Boiling Point: Democrats, Republicans, and the Decline of Middle-Class Prosperity. - book reviews

National Review, April 12, 1993 by Richard Vigilante

Boiling Point: Democrats, Republicans, and the Decline of Middle-Class Prosperity, by Kevin Phillips (Random House, 336 pp., $23)

When Kevin Phillips's editor at Random House, Jason Epstein, told me about this book two years ago, he was unable to contain his glee that the country's most famous Republican political theorist was finally really, really going to get Reagan. Phillips would show how the Gipper had betrayed his own populist agenda, selling out middle- and working-class Reagan Democrats by selling the country to the rich.

Epstein's excitement seems to have gotten the better of him. He has allowed Phillips to release a book so thin and self-contradictory in argument, so pedestrian in its analysis, so mindlessly dependent on obviously suspect factoids, dubious sources, incoherent compilations of anecdotes, and loosely strung together quotations from special pleaders masquerading as experts, and so ignorant of the relevant scholarship, that it is difficult to see how Phillips's reputation can survive. He has, I suppose, one hope: despite its relentless refusal to rise above the intellectual level of "think" pieces from the feature section of a small-city newspaper, the book is almost impossible to read.

Phillips starts in the right place: The American middle and working classes, especially families with children, are unhappy; their finances, quality of life, and power in society are in decline. This unhappiness will be the central issue of American politics for the foreseeable future.

Phillips's mission, however, is to trivialize this crisis by fitting it into a theory of political cycles characterized by recurrent capitalist "heydays" (e.g., the Twenties, the Eighties) during which Republican regimes try to boost economic growth by redistributing income from the middle class to the rich, but which are ultimately disastrous because the nation depends on a healthy middle class.

In other words, Ronnie did it. His main weapon was a reversal in tax policy by which middle-income families, promised a tax cut, actually paid more, while the rich paid lower rates. Phillips is particularly offended by the latter change; for him, flattening the tax code so that the rich pay much the same rates as everyone else is clearly the greater offense. This would make some sense if he believed that cutting rates for the rich caused high taxes on the middle class. But Phillips concedes that upper-bracket tax reductions produced a net revenue increase (thus financing, as Lawrence Lindsey has shown, Reagan's rate cuts for the middle class). That makes moot Phillips's many, many pages of agonizing about Reagan's sweet deal for the rich: if Reagan's tax cuts for the rich did not cause the present plight of the middle class, reversing those cuts cannot cure it.

Phillips does spend some time on the absolute rise in the middle-class tax burden, which has been devastating. He points out that in 2948 federal taxes of all sorts were insignificant for an average American family. The dependent exemption of that era was worth over $7,000 in today's terms. If the same rules applied today, a mortgage-paying family of husband, nonworking wife, and two children might pay no federal income taxes on the first $30,000 or so of family income.

But because he desperately wants to argue that Reagan was particularly hard on the middle class, he gets Eighties tax policy exactly backward. He downplays Reagan's middle-class income-tax cuts, and instead pretends to believe that the core of Reagan's policy was the rises in Social Security and state and local taxes that largely offset the income-tax cuts. This is ridiculous. Reagan failed to reverse the trend of rising Social Security taxes. But he did not significantly accelerate it (though Phillips at one point implies he did, by failing to specify how much of the increases under Reagan had been scheduled by Carter).

The real story of the 1980s is that Reagan was the only President in the postwar era to give the middle class significant tax relief. Measured against what would have happened to middle-class tax rates had Reagan not intervened (a chart one never sees), his rate cuts of just under 25 per cent, the more than doubling of the dependent exemption, the repeal of the marriage penalty, and above all the indexing of tax rates to halt bracket creep, loom as a stunning if temporary reversal of the post-1948 upward trend.

Although the decline or stagnation in family income is in some sense the subject of this book, Phillips has nothing edifying to say about it. He recognizes, as does everyone, that the problem started in the early 1970s at the latest. Phillips cannot hide the fact that Reagan, through the tax cuts and the resulting boom, did temporarily raise middle-class income in the mid 1980s, thus laying even firmer claim to the distinction of being the only persuasively pro-middle-class President in recent years.

Still, Phillips does his best to blame Reagan. He makes much of statistics showing the rising share of national income earned by the rich under Reagan, but downplays the booby traps concealed by them: e.g., if a rich retiree under a 70 per cent tax rate invests everything in tax-free municipal bonds, his reported income will be zero even if his actual income is $1 million; if a tax-rate cut prompts him to move into taxable investments, his recorded "share" of national income will jump from zero to over $1 million. Statistical faux pas aside, merely showing how well the rich are doing, once again, is of little help in analyzing the problems of the middle class. The best Phillips can do is a pastiche of nightly-news insights on alleged side effects of the Reagan boom--a blizzard of anecdotes in support of the obsolete notion of permanent American industrial decline, which, with his perfect instinct for the hackneyed pseudo-insight, he blames on the Reagan-era financial industry's obsession with paper fortunes.