Third, President Reagan saw to it that the tariffs on goods produced by American companies operating abroad, for import into the US, were essentially eliminated, making it terribly profitable to manufacture inexpensively abroad almost everything that was sold at home.
Then, two things produced ever more workers looking for the reduced number of jobs that resulted from the three things just mentioned.
1) the massive movement of American women into the paid labor market and
2) waves of immigration--people from around the world who wanted to participate in the 150-year rising real wages in America.
This confluence of factors produced labor market conditions that had US employers, for the first time, in the enviable situation of no longer being required to raise wages to acquire or keep employees. And so, quite naturally, they stopped raising wages.
Thus we had an explosion of profitability and a wild ride in the stock market in the '80s and '90s, because the corporations--America's primary employers--were profiting more than they had ever dreamed in their wildest fantasies as MBA students--getting ever more out of employees without having to pay them any more. As a result, large corporations began giving out huge bonuses and severance packages to top executives.
What are the "real" costs to the larger society and economy of these huge money grabs?
In Europe, a good portion of productivity gains are used to reward the society and populace as a whole: ever-more-productive workers are paid rising wages, thereby allowing them to share in the growing wealth that rising productivity makes possible. But not only that: With more evenly distributed productivity gains, college education, health care and child care can more easily be made available to one and all.
However, in the U.S. and U.K., there is an assumption that wages should stop rising whenever possible so that the wealth emerging out of growing productivity can be concentrated in the hands of a tiny number of people, the financial elite, who thereby receive stratospheric incomes and wealth holdings. The problem with this arrangement is that society can no longer produce for a mass market because the mass market isn't growing in parallel with the growing productivity. And this is what is happening today in America. Sales of domestically produced products are steadily dwindling as consumer and government indebtedness reaches crisis proportions. Corporate owners are getting obscenely rich from all this, but with well-paid jobs, college, and good health care increasingly out of reach for ever more people, the society and economy beneath them is crumbling.
Taxes
When Reagan became president, the highest income tax rate, paid by top earners on all income in excess of $3 million (in today's dollars), was in the 70 to 80% range. Reagan dropped that rate to approximately 35% -- an unbelievable gift to the richest among us, who thereby became his greatest boosters and campaign financiers for the remainder of his political career. The rest of us are still laboring longer and harder as a result of that much-reduced tax rate for the rich, to make up for the loss of the larger share they used to pay.
Corporate income tax, which used to provide a much larger share of our total income tax revenue, now only brings in about 10 or 15% of it. Over the past 100 years, rich people moved the tax burden off themselves and onto everyone else. And corporations moved much--but not quite all--of their burden onto the individual. The result has been a double shift from the corporate to the individual, and from the richest individuals to everyone else, with the exception of the very poor on the bottom who were already too poor to be taxed.
When the average American gets upset by taxes going up, they are making an error. The taxes aren't going up so much as they are being shifted. The tax may have gone up on you, but it has gone down on others. However, because it's less dangerous politically, Republican politicians prefer to talk about taxes as if the issue is high or low, rather than who pays at a high rate and who doesn't.
Reagan provided us with the perfect example and it was wonderfully clever politics on his part. He gave a big tax break to corporations and a huge tax cut to the richest among us. But he was smart enough to know that if that's all you do you're going to get crucified politically. So he added a mass tax cut for everyman. However, this tax cut for the average citizen was not only very small, but came by way of a little trick. While the Reagan Administration lowered the income tax rates on the average person a little, it raised the amount of their income that the Social Security tax applied to. So the government got to put back into Social Security most of what it gave to the mass of Americans in the lowering of the tax rate--which is why the size of people's paychecks didn't change much. The mass of Americans were so thrilled by their "tax cut' that this bad news got lost in the shuffle. Not only was the cut given to the richest and the corporations much more substantial, but the masses were being hit with a rising Social Security cost.
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