In my previous post, I discussed the bad economic hand Millennials have been dealt and the tendency of many of them to place responsibility for their problems on the Baby Boomer generation. Many Millennials see Baby Boomers as a selfish generation who inherited a strong, viable economic system and squandered it on themselves, leaving other generations to struggle and pick up the pieces. Is this depiction an accurate one?
As discussed in my book, Capitalism, Socialism, and the Promise of Democracy, the key to our current economic problems lie in the economic and tax policies of the Reagan administration which were adopted in the 1980’s. These policies resulted in the end of the period of Democratic Capitalism, a period of unmatched economic equality and opportunity, and ushered in a second era of Oligarchic Capitalism.
The Democratic Capitalist period began with the election of Franklin Roosevelt in 1932 and was expanded during the administration of Lyndon Johnson. By 1970, the bottom 90% of Americans by income were receiving an unprecedented 67.13% of all income. In terms of wealth, the bottom 90% of American by wealth held an unprecedented 31.7% of all wealth. Meanwhile, the top 1% of Americans had seen their share of income fall to 9.09% and of wealth to 28.1%. This was the most equal distribution of income and wealth in American history. And then Ronald Reagan was elected president in 1980.
The Reagan administration dramatically reduced taxes; income, estate, capital gains, and corporate, in a manner that disproportionately benefited higher income/higher wealth Americans relative to everyone else. Over time this has led to much greater inequality in both income and wealth. By 2016 the bottom 90% of American were receiving only 50.69% of income (a drop of 7.33% from what it was in 1970) and held only 21.2% of wealth (a drop of 22.05%). Meanwhile, the top 1% saw their share of income rise to 21% (a rise of 5.5%) and their share of wealth increase to 39.6% (an increase of 9.69%). The result has been an increase in economic inequality that parallels what existed during the Gilded Age.
So, who were the architects of the Reagan economic and tax policies?
- President Ronald Reagan, born 1911 (not a boomer)
- Vice President George H. W. Bush, born 1924 (not a boomer)
- Treasury Secretary Donald Regan, born 1918 (not a boomer)
- Chief of Staff James Baker, born 1930 (not a boomer)
- Counselor Edwin Meese, born 1931 (not a boomer)
- Chair of the Council of Economic Advisors (1981-1982) Murray Weidenbaum, born 1927 (not a boomer)
- Chair of the Council Economic Advisors (1982-1984) Martin Feldstein, born 1939 (not a boomer)
- Director of the Office of Management and the Budget David Stockman, born 1946 (borderline boomer)
- Secretary of Commerce Malcolm Baldrige, born 1922 (not a boomer)
- Senate Majority Leader Howard Baker, born 1925 (not a boomer)
- House Majority Leader Phillip “Tip” O’Neil, born 1912 (not a boomer).
It was not Baby Boomers who created the foundation and environment for the current economic struggles of Millennials. Certainly there have been Baby Boomer presidents (Bill Clinton, George W. Bush, and Barak Obama) who it could be said had the opportunity to change the Reagan policies. However, as discussed in my book, the die had been cast by the Reagan administration that put us on a trajectory that would prove hard to reverse. While the Clinton and Obama administrations did to some degree soften the worst aspects of the Reagan economic and tax policies, they were unable to make the types of fundamental changes needed due to conservative elements in Congress, particularly in the Republican party. Also, the George W. Bush administration undertook tax policies that reversed much of what Clinton had done and which exacerbated the problem of economic inequality.
The tax and economic policies implemented by the Reagan administration brought an end to the era of Democratic Capitalism and ushered in a second era of Oligarchic Capitalism. This is why the current level of economic inequality rivals what existed during the Gilded Age and the period of the Robber Barons. We have replaced the likes of John D. Rockefeller, Andrew Carnegie, J. P. Morgan, James Duke, and Leland Stanford with the likes of Bill Gates (born 1955), Jeff Bezos (born 1964), Mark Zuckerburg (born 1984), Steve Ballmer (born 1956), Dustin Moskovitz (born 1984), and Lukas Walton (born 1986). Regardless of the generation you were born into, it is the tax policies implemented in the 1980’s that have created so much economic inequality.
The economic challenges Millennials face are not a problem between generations; of Millennials versus Boomers. Rather, the economic challenges that Millennials confront are based on a tax system designed to benefit higher income/higher wealth Americans at the expense of middle income/lower income/lower wealth Americans, regardless of which generation an American may belong to. A tax system designed by the Reagan Administration and only slightly modified since. It is the reform of the tax system that is the key to dealing with the economic problems confronting Millennials, Baby Boomers, and every other generation of middle income/lower income/lower wealth Americans who are struggling.
Millennials have a right to be angry and upset about the economic situation they find themselves in and to demand change. They have been dealt a bad hand and have also been playing a rigged game. Unfortunately, many of them have misidentified who dealt the hand and who rigged the game.
