Favoring the rich -- without aiding the economy
In a recent press conference President Reagan made a revealing comparison between today's recession and the hard times of the '30s. Denying that the Miami riots could be attributed in any way to the worsening economic situation of unemployed blacks, he remarked: ''In the Great Depression nothing like that ever took place. When the situation was much worse and there was no unemployment insurance . . . not even any welfare program.''
Most observers have stressed the similarities - chilling in some instances - between current developments and those of the earlier years. The rise in stock prices has not been as enjoyable as it might have been because it reminds people of a similar rise before the 1929 crash. Calls for more effort by private charities have produced more soup kitchens and today's lines of waiting customers look just as dejected and humiliated as those in pictures of breadlines from the '30s.
Then, and now, gloom in factory towns and farmlands led to community uprisings to prevent mortgage foreclosures. For state governments in both periods declining revenues accompany increasing demands for emergency relief. And some of the comments from today's White House echo the famous slogan, ''Prosperity is just around the corner.''
But all these parallels omit the crucial difference between the two periods, as did the callousness of the President's statement. A few people in the '80s are better off than ever: this depression has been highly selective. The stagnant '30s supplied hardship indiscriminately: rich people lost their homes along with the poor, bank vice-presidents and factory hands stood side by side in the lines of unemployed looking for any kind of work. Bankruptcies, shutdowns , foreclosures, hunger and deprivation appeared in every community, whether wealthy or middle-class or slum. No such universal experience exists today.
Today's divided economy results, of course, from the deliberate policy followed by the administration since 1980. No economic rationale supports this policy, which is simply to redistribute income in favor of the rich. This primary goal has been successfully masked by all sorts of pseudo-economic reasoning: supply-siders, monetarists, crusaders for reindustrialization, and proponents of deregulation have attempted to design economic policy. But they have only diverted attention from the actual accomplishments of the administration, which have been considerable. The distribution of income has significantly changed.
Tax cuts already enacted will add almost $300 billion to total income over the next three years and most of it will go to people in the top quarter of the income distribution. This year's tax savings average over $2,000 for those with incomes above $50,000 and about $10 for those with incomes below $4,000. The share of total income received by families with incomes above $50,000 will increase; the amount left for everyone else, receiving less than $50,000, will be smaller.
Nor is the divisiveness of such a deliberate policy in any way secret. In the most depressed community, and graphically displayed in the media, evidence abounds of how well off some people are. Sales of expensive jewelry, of luxury cars and furs, of spectacular cruises, safaris and vacation jaunts continue to rise amid the apathy and decline registered by most retailers. Layoffs and wage cuts are not matched by a decline in executive raises from 10 percent to 6 percent, especially when top management salaries average over $400,000.
Reagan's coalition originally included millions of working Americans who believed that welfare supported unnecessarily idle and undeserving beneficiaries. Ironically, new definitions of the ''truly needy'' hurt many of these same Americans who themselves are idle now, as prolonged unem-ployment drags on. The reductions in so-called social programs have accentuated the transfer of incomes from poor and middle-class people to the rich. Only about $ 30 billion of money transfers have been cut, and perhaps an additional $35 billion in noncash benefits. But federal transfers provide more than half the income received by those in the lowest 20 percent of the income distribution, and only 3 percent for the richest fifth. So the cutbacks have severely worsened the gap between rich and poor.
The budget proposals for fiscal 1984 exacerbate the situation. Reagan would economize by reducing payments to retirees and government workers, few of whom reach high-income brackets, by insisting on cutting taxes as planned in July 1983 to benefit the wealthy.
The deliberate policy of creating gains for the rich at the expense of the poor might be justified if it promoted an improved economy overall. But because symptoms of decay and declining growth abound, the deepening gulf between those who benefit and those who lose promotes social unrest of all kinds. In localities already stressed by racial or cultural frictions the worsening economy can very well fuel riots or dissension. But the crucial indicator of the divisiveness that now characterizes the country lies in Congress, which in its helplessness mirrors the fractioning of public opinion.
Nobody wants to focus on economic policy, and even using economic analysis to consider other issues has somehow become suspect. Our national defense, it is argued, must transcend questions of cost because the survival of the free world is at stake. Social security cannot be viewed in terms of deficits or transfer payments because it is a humanitarian question, or else one of redeeming the national honor by keeping promises made to the elderly. Agricultural price supports concern the existence of the family farm and of providing food for millions, lofty values that escape dollar-and-cents calculations. Nor can economics say anything useful about health costs since after all one cannot measure the value of a human life. And so bitter arguments among special interests occupy the time and energies that should be given to reasoned debate or careful design of a national economic policy.
Reaganomics has added another source of dissension in a troubled society. The conflict between haves and have-nots has not yet erupted on a major scale. But it has led to a paralysis in economic policymaking that probably threatens more danger than local riots or violence.