching $49,100 by 1995. Only in the second half of the 1990s (when Clinton was resident) did the middle 20 percent begin to see the benefits of prosperity with its household worth climbng to $61,000 in 1998. Still, after the two longest spurts of economic growth in American history, the middle 20 percent of American households was, on average, only $5,500 richer.
And the winners of this economic growth derby? - the rich and the super rich. The top 1 percent of households saw its average net worth grow from $7.2 million to $9.1 million between 1983 and 1989 a 26.9 percent increase that far surpassed the 6 percent growth for the middle 20 percent. The next 9 percent at the top of the ladder saw its worth grow from $814,200 to $897,000, a more than ten percent increase. In the ensuing years the rich and super rich continued to pull ahead of the pack. The top 1 percent had a net worth of $10.2 million in 1998 - a 42.2 percent increase from 1983 - and the next 9 percent had an average worth of $1 million, a 24.4 percent increase from 1983. The middle 20 percent of households saw their net worth increase by only 9.9 percent in that decade and a half.
Ronald Reagan disenfranchised the average citizen by inventing the soft-money machine that made large corporations the real power in Washington. He weakened the enforcement of labor laws and inspired union busters across the country by firing more than eleven thousand air traffic controllers and breaking their union in 1981. He empowered corporate executives to abandon the concept of loyalty to employees, shareholders and communities. He presided over the slow creep of crass commercial values into virtually every sphere of American life: the non-profit sector, law, health care, politics, public schools, public radio and public television. Instead of public policy's influencing the corporation to fit the needs of society, society is shaped to fit the needs of the corporation.
Something went horribly wrong on election day in 1980, the day our country was turned over to mean-spirited religious zealots, thinly veiled racists, law and order extremists, warmongers, and a class of people shamefully willing to act as handmaidens of the wealthy at the expense of the ordinary citizen. It has proven untrue that deeply slashing income taxes promotes investment and creates an increase in tax revenues; it has proven disastrously untrue that deregulating the financial sector benefits the consumer. What you've got when you have monstrously big business and a government "small enough to be drowned in the bath tub," is a plutocracy "of the rich, by the rich and for the rich." What you've got when you have a government that does not regulate financial crooks and scoundrels is a kleptocracy of thieves.
This book chronicles America's sad decline from its Golden Age and the primary reason for that decline - Ronald Reagan
Kleinknecht also says the book was borne of bewilderment over the myth that continues to surround the presidency of Ronald Reagan, who he characterizes as an empty suit who believed in flying saucers and allowed an astrologer to guide his presidential scheduling. We just finished a presidential campaign season marked by unseeming competition among Republican aspirants to wrap themselves in the Reagan mantle.
Some portions of "The Man Who Sold the World" are missing credible documentation; others blame Reagan for actions that only began during his leadership and were extended by Bush I and II, and Clinton. His 1987 appointment of Alan Greenspan (Mr. Bubbles) to head the Federal Reserve may have been Reagan's worst, given Greenspan's key role in the dot.com and housing bubbles, but we cannot forget he was reappointed again and again by other presidents until 2006. Deregulation of airlines and trucking are also attacked, though undertaken by Carter. And finally, Kleinknecht misses some important additional Reagan actions - eg. undermining Carter's fuel economy and alternative energy initiatives, and the whole Iran-Contra fiasco. Nonetheless, the book still is an important contribution.
Reagan was well known for stories not quite rooted in fact, and his statistics were similarly also sometimes loose. This included his war on regulation and Murray Weidenbaum's (became Reagan's Chairman of Economic Advisers) conclusion that federal regulations cost the economy $103 billion/year in 1978, including $666/car. The Bureau of Labor Statistics later repudiated some of Weidenbaum's methodology and a subsequent year-long Wall St. Journal sponsored study of the 48 largest firms vs. the six most active regulatory agencies found the regulatory impact only 1.1% ($2.6 billion). Worse yet, Weidenbaum's analysis omitted any benefits from these regulations, and Japanese firms spent more for compliance and still cost less. Unfortunately, Weidenbaum's study came first, got all the press, and inspired the administration's weakening of regulations through reducing enforcement funds and installing leaders who didn't believe in regulation and would interpret regulations in a more 'business-friendly' manner.
Between 1962 and 1983 the average household net worth of those in the bottom 40% rose from $800 to $4,700 in 1998 dollars. When Reagan left office in 1989 it was a negataive $4,100, reaching only $1,100 by 1998. Between 1983 and 1989 the net worth of the middle 20% increased from $55,500 to $58,800 (6%), vs. 27% for the top 1% and 9% for the top 2-10%. By 1983 federal tax receipts from corporate income taxes hit 6.1%, down from 32% in 1952 and 12.5% in 1980.
Regan, Sec. of Treasury, worked to eliminate all controls on the types of loans provided by banks and other institutions - leading to the S&L crisis. Restrictions binding them to a specific area were lifted, as well as interest rate ceilings on deposits; FSLIC insurance was increased from $40K to $100K and large institutional investors could then split funds into parcels fully insured around the nation. Changes in accounting practices were approved that let failing S&Ls (about 800) inflate their worth and stay in business; eliminated the requirement for 400 stockholders and allowed developers to own S&Ls and loan money to themselves with no money down. The scandal broke open in 1989, wasn't even mentioned in the 1988 campaign. He also initiated repeal of Glass-Steagall - work finished in 1999. While Congress deregulated more industries during Carter and Clinton years than Reagan-Bush years, Reagan achieved deregulation by odering the bureaucracy to stop enforcing existing regulations and reducing their funding. He also gave a potent political voice to the backlash against regulations.
The finance industry particularly benefited. By the beginning of the 1980s, an estimated two-thirds of the nation's thrifts were losing money, and thousands virtually insolvent. Regulatory relief including increasing FDIC coverage from $40,000 to $100,000, allowing developers to own thrifts and borrow from them, loosening accounting practices to boost net worth, and freeing them from investment restrictions. The result - the 1989 S&L debacle that required $150 billion in taxpayer bailouts.
Kleinknecht believes the rapid rise of M&A activity under Reagan's relaxed anti-trust enforcement became a prime cause of our manufacturing decline. CEOs lived in fear of 90%-leveraged LBOs using the firm's own assets as collateral, instead of focusing on customers and the Japanese. The M&A/LBO debts incurred ($33+ billion in 1981, plus at least another $70 billion tied up in merger-related loan commitments) hampered firms from investing in new equipment and made them more vulnerable to downturns. Between 1980-86, M&A went from 1,565 ($33 billion) to $4,323 ($204 billion).
Business tax cuts, instead of spurring new investment in equipment, were largely used for M&A as well. Kleinknecht cites the example of G.E. - paid no income tax the first three years of Reagan, received $283 million in rebates (despite pretax profits exceeding $6.5 billion), while shedding 50,000 jobs through layoffs, attrition, and selling subsidiaries. Meanwhile, it acquired RCA and NBC, among others.
A number of credible studies document long-term stock losses by the majority of merged companies. A Wall St. Journal study in 2002 found the stocks of the 50 biggest corporate acquirers fell 3X the DJIA.
Kleinknecht's data on "Lockdown America" is quite limited, consisting of data from New Jersey. In 1980 it had 76 prison inmates per 100,000 population, and 331 in 2002; meanwhile, violent crime increased.
Overall, "The Man Who Sold the World" is important reading.
I have given this book 4 rather than 5 stars because it is currently being ignored and will soon be forgotten, even though it is a title that should be a part of all U.S. history collections.
Here follows a minor insight into the content of the title:
"The contagion of free-market purisim has infected almost every sector of American life (p xii)." He cites a rising inequality whith those on top reaping the benefits and claims the obvious that trickle economics is a fallacy. "With Reaganism has come an abandonment of all faith in reason and progress." There is the decline of heavy industry (p.7) and the factory farm policies which have all but destroyed family farms (p. 11). The destruction of unions was an obvious plus for the haves and a bitter pill to swallow for the nots.
But, to get back to the title of this essay: "...the ignomy of social Darwinism which had nourished a view of the lower classes as predestined by genetics and breeding to live in squalor (pp.24-25)." Perhaps the term anti-social Darwinism would have been more to the point.
Corporate income tax drops created a sea of red ink helping to justify the cutting of beneficial social programs (p. 29). As a pioneer of the use of soft money for campaigning this administration walked point for the election styles of the present (p.59).
The business of this presidency, said the author was business (p. 70). This included the evisceration of regulations a more sensible generation had put into place which led to financial disasters (p. 72) that taxpayers just just begun to fund. The destruction of the 1927 McFadden Act which restricted the ability of financial institutions to operate in more than one state was a disaster still not entirely realized and Proxmire's prediction of doom was laughed at (p.109). The author said that the move was to "Privatize the wealth and socialize the risk (p.119.)" The list goes on and on.
This book deserves to be read slowly and seriously.
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