Wealth and the American

Electorate in the Reagan Aftermath

By Kevin Phillips

Random House. 261 pp. $19.95

WELL-KNOWN people in our media society inevitably acquire Homeric epithets that become permanently attached to their names for purposes of easy identification when they're quoted on television and in the papers. Over the years Kevin Phillips has become "Conservative Political Analyst Kevin Phillips," so it's initially jarring to find him codifying and endorsing, in his new book, the critique from the left of the Reagan administration that was taking shape all through the '80s. Phillips repeatedly quotes, respectfully and approvingly, from the work of liberal intellectuals like Frank Levy, William Greider, Arthur Schlesinger Jr. and Lester Thurow; he takes his reading of the American past from the work of such left historians as Eric Foner, Matthew Josephson and Charles Beard. Has he gone over to the other side?

Actually Phillips, though his party affiliation is Republican, has always probably belonged in that square of the American ideological matrix reserved for people who are culturally conservative and economically liberal or agnostic. The best-known of his previous books, The Emerging Republican Majority, accurately predicted that the "social issues" were conservatism's ticket to the stars in the '70s and '80s. Most of The Politics of Rich and Poor is written in the neutral voice of a professional political dopester, but in a few places Phillips displays his own feelings just enough to make it clear that he was personally outraged by Reaganism, because it "accelerated America's relative economic decline beyond what would have occurred in a less avaricious environment."

Phillips makes a two-step argument in The Politics of Rich and Poor. Step one is demonstrating that during the '80s, the rich (or, to use Phillips's catchy phrase, "Upper America") got much, much richer and the poor got poorer. Phillips has not done his own primary research, but he has marshaled enough statistics and studies to prove the point convincingly. The best-off fifth of the country dramatically increased its share of the national income and wealth. The pay ratio between the chairman of the board and the average factory worker went from 29 to 1 in 1979 to 93 to 1 in 1988. Vast fortunes were made on Wall Street. The most affluent venues on the east and west coasts boomed. Big tycoons became celebrities.

All the economic policies of the Reagan administration, as Phillips presents them, are best understood simply as income transfers to the well-to-do. The top income tax rate went from 70 percent when Reagan moved into the White house to 28 percent when he left it. Meanwhile, the poor saw their total tax bill go up because of increases in the Social Security tax (that's the mysterious F.I.C.A. on your paycheck) and excise taxes. The substantial increase in the federal deficit was essentially a subsidy for the wealthy buyers of Treasury bills, who were ensured that the government would have to spend its monies paying them interest instead of providing services to poor people. The decline in the inflation rate helped bond-holders and other fat cats who prosper through money-lending. Phillips sees the substantive arguments made for all these policies at the time -- for example, in the writing of George Gilder and Jude Wanniski -- as having been tactically important to their enactment, but otherwise without merit. He never mentions that the 1986 tax reform law eliminated a lot of tax shelters (which was the essence of its appeal to liberals), presumably because he sees the law's only real significance as having been that it gave the rich their second big income-tax-rate cut of the decade.

Step two, for Phillips, is predicting that the economic changes of the '80s will produce a political counterreaction -- a resurgence of economic populism based on resentment of the rich combined with concern over the decline of the United States relative to Japan. Here he is on shakier ground, because there isn't any way for him to prove his point directly. Phillips detects a few economic-populist stirrings in the politics of the late '80s -- the brief surge of support for Richard Gephardt's 1988 presidential primary campaign, some of the results of the 1986 Senate races, polls showing support for higher taxes on the rich -- but President Bush's big win in 1988 obviously doesn't provide him with much support.

Instead of attempting to show conclusively that the populist revival is already happening, Phillips traffics heavily in Arthur Schlesinger's cyclical theory of American history, in which liberalism is destined to triumph at regular 30-year intervals. The '80s, Phillips says, were quite similar economically and politically to the late 19th-century Gilded Age and to the Roaring Twenties. During both of theose periods, there was an economic boom that primarily benefited the rich, particularly manipulative financiers, and the White House was ruled by laissez-faire conservatives who cut tax rates. Both times the excesses of unbridled, exploitative capitalism led to a revolt among the people left behind: in the first case populism, and in the second the New Deal. That it happened before means it will happen again.

It's a fascinating proposition, and plausible, even if it necessarily must be made to rest on a suspiciously ironclad form of historical determinism. (Remember the dictum, disproved by Reagan, that every president elected in a year ending in zero will die in office? The "proof" for Phillips's return of populism is uncomfortably similar in style.) But the temptation to try to out-theorize the great theorizer Phillips is irresistible.

The New Deal came in response to a severe economic crisis of a kind we're unlikely to see again soon, and anyway populist resentment was only a strain in Franklin Roosevelt's presidency, not the dominant theme. In the case of the 19th-century populists, their political base was a group that has since shrunk to near-insignificance -- rural and small-town farmers and independent artisans, running family businesses on borrowed money and living in a state of total alienation from the national culture. Anyway, William Jennings Bryan, the populists' avatar, may have been nominated for president three times, but he lost three times too. The political tendency that profited most from the reaction against the excesses of the Gilded Age was Progressivism, which was bipartisan, patrician, Eastern and not at all uncongenial to old money -- somewhat like the Bush administration, as a matter of fact.

Also, populism in practice has never been purely economic; there has always been a nativist or racist strain running in and out of it. The redirection of lower-income voters' attentions from economic issues to racial ones is an old story in the South, presented most impeccably in C. Vann Woodward's biography of Tom Watson and much more bluntly by Lyndon Johnson in the 1964 campaign speech in which he said of southern voters, ". . . they haven't heard a Democratic speech in 30 years. All they ever hear at election time is nigger, nigger, nigger!" During the two previous capitalist heydays Phillips discusses, African-Americans lived overwhelmingly in the South; since then, the great migration to the cities of the North and West has taken place, so that it is now possible for economic issues to be obscured in presidential campaigns by exactly the means Johnson described. Some of that went on in 1988.

Still, Phillips is right that the Republican coalition is "rooted mainly in the distant psychologies of the 1960s and 1970s," such as the incredibly resilient idea that liberals are rich snobs who are against hard work, public safety and patriotism. At the very least, the Republicans surely are not going to be able to run against George McGovern every four years for very much longer. That Phillips himself now appears to resent economic elitists more than cultural ones should count as some sort of milestone. He has produced a consistently stimulating piece of work, whose future life is likely to be governed by the Jeane Dixon Rule, which is named for another leading Washington seer. If he turns out to have been wrong, nobody will remember; if he is right, then, as author of a book-length prophecy whose message is original and memorable, he'll look like a genius. Nicholas Lemann is a national correspondent for The Atlantic.