Neoliberalism Failed America

​The inauguration of Ronald Reagan in 1980 was the dawn of neoliberalism, a political philosophy that favored free-market capitalism, deregulation, and reduction in government spending.  Neoliberalism certainly benefited the wealthy but has failed the bulk of the country.  Associated shareholder-value mantras favor profit at the expense of labor and so cause a huge social cost and transference of wealth.  Moving toward a planned economy with strategic actions to support long-term growth and sharing of wealth is critical to resolving the social problems facing the United States and all mankind.

The election of Ronald Reagan in 1980 was the dawn of neoliberalism  Reagan and his associates had a core vision of anti-communism, lowering marginal tax rates on the wealthy, and deregulation.  The Reagan regime had arguable successes: stabilizing El Salvador, GDP growth, and buffering the Soviet Union.  The empirical outcome of neoliberalist tax policy and its impact on the bulk of the population of the country are an example of failed policy.

The Reagan regime sponsored two major tax cuts: The Economic Recovery Tax Act of 1981 and the Tax Reform Act of 1986 which were summarized by the terms trickle-down economics and supply-side economics.  The Economic Recovery Tax Act of 1981 cut the highest personal income tax rate from 70% to 50%.  The Tax Reform Act of 1986 cut the highest personal ​income tax rate from 50% to 38.5% and which was decreased to 28% in trailing years.

​The Reagan Revolution’s neoliberalist argument was a reduction in marginal tax rates would result in incentives for people to strive to get rich and consequent market incentives would result in benefits for all - hence the summary term trickle-down economics.  The results have been startling and very positive if one is wealthy.  Otherwise, not so much.

​The evaluation of the current situation poses certain questions:

• The Biden administration will likely have an aligned Senate and House for at least two years.  Should they legislate a change to revert to historical levels of taxing wealth to reduce the disparity of income?
• A wealth tax on billionaires combined with a guaranteed minimum income would quickly reduce the disparity and improve the outcomes of Americans as a whole.  Neoliberalists would disparage any progressive initiatives as socialist,  but regardless of political objections, would this make sense for the future growth of the United States?
• Legislative initiatives to protect the rights of labor and the ability of workers to organize would also result in generational change.  Should these be considered, and as above, in the near term?
• Flattened GDP growth rates are correlated with neoliberalist governance.  Higher GPP rate growth rates are correlated with planned economies.  A thorough investigation of this will be forthcoming.

​Information on median income was obtained at https://www.census.gov/data/tables/time-series/demo/income-poverty/historical-income-households.html.  The graphic on the changes in distribution of wealth is presented at https://www.stlouisfed.org/open-vault/2019/august/wealth-inequality-in-america-facts-figures.