Page 2 Portland Observer, September 2 2 .1S62
Reaganomics: Its effect on the U.S. economy
When Ronald Reagan took office
in January o f 1981 he put into effect
U n em p lo y m e n t, 1977- July 1 9 8 2
four basic units o f his economic
plan: a slowdown in monetary
growth which has produced high in
terest rates; massive tax cuts for
large corporations and the wealthy;
budget cuts primarily aimed at so
cial programs; and a rollback in reg
ulations protecting workers, con
sumers and the environment.
Since July o f 1981 the economy
has fallen into a steep decline. Be
tween July o f 1981 and July o f 1982,
o ffic ia l unem ploym ent rates rose
from 7.2 per cent to 9.8 per cent, the
highest level in 40 years. Another
1.5 million gave up looking for
work and 5.7 million were forced to
work part time. Reaganism resulted
in 17.6 m illion Americans suffering
job or income loss in July. Over the
period o f a year, one-third o f the
Monthly i m m n t f « o n M y M | u « M
workers are unemployed.
,981
Soun.» tfcnM u 01 LJtor SlohUKS
The unemployment rate among
adult men was 8.8 in July, the high
est since the Great Depression.
Employment o f adult males is tradi
tionally the most stable o f the work
force, yet since July o f 198 , 60 per
Who A re T h e U n em p lo y ed ? — July 198 2
cent o f the increased unemployment
has been adult men. Nealy one-half
o f the unemployed are adult males.
Women have an unemployment rate
o f 8.4 per cent; black Americans
18.5 per cent; Hispanics 13.5 per
cent; black teenagers, 50 per cent.
The effects o f the recession are
being felt throughout the economy.
The auto, steel, and construction in
dustries, which directly and indirect
ly account for one-third o f the jobs
in the country, have been particular
ly hard hit. Employment in manu
facturing has declined by more than
1.5 million since July 1981. As o f
July 1982, 17 states and Washing
ton, D .C ., had unemployment rates
over 10 per cent, compared to one
state plus Washington, D .C . one
year ago.
According to the administration,
the tax give-aways to big business
and the wealthy were to stimulate
job-producing investment. Corpor
ate income taxes are one-third lower
than a year ago, yet business invest
ment declined by 3.3 per cent. In
dustrial production declined by 10
ployment benefits and are without
gross wages have increased, the buy
per cent, with more than 30 per cent
resources.
Between
July
1981
and
ing power o f those wages decreased
o f the industrial capacity idle.
June o f 1982, 3.3 million workers
by 1.8 per cent. Reduced buying
Reagan’s high interest rate policy
used up their regular unemployment
power contributes to the recession
has had a devastating effect on the
benefits. The Reagan budget cuts re
by reducing sales and therefore,
housing, construction, automibile,
moved much o f the “ extended bene
jobs.
and farming industries and local
fits”
usually
available
in
regions
and state governments. Home fore
Poverty
with high unemployment. During
closures and business bankruptcies
The
high
unemployment
is
the 1974-1975 recession benefits
are at an all-tim e high. Unem ploy
forcing more Americans into pove
were extended to 65 weeks. In A u
ment in manufacturing hit 12.0 per
rty. The numbers o f people in pov
gust Congress approved an exten
cent in July 1982; unemployment in
erty and the poverty-rate are highest
sion to a maximum o f 45 weeks, and
durables— autos, steel, machinery,
since the mid '60s. The percentage
these
benefits are taxable.
etc.— was at 12.7 per cent. Con
o f people living in poverty rose from
During A pril, M ay and June,
struction unemployment was at 20.3
13.2 percent in 1980to 1 4 .0 percent
500,000 people per month exhausted
per cent; retail trade at 10.5 per
in 1981 and will increase substantial
their regular or extended benefits.
cent. The high unemployment rate
ly by the end o f 1982. This is the
An
estimated 4 million people will
among agricultural wage and sala
first sustained increase in poverty
exhaust their benefits in 1982.
ried workers o f 13.8 per cent indi
since the late '50s.
cates a deep recession in the agricul
Buying power
M ore than one-third o f blacks
tural sector.
The buying power o f U .S. work
and women who maintain families
As high unemployment contin
ers declined in 1982 and remains be
live in poverty. Twenty per cent of
ues, more people use up their unem-
low levels o f the late 1970s. While
children live in poverty. The number
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o f married couples who are poor in
creased by 10 per cent during Rea
gan’s first year in office.
Interest retee
During recessions interest rates
usually
decline
to
encourage
economic activity. During this reces
sion interest rates have been kept at
near historic highs. Mortgage inter
est rates have remained at levels that
discourage housing construction
and sales. During Reagan's adminis
tration the prime rate— the rate
targe banks charge their largest cor
porate customers— never dropped
below ,5 per cent until mid-August.
In 1981 it averaged I9 per cent and
in 1982, 16 per cent.
The reason for high interest rates
is the loss o f revenue caused by Rea
gan’s tax cuts to the wealthy. As a
result o f these cuts, the deficit and
Treasury's borrowing, have in
creased. At the same time the Feder
al Reserve, with administration ap
proval, is restricting the availability
o f funds in an attempt to achieve a
slower rate o f monetary growth.
This policy has increased the im
balance in distribution o f wealth. In
1974 66 per cent o f total personal in
come o f Americans was from wages
and 9.6 per cent from interest on in
vestments. Now 6 , per cent is wages
and 14.7 per cent is interest. Since
interest is usually paid to persons in
upper income brackets, this in
dicates a shift o f wealth to the
wealthy.
1982
Businas*
Reagan’s tax benefits were sup
posed to help business through
increased investment, but continu
ing unemployment and high interest
rates are forcing business failures at
an unprecedented rate. Because
small businesses pay the highest in
terest rates on less favorable terms,
and offer higher tax rates, they are
p a rtic u la rly v u ln erab le. Several
large firms have declared bank
ruptcy in 1982: Wickes Company,
building supplies; B raniff Airlines;
A .M . In tern atio n al (fo rm erly A d -
dressograph-Multigraph).
More than 10 per cent o f savings
and loan corporations suffered loss-
TRY
y J X y U U fP Ò
es because o f the high interest rates
they are forced to pay on savings.
By August o f this year there had
been 27 bank closings.
Mortage rates are expected to re
main high under the double squeeze
o f the tax-cut induced deficit and
slow monetary growth. Reagan ve
toed a three-year housing program
that would have provided an esti
mated 200,000 new homes and has
mounted a campaign to eliminate
subsidized housing construction.
Inflation persists, with the Con
sumer Price Index rising .09 per cnet
in M ay and 1.0 per cnet in June. The
cost o f housing rose 7.5 per cent in
the first half o f 1982; food 5.5 per
cent; medical care 10.8 per cent.
The Reagan-induced recession
has not produced the results intend
ed— the elimination o f inflation—
but has devastated the nation’s
economy and standard o f living.
Gross National Product
The gross national product is (he
dollar measure o f the nation's out
put o f goods and services. The
G N P , adjusted for inflation, fell at
an annual rate o f 5.3 per cent in the
last quarter o f 1981 and 5.1 in the
first quarter o f 19^8 12.
1 The annual
rate in 1982 was less than in 1979.
Corporate before-tax profits have
declined the first time since World
W ar I I , dropping 33 per cent be
tween June 1, 1982 and June 30.
1982. Corporate taxes have declined
by almost 41 per cent, the result o f
lower profits and Reagan's tax cuts.
Corporate expenditures for new
plants
and
equipment
have
dropped. Not only do corporations
have to contend with cuts in salses
and high interest on borrowed mon
ey, but there is no guarantee that the
savings made by tax cuts will be re
invested. It can be used to pay high
er dividends to stockholders, specu
lation, mergers, relocations, or in
vestment.
(Editor'* note:
Inform ation
and Illustrations for the above
article are from the A F L -C IO
American Federationisi. Auo. 28
1882.1
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