Bests & Worsts Reviews from Amazon

I will give this book two stars because I thought it was a pretty good history until it got to the 1970’s. Then it became right-wing propaganda. I am not economist but I am an engineer and I can process data. Why should you believe me instead of someone who has a PHD in economics and is a former Fed chairman? Maybe you shouldn’t believe either of us, and instead you should look up economic data yourself. Otherwise you will be fed cherry-picked and manipulated data to support conclusions that other people want you to believe. Edward Bernays, “the father of public relations”, was a nephew of Sigmund Freud and used Freud’s insights in his public relations work. He said, “The conscious and intelligent manipulation of the organized habits and opinions of the masses is an important element in democratic society. … In almost every act of our daily lives, whether in the sphere of politics or business, in our social conduct or our ethical thinking, we are dominated by the relatively small number of persons … who understand the mental processes and social patterns of the masses. It is they who pull the wires which control the public mind. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country.” You better believe that you are being manipulated. This manipulation goes back decades. You hear the same thing over and over so you think it must be true. This is brainwashing through repetition. I will point out some of the misleading claims in the book, and the significant economic events that were ignored because they don’t fit the “free market” narrative that Alan Greenspan is pushing. To start, the book talks about the high rate of economic growth in the 19th century. As Frank Lysy pointed out in his blog “An Economic Sense”, real GDP per capita has grown at a nearly constant rate since at least 1870. There are fluctuations from year to year, or even decade to decade, but the growth trend always returns to the same curve. During that time we have had periods with no income taxes, high income taxes, and low income taxes. They made no difference to the growth in real GDP per capita. Anyone who says they have a “secret sauce” for growth such as tax cuts or deregulation is lying. That is economic quackery. The only reason overall GDP growth rate was higher in the 19th century was because the population growth rate was higher, not because of the free-wheeling laissez-faire economic system that Alan Greenspan attributes it to. In 1900, at the height of the Gilded Age, the United States was as bad as any third world country with its low pay, long work hours, poor working conditions, slums, pollution, and child labor. The poverty rate was 80%. Alan Greenspan makes it sound like the roaring twenties was a time of great prosperity. Maybe it was for a few people, but the poverty rate was still over 50% and median income adjusted for inflation was only a little higher than Mexico’s is today. In 1933 Franklin Roosevelt began putting the New Deal into place. The New Deal included high top tax rates and regulations that were intended to benefit “the forgotten man at the bottom of the economic pyramid.” It worked spectacularly well. Between 1933 and 1973 the average real (inflation adjusted) income for the bottom 90% went up by a factor of 5 and the poverty rate dropped from 70% to 11%. Workers got Social Security, Medicare, Medical, disability insurance, unemployment insurance, pensions, health insurance, paid vacations, paid sick time, and paid holidays. That is when the great American middle class was created and thrived, as economic growth was shared by almost everyone. The high top tax rates (they were over 90% from 1951 to 1963) put a cap on income so that the average income of the top 0.01% was only about $3 million per year (adjusted dollars). The cap on income prevented the rich from taking a disproportionate share of income and made more money available for everyone else. High corporate tax rates encouraged companies to raise pay and benefits because they were pretax. Companies had a choice between raising compensation for their employees and paying high taxes. CEOs were maxed out on pay so they had no personal incentive to squeeze money out of their employees. Stock repurchases were illegal because they were considered to be stock price manipulation. Right wing economists like to talk about “maximizing revenue” so they can use the Laffer curve to rationalize tax cuts (Since 1981 U.S. economic policy has been based on a curve Art Laffer sketched on a napkin, with no empirical basis). High top tax rates are not about maximizing revenue, they are about putting a cap on income. Hardly anyone paid those high New Deal top rates, and the top 1% paid a lower share of total taxes than they do now because their incomes were lower. Almost all wage growth for the last 100 years happened when taxes were high and top incomes were suppressed. Forty years of unprecedented strong wage growth were ended in 1973 by a government program specifically designed to stop wage growth known as Nixon’s wage and price controls. Real wages been trending down since then. White House audio tapes revealed that at the same time Nixon was pretending to fight inflation with his wage and price controls he was pressuring the Fed Chairman, Arthur Burns, to expand the money supply in order to goose the economy so he could get re-elected in 1972. Wage and price controls failed to stop inflation because wages and prices don’t create inflation, an expanding money supply does. In other words the inflation in the 70’s was deliberately created by Richard Nixon’s monetary expansion and not “oil shocks” or whatever else people say. To this day some so-called economists publically fret that raising wages might trigger inflation even though history says otherwise. The United States had 40 years of strong wage growth without inflation getting out of hand. High inflation in the late 70’s was accompanied by declining wages. High inflation pushed people into higher tax brackets because the brackets weren’t adjusted for inflation. That and stagnating or declining wages after 1973 squeezed the middle class and made them susceptible to Ronald Reagan’s tax cut con. Wealthy conservatives have always been opposed to Social Security and Medicare, considering them to be socialism. However Social Security and Medicare were very popular with the general public so conservative politicians could not simply eliminate them. Conservative thinkers in the 70’s devised a strategy called “Starve the Beast” to solve that problem. The idea was to cut taxes until an economic crisis was created so that Social Security and Medicare would be forced to be cut. If Ronald Reagan had said, “I’m going to cut taxes for the rich and pay for those tax cuts with public debt, and eventually that debt will be used as an excuse to cut Social Security and Medicare” he might not have been elected. A ruse called Supply Side Economics provided cover for the tax cuts. Reagan’s own budget director, David Stockman, said in 1981 that Supply Side Economics (Kemp-Roth) was a “Trojan horse to bring down the top rate.” Reagan said that Supply Side Economics would grow the economy, create jobs, and raise pay. None of those things happened. Instead after the tax cuts in 1981 nearly all economic growth has gone to the rich, with the bottom 90% getting no benefit at all from the growing economy. Economic growth averaged 3.21% per year from 1970 to 1979, and 3.12% per year from 1980 to 1989. That’s right, the “Stagflation 70’s” actually had higher economic growth than the “Booming 80’s”. Economic growth from 1946 to 1980 averaged 3.1% per year, and growth from 1981 to 2017 averaged 2.7% per year even though top tax rates were much lower. So where is that high growth we were supposed to get? (It would be wrong to conclude that tax cuts hurt growth. Economic growth slowed down because population growth slowed down. Still, there is just about zero evidence that tax cuts create growth.) Economic growth in the United States was pretty mediocre compared to other first word countries in the 80’s. The number of jobs increased by 17.7% during Reagan’s 8 years in office, but jobs increase by 18.8% during the previous 8 years. The “Stagflation 70’s” were actually better than the “Booming 80’s for job growth. From census data for males aged 35 to 44 years (chosen to represent mid-career people) wages grew 8% from 1970 to 1979 (incomes went up 11% from 1970 to 1973) and went down 1% from 1980 to 1989. Where was that trickle-down we were supposed to get? Somebody’s been pulling the wool over our eyes about the “Stagflation 70’s” and the “Booming 80’s”. Reagan campaigned against the national debt and talked about how a stack of thousand dollar bills totaling one trillion dollars would be 67 miles high. When Reagan took office the national debt as a percent of GDP was at its lowest level in 50 years and was really no problem at all. Reagan’s tax cuts and military spending nearly tripled the national debt by the end of his eight years in office. Those were some of the most mismanaged budgets in U.S. history, along with George W. Bush’s and Trump’s. At first Reagan cut the existing 70% top tax rate to 50% and also cut the lower rates a comparable amount. Then over the next 7 years he cut the top rate to 28% and raised the lower rates several times until by the end of his term many middle class people were paying a higher tax rate than they were before he started. Incomes for the top 0.1% exploded after Reagan’s tax cut. Their newly unlimited incomes became so high and took so much of the economic growth there was hardly any money left for anyone else, which led to declining wages and loss of benefits. Tax cuts and deregulation encouraged companies to move factories out of the country. The number of manufacturing jobs in the United States hit an all- time high in the late 70’s right before Reagan took office and have gone down ever since. According to Forbes magazine, the richest person in 1982 had $2 billion which is equivalent to about $5 billion today. Now after 38 years of Supply Side Economics, the richest person is Jeff Bezos with $130 billion as of January 6, 2019. That is a 26 times as rich as the richest person in 1982. The top 0.1% has gained at least $13 trillion dollars since Supply Side Economic went into effect, money that otherwise would have gone to the working class. When top tax rates are high the top incomes are limited and everyone else gets a share of economic growth. When taxes are low the top incomes become so high there is no money left for anyone else. By no coincidence “Shareholder Value” began in the early 80’s too, which held that the only responsibility a company has is to its shareholders, not its customers, employees, or community. Alan Greenspan seems to think this is a wonderful thing with its “exuberant era” “as financiers applied their brainpower to squeezing better returns out of their investments”, “eternal vigilance” by the owners of capital, and “financial innovation”. But how did it actually work out? From 1945 to 1980 the S&P total annual return (including dividends) was 11.3%. From 1981 to 2015 the total annual return was 10.8%. That’s not better. The big winners from “shareholder value” were the CEOs, whose incomes went up by almost a factor of 10. Unlimited CEO compensation created an incentive for them to run their companies for their own personal benefit. Stock repurchases became legal in 1982. CEO compensation went from mostly salary to mostly stock options, supposedly to align their interests with the interests of the shareholders. This led CEOs to repurchase stocks in order to pump up the share price before their options vest. Corporate profits that used to go to employee wages and benefits has been diverted to stock repurchases. Corporations borrow more money to use for more stock repurchases. This hasn’t done the shareholders any good but it made CEOs very rich. The high tax model has been tried in other countries too. First world countries such as Western Europe, Canada, Australia, New Zealand, and Japan also had high taxes after World War II and also developed a decent middle class. Some of them also cut taxes later, and those tax cuts generally did not create higher economic growth but instead redistributed wealth upward, with the largest tax cuts associated with the largest upward redistributions. This has been tested and proven many times over: high top tax rates distribute wealth to the lower classes. Low top tax rates distribute wealth to the top. There is no such thing as “free market capitalism”. It is always rigged. Usually the rich class is also the ruling class so they make the system work for their benefit. During the period of 1933 to 1981 the U.S. economy was rigged in favor of the working class and that’s when the great American middle class was created. The Reagan Revolution was a counter-revolution of the rich against the working class. It was a mortal blow to the middle class. The middle class will continue to shrivel and die unless high top tax rates are restored. Right wing economists such as Alan Greenspan like to invent phony economic growth problems so they can prescribe tax cuts, deregulation, and entitlement cuts that transfer more wealth upward. I don’t know of any economic theory that says the first 2.5% of growth goes to the rich so the growth has to be extraordinarily high for anyone else to get anything. The problem is not growth, it’s how the growth is distributed. “Globalization” is a red herring. It has had zero effect on real GDP per capita. It is just something cooked up to blame for middle class decline, to divert attention from the real reason which is Reaganomics. We could have had higher wages, shorter working hours, universal health insurance, expanded social security and tuition free college for all. The money was there. Instead we have given trillions of dollars in tax cuts to the very rich so they could stash it in their offshore accounts. The demographics affecting Medicare and Social Security have been known for decades and adjustments could have been made long ago. Our elected “representatives” (who actually represent their rich donors) have not done anything about it because they don’t want to. They want those programs to fail. Alan Greenspan’s claim that entitlements hurt growth is economic malpractice. As I alluded to earlier, since at least 1870 no government policy change has had any effect on economic growth. Some other first world countries like Canada and Norway have much better social insurance programs than the United States, and they have also had better GDP growth and wage growth since 1981. The evidence that entitlements hurt economic growth is non-existent. Don’t believe Alan Greenspan’s lies! It look the labor class several decades of strikes, riots, and union organizing before they reached the promised land of the New Deal and achieved middle class status. Now they are being conned out of it. Alan Greenspan’s book is part of the con job. I attached some charts. The first one shows the top tax rate history. The second one shows the national debt as percent of GDP. Notice that the debt exploded after every tax cut. Reagan campaigned against the debt and said he would pay it down. George W. Bush inherited a budget surplus and said he would pay down the debt “more quickly than has ever been repaid by any nation at any time in history.” The chart shows what really happened. Donald Trump campaigned against the debt and said he would pay it off in 8 years. Instead the debt has increased by more than 2 trillion dollars in two years. There is a saying, “Fool me once, shame on you. Fool me twice, shame on me.” What is it to be fooled three times? The third chart shows that virtually all wage growth occurred when taxes were high. Anyone who says low taxes are good for workers is lying. The fourth chart shows that top incomes were suppressed when taxes were high and exploded after taxes were cut. The fifth chart is GDP per capita. If you don’t believe me look up the data yourself! I did, it’s easy.