The US has been steadily declining since Regan took office and instituted his insane supply-side economic theory espoused by now wholly discredited economists like Milton Friedmann and Arthur Laffer. He drastically cut marginal tax rates on corporations and the rich, assuming this would boost the economy. The reverse happened and the government experienced huge revenue shortfalls. So bad, in fact, that they couldn't even pay their social security obligations. Regan was forced to institute the biggest tax increase in US history and just reamed the middle class with FICA and SS tax increases. In order to cover up just how badly his economic policies were failing, he went on an insane borrowing binge and ran up a debt greater than all previous US presidents combined.
To make matters worse, he opened the flood gates to foreign ownership of US assets in order to secure said loans from places like Japan and Saudi Arabia. Money and profits that used to stay in the US and get re-invested in the US economy and infrastructure instead went overseas and built up the economies and infrastructure of Japan and the house of Saud. The US began to lose its manufacturing base and, as such, the only real engine of wealth generation. Debt and deficits climbed as traditional industries closed or relocated. The US went from being the world's leading creditor nation and leading manufacturer of finished goods to becoming the world's number one debtor nation and importer of finished goods. It also went from being an importer of raw materials to being an exporter.
The middle class got screwed as the tax burden formerly paid by corporations and the richest 1% got shifted onto their backs. Pay and benefits shrunk and tax burden went up.
Bush Sr, tried to claw back some of the excesses but refused to raise taxes on corporations. Instead, he cranked up taxes on the middle class again and lost the election to Clinton.
Clinton ran on a platform of trade unionism, but turned his back on them the moment he got elected and he took the idiotic "Free trade" theories of Friedman and signed onto NAFTA, GATT, and later the WTO. Ross Perot warned that if Clinton went ahead and signed onto NAFTA, you'd hear a giant sucking sound as jobs left the US in favour of 3rd world hellholes and he was exactly right. Clinton's policies gutted what was left of the manufacturing base in the US. Corporations became transnational and the US could no longer effectively levy taxes as they'd just offshore and, thanks to "free trade", enjoy the benefits of the US market without having to incur any of the costs of the upkeep that market required. Massive corporate mergers took place, the big fish ate the little ones, and we were left at the mercies of virtual monopolies in most strategic sectors.
Bush, Jr borrowed like a drunken sailor and drove debt to insane levels, selling off mroe than 50% of US holding into foreign ownership, chiefly China, Japan, and Saudi Arabia. At the same time, he cut regulations and oversight on banks, investment houses, the energy market, and pretty much anything else Cheney told him too. The result? Massive corporate fraud, unregulated and unmonitored leveraging, and the collapse of the whole house of cards. The ENRON fiasco should've served as a warning, but it was quickly forgotten about after Sept.11th.
The US no longer has any sort of meaningful manufacturing base and virtually the entire economy is based simply on arbitrage, which is creating money by manipulating markets. Nothing is ever created in such a system, so no real wealth is ever generated.
Obama's refusal to do anything regarding systemic change means we're doomed to further "corrections" and contractions. We need another set of Roosevelts to bust the monopolies, re-regulate the markets, make the borders less porous, and return manufacturing to the US. With the likes of Timmy Geitner running the show, that won't happen. We'll just continue backsliding into a society more like that of Charles Dickens' time, with a few super rich at the top, a small middle class, and a huge under class of the working poor.
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