Reagan: The great American Socialist
Socialism has been much in the news for some months. Recently, some
GOP stalwarts charged President Obama with preaching the heresy. John
Boehner, the House minority leader, characterized Obama’s stimulus
package as, “one big down payment on a new American socialist
“Socialism” is a pejorative term in American politics and needs to be
carefully examined. It usually refers to increased government control
over the economy, or policies that promote the redistribution of wealth.
There is no doubt that President Obama’s economic measures, passed
and proposed, will raise tax rates on the richest Americans to pay for
increased government funding of health care, green energy and education.
So the new president is indeed a redistributionist, but so was Ronald
Reagan, except that Obama’s plans will transfer wealth from the rich to
the poor, whereas Reagan’s bills transferred wealth from the poor and
the middle class to the opulent.
In fact, Obama’s measures are puny, whereas Reagan’s were massive. If
the Democrat is a “small” socialist, Reagan was the Great American
Let’s go back to the early 1980’s. In 1981, Reagan signed a law that
sharply reduced the income tax for the wealthiest Americans and
The president asserted his program would create jobs, purge inflation
and, get this, trim the budget deficit.
However, following the tax cut, the deficit soared from 2.5 percent
of GDP to over 6 percent, alarming financial markets, sending interest
rates sky high, and culminating in the worst recession since the 1930’s.
Soon the president realized he needed new revenues to trim the
deficit, bring down interest rates and improve his chances for
reelection. He would not rescind the income tax cut, but other taxes
In 1982, taxes were raised on gasoline and cigarettes, but the
deficit hardly budged. In 1983, the president signed the biggest tax
rise on payrolls, promising to create a surplus in the Social Security
system, while knowing all along that the new revenue would be used to
finance the deficit.
The retirement system was looted from the first day the Social
Security surplus came into being, because the legislation itself gave
the president a free hand to spend the surplus in any way he liked.
Thus began a massive transfer of wealth from the poor and the middle
class, especially the self-employed small businessman, to the wealthy.
The self-employment tax jumped as much as 66 percent.
In 1986, Reagan slashed the top tax rate further. His
redistributionist obsession led to a perversity in the law. The
wealthiest faced a 28 percent tax rate, while those with lower incomes
faced a 33 percent rate; in addition, the bottom rate climbed from 11
percent to 15 percent.
For the first time in history, the top rate fell and the bottom rate
rose simultaneously. Even unemployment compensation was not spared. The
jobless had to pay income tax on their benefits.
A year later, the man who would not spare unemployment compensation
from taxation called for a cut in the capital gains tax.
Thus, Reagan was a staunch socialist, totally committed to his cause
of wealth redistribution towards the affluent.How much wealth transfer
has occurred through Reagan’s policies? At least $3 trillion.
The Social Security hike generated over $2 trillion in surplus
between 1984 and 2007, and if it had been properly invested, say, in AAA
corporate bonds it could have earned another trillion by now.
At present, the fund is empty, because it has been used up to finance
the federal deficits resulting from frequent cuts in income tax rates.
If this is not redistribution of wealth from the poor to the rich, what
Thus, Reagan was the first Republican socialist - and a great one,
because his wealth transfer occurred on a massive scale. His
accomplishment dwarfs even FDR’s, and if today the small businessman
suffers a crippling tax burden, he must thank Reagan the
However, FDR took pains to help the poor, while Reagan took pains to
help the wealthiest like himself.
Reagan’s measures were similar to those that the Republicans adopted
during the 1920s, which were followed by the catastrophic depression.
More recently, such policies were mimicked by President George W. Bush
and they are about to plunge the world into a depression as well.
Ironically, the Reagan-style socialism or wealth redistribution is
about to destroy monopoly capitalism, the very system that he wanted to
preserve and enrich.
Wake up America and elect leaders with a heart - not those who would
tax your unemployment benefits and cut the capital gains tax.
The writer is a Professor of Economics at Southern Methodist
University, Dallas, is the author of five international best sellers. He
was the chairperson of his department from 1977 to 1980. This article is
based on Batra’s two books, “The New Golden Age” and “Greenspan’s
Fraud.” His web site is Ravibatra.com.