GREED IS NOT ENOUGH: Reaganomics

CUNY economist Lekachman adroitly lays out--and analyzes--the essentials of ""Reaganomics"": a blend of ""supply-side"" stimulus, ""monetarism,"" and return to the gold standard. Supply-side is a new-fangled word for an old idea; namely, that by stimulating investment through low taxes, the economy is made more productive. The underlying psychological assumption doesn't hold, however, since there is no guarantee that the increased capital will be reinvested, much less reinvested productively. As for monetarism, its central tenet--that inflation is a function of too much money--grates against the supply-siders' view of the world, since they want to leave the value of money to the market. That's where the gold standard comes in; its advocates claim that by returning to it, the value of money will be held in check through the movement from gold to money and back, depending on the relative values of the two. Aside from the fact that these elements of Reagenomics don't mesh, there are institutional problems as well. Inflation is bad for banks; if they lend at 20 percent in a period of 17 percent inflation, while themselves borrowing from the Federal Reserve Bank at 19 percent, they earn very little. Not surprisingly, the monetarists speak for the financial interests. But inflation is not necessarily bad for everyone--including defense contractors and others who are able to push their prices up along with the inflation rate, and who do not want the money supply tightened. So the result is a hodgepodge, but one that benefits the rich in the short run. As Lekachman shows, you have to be making over $100,000 before Reagan's income tax cut will do you any appreciable good; that's 0.7 percent of the population. ""This amiable gentleman's administration has been engaged in a massive redistribution of wealth and power for which the closest precedent is Franklin Roosevelt's New Deal, with the trifling difference that FDR sought to alleviate poverty and Ronald Reagan enthusiastically enriches further the already obscenely rich."" For the future, Lekachman sees three basic possibilities: extreme repression to hold together an irrational economy based on sharp inequalities; corporate planning along the lines suggested by Felix Rohatyn; or--his preference--some kind of democratic planning through the medium of popular control over investment. The best analysis available--short, witty, and accessible.