Today Weekend Reader brings you The Crash of 2016: The Plot to Destroy America—and What We Can Do to Stop It by Thom Hartmann, a former psychotherapist, entrepreneur, political commentator, and host of his own weekday radio show, The Thom Hartmann Program. The Crash of 2016, scheduled for release on Tuesday, details why changes to the American economic system by Republican leaders—whom Hartmann refers to as Royalists—may have caused the U.S. to now find itself in the midst of an economic catastrophe. Hartmann remains optimistic that reforms are possible, but they need to be implemented now and implemented properly
You can purchase the book here.
In a 1966 article, TIME magazine looked ahead toward the future and what the rise of automation would mean for average working Americans.
It concluded, “By 2000, the machines will be producing so much that everyone in the U.S. will, in effect, be independently wealthy. With Government benefits, even nonworking families will have, by one estimate, an annual income of $30,000–$40,000. How to use leisure meaningfully will be a major problem.” And that was $30,000–$40,000 in 1966 dollars, which would be roughly $199,000 to $260,000 in 2010 dollars.
Ask anybody who was teenage or older in the 1960s, this was the big sales pitch for automation and the coming computer age. There was even a cartoon show about it—The Jetsons—and everybody looked forward to the day when increased productivity from robots, computers, and automation would translate into fewer hours worked, or more pay, or both, for every American worker.
And there was good logic behind the idea.
The premise was simple. With better technology, companies would become more efficient. They’d be able to make more things in less time. Revenues would skyrocket, and Americans would bring home higher and higher paychecks, all the while working less and less.
So by the year 2000, we would enter what was then referred to as “The Leisure Society.” Futurists speculated that the biggest problem facing America in that Jetsons future would be just how the heck everyone would use all their extra leisure time!
And, of course, there were also those who were worried about what kind of degeneracy would emerge when a nation has lots of money and lots of free time on its hands.
This didn’t happen. And it didn’t happen because Ronald Reagan stole the Leisure Society from us and he handed it over to the Economic Royalists.
Tax Cuts of Mass Destruction
In 1981, the Royalists went right to work taking down that first pillar on which FDR rebuilt the American middle class: progressive taxation.
Taking advantage of the oil-shock crisis, neoliberal shock troopers immediately ushered through a revolutionary change to the tax code with the Economic Recovery Tax Act of 1981.
The first major piece of legislation signed by Reagan, it slashed the top marginal income tax rate down from 70 to 50 percent, cutting estate taxes for wealthy businesses and slashing capital-gains and corporate-profit taxes.
Reagan succeeded, a few years later, in dropping the top income tax rate even lower, to 28 percent—where it hadn’t been since before the Great Depression. It was the second largest tax cut in history. And it was nearly identical to the largest tax cut ever, Treasury Secretary Andrew Mellon’s in the 1920s, the one that created the bubble known as the Roaring Twenties, which eventually burst in 1929.
The Great Forgetting had certainly arrived. The economic mistakes of the 1920s were coming back around. And, again, the influx of all this hot money in the market, coupled with a robust deregulation agenda through the 1980s and 1990s, would trigger a series of painful financial panics.
The reason why the Leisure Society could be imagined by TIME magazine is because, ever since 1900, working people’s wages tracked evenly with working people’s productivity.
So, as productivity continued to rise, which was likely, due to increasing automation and better technology, so, too, would everyone’s wages. And the glue holding this logic together was the current top marginal income tax rate.
In 1966, when the TIME article was written, the top marginal income tax rate was 70 percent. And what that effectively did was encourage CEOs to keep more money in their businesses, to invest in new technology, to pay their workers more, to hire new workers and expand.
After all, what’s the point of sucking millions and millions of dollars out of your business if it’s going to be taxed at 70 percent?
According to this line of reasoning, if businesses were to suddenly become way more profitable and efficient thanks to automation, then that money would flow throughout the business—raising everyone’s standard of living, increasing everyone’s leisure time.