Opinion | The Real Legacy of the 1970s - The New York Times - 0 views
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economics politics culture inflation 1970s supply-side deregulation taxes

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In most histories of how Americans became so polarized, the Great Inflation of the 1970s is given short shrift
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nflation changed how Americans thought about their economic relationships to their fellow citizens — which is to say, inflation and its associated economic traumas changed who we were as a people.
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It also called into question the economic assumptions that had guided the country since World War II, opening the door for new assumptions that have governed us ever since.
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Slowly, though, inflation entered the picture. It hit 5.7 percent in 1970, then 11 percent in 1974. Such sustained inflation was something that had never happened in stable postwar America. And it was punishing. For a family of modest means, a trip to the supermarket was now a walk over hot coals.
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the average family of 1936 was near poor. Everyone was in it together, and if Bill couldn’t find work, his neighbor would give him a head of cabbage, a slab of pork belly.
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But the Great Inflation, as the author Joe Nocera has noted, made most people feel they had to look out for themselves
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Throw in wage stagnation, which began in the early ’70s, and deindustrialization of the great cities of the North
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Inflation also produced the manic search for “yield” — it was no longer enough to save money; your money had to make money, turning every wage earner into a player in market rapaciousness
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The Great Inflation was an inflection point that changed us for the worse. This moment can be another such point, but one that will change us for the better.
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Then along came Ronald Reagan. The great secret to his success was not his uncomplicated optimism or his instinct for seizing a moment. It was that he freed people of the responsibility of introspection, released them from the guilt in which liberalism seemed to want to make them wallow.
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Americans became a more acquisitive — bluntly, a more selfish — people. The second change was far more profound.
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John Maynard Keynes. His “demand side” theories — increase demand via public investment, even if it meant running a short-term deficit — guided the New Deal, the financing of the war and pretty much all policy thinking thereafter. And not just among Democrats: Dwight Eisenhower and Richard Nixon were Keynesians.
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There had been a group of economists, mostly at the University of Chicago and led by Milton Friedman, who dissented from Keynes. They argued against government intervention and for lower taxes and less regulation. As Keynesian principles promoted demand side, their theories promoted the opposite: supply side.
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Inflation was Keynesianism’s Achilles’ heel, and the supply-siders aimed their arrow right at it. Reagan cut taxes significantly. Inflation ended (which was really the work of Paul Volcker, the chairman of the Federal Reserve). The economy boomed. Economic debate changed; even the way economics was taught changed.
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walk down a street and ask 20 people a few questions about economic policy — I bet most will say that taxes must be kept low, even on rich people, and that we should let the market, not the government, decide on investments. Point to the hospital up the street and tell them that it wouldn’t even be there without the millions in federal dollars of various kinds it takes in every year, and they’ll mumble and shrug.
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we have a long way to go. Dislodging 40-year-old assumptions is a huge job. The Democrats, for starters, have to develop and defend a plausible alternative theory of growth
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a 2006 Department of Labor study pegged the average household income of 1934-36 at $1,524. Adjust for inflation to 2018, that’s about $28,000, while the official poverty level for a family of four was $25,100
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they can move moderate and maybe even conservative public opinion in a way that Democratic politicians, civic leaders and celebrities cannot.
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A place of more and more tax cuts for them, where states keep slashing their higher-education spending and tuitions keep skyrocketing; where the best job opportunity in vast stretches of America is selling opioids; where many young people no longer believe in capitalism and record numbers of them would leave this country if they could?
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Or a country more like the one they and their parents grew up in, where we invested in ourselves and where work produced a fair and livable wage?