The Forty-Year Cycle

The social and political pendulum swings again.

It is said that our economy and politics are subject to cycles of about forty-years, and that toward the end of each period, the pendulum begins its swing from one side to the other. For the sake of limited space and attention spans, I won’t dig back farther than 1940 and FDR’s New Deal, when a liberal approach to economics and governing began to hold sway.

With this new liberalism, we saw government intentionally grown to create jobs (the WPA and the CCC), provide a social safety net (Social Security), and universal medical insurance for the elderly (Medicare). In 1938, we saw the introduction of a minimum wage. By the Seventies, we instituted workplace safety laws (OSHA), and Nixon’s EPA. In this era, our courts protected minority and voting rights. By 1970, women were finally allowed to hold credit-cards in their own names. Societally, a reduced hostility to labor unions produced the merger of the AFL and CIO in 1965. For the forty-years between 1940 and 1980, America led the world in civil justice and a strong Middle Class.  

In 1981, with the Reagan presidency taking shape, a new economic idea, called “supply-side” took hold. It was dubbed “Reaganomics.” The theory was that reversing the tax structure, which heretofore was “progressive” for placing more burden on the wealthy than the working class, capital would be freed up, and the wealthy would create jobs, allowing prosperity to “trickle-down” to the masses. For the last forty-years, tax cuts for the wealthy came from the Reagan, George W. Bush, and Trump administrations. During that period, the rich certainly got richer, but the working class did not benefit. There was no trickle-down. Now, with the passage of new legislation, Reaganomics appears to be swirling around history’s drain.

Predictably, the supply-siders are inflamed by a minimum corporate tax and other corrections. Reaction to the Inflation Reduction Act is that Biden and the Dems should be damned for redistributing wealth. A neat rhetorical trick because they’ve been redistributing wealth all this time, moving it up to the top 1-10%, all the while claiming that reducing the tax burden of the wealthiest—the “job-creators”—has allowed them to redeploy capital and create jobs through expansion. A lovely fairytale. If only it were true.

To paraphrase Historian Heather Cox Richardson, from 1989-2019, the share of wealth belonging to families in the top 10% increased 240% from $24.3 trillion to $82.4 trillion. Most of that increase went to the top 1%. In 2019, families in the bottom half of the economy held only 2% of the national wealth, while those in the bottom quarter owed more than they owned.

Liz Truss, the new Prime Minister of the United Kingdom, mistaking the year for 1980, herself for Margaret Thatcher, and her conservative movement for Ronald Reagan’s, did, with great fanfare last week, reduce the tax rates of Britain’s “job-creators.” It was a remarkably tone-deaf moment that brought instant reproach from the opposition Labor Party, economists worldwide, and, rather stunningly, from her own Conservative Party. By the first of the week, she was in full reverse, and the tax cuts evaporated, along with her honeymoon period. It’s an instance of changing times that a leader fails to recognize.

Competing politicians often hang economic troubles around the necks of political leaders. At home, regardless of party, the sitting president is always left holding the bag, fair or not; guilty or not. In the way of his typical plain-spoken truth-telling, Harry S. Truman had a sign on his Oval Office desk that read, “The buck stops here.”

There’s nothing unusual about the opposition party vilifying a sitting president for rising gas prices that are completely out of his control. Democrats did it to Nixon during the 1973 Arab Oil Embargo, and every president since has had that mud flung at them. The current gas-war is only fifty-years old: I remember a different kind of gas-war in the Sixties when gasoline was 29¢ a gallon, and stations gave away everything from Green Stamps to fancy glassware to attract customers.

Times change.

A current illustration beyond the price of gasoline is inflation and the cost of consumer goods. So derided is the dismal science, that it is said if you ask three economists to answer a given question, you’ll get five replies. However, today all but the most partisan acknowledge that the rising price of energy and consumer goods reflect the twin turbulences of Russia’s invasion of Ukraine and the supply chain interruptions of the Covid 19 pandemic.  

After four decades of Reverse-Robinhood, where our economic policies stole from the poor and gave to the rich, the economic pendulum is right on time, swinging back to the left. The same cannot yet be said for civil justice issues.

©2022 Jon Sinton