The Great Money Binge: Spending Our Way to Socialism
By George Melloan
(Threshold Editions, 286 pages, $26)
It’s Not as Bad as You Think: Why Capitalism Trumps Fear and the Economy Will Thrive
By Brian S. Wesbury
(Wiley, 210 page, $24.95)
Long ago but not so far away — in fact, at the old lounge bar of the National Press Club right here in Washington in the early 1970s — I was one of the first of what would become thousands of people to be treated, voluntarily or otherwise, to a cocktail napkin diagram of the Laffer Curve by the late Jude Wanniski. Let’s just say that the experience didn’t leave me breathless. For those of you with short memories, Jude was the Wall Street Journal editorial writer who became a one-man cheerleading team for supply-side economics. As such, he deserves both great credit for popularizing a valid concept in general and lesser blame for overemphasizing the Laffer Curve in particular, a somewhat simplistic device that, in the words of author George Melloan, “appealed to the something-for-nothing instincts of politicians.”
The adverse effect that emphasizing the Laffer Curve had was fostering the notion that the right kind of tax cuts would boost tax revenues which — in the hands of the wrong sort of politicians — could be used to sustain or expand big government. Which was why, as Mr. Melloan points out, some supply-siders “felt that the curve distracted from the primary objective” of reducing congressional access to tax money and curbing “the always voracious spending appetite of the legislative body.”
Their fears would prove valid during George W. Bush’s administration because “he put up little resistance to the spending appetite of his own party and sometimes even encouraged it.” The result was as inevitable as it was obvious, the ultimate economic morality play acted out on a political stage:
The lure of easy money provided so generously by the Fed was too much for the Republicans to resist, and they laid on a feast for their constituents through the use of earmarks in appropriations bills directing spending to specific uses. They paid for their profligacy in the 2006 congressional elections when their conservative base deserted them and they lost both houses of Congress to the Democrats.
The fact that throwing one set of rascals out meant voting an even worse set of rascals in was lost on the electorate at the time and again two years later, when it did to the White House what it had already done to the Congress. After running as a post-partisan moderate, Barack Obama quickly revealed himself as a knee-jerk lefty, devoting the first year of his presidency to pushing a massive extension of the welfare state through socialized health care. The good news is that, just as ailing free markets tend to cure themselves when allowed to do so, the political marketplace seems to be heading toward a major midterm correction. The bad news is that it is too early to tell whether the GOP has well and truly learned its lesson for good.
Reading the two books reviewed here should help to keep the Republicans thinking straight. While their titles seem to head in opposite directions, they each contain half of the same message. Simply stated, it is this: the private sector is the one that generates most of our wealth and progress, and the biggest threat to the private sector is the public sector’s insatiable appetite for money and power. Both authors share much solid common ground. First and foremost, both George Melloan (a distinguished journalist with a 54-year career at the Wall Street Journal) and Brian Wesbury (a prominent economic forecaster and economics editor for The American Spectator) understand and appreciate the American system of capitalism. And they both recognize it for what it is — the most massive, magnificent economic success story in human history.
While Mr. Melloan tends to emphasize the threats to that system, Mr. Wesbury stresses the system’s strengths, especially its remarkable recuperative powers. Both men make important points and, ultimately, both authors hold out hope. After a grim recital of all the political and economic threats facing the system, Mr. Melloan concludes on a conditionally hopeful note:
The American political system constantly springs surprises, and sometimes they come when we most need them. The American private sector, with all its hard workers, its entrepreneurs, its talented research scientists, its skilled professionals, its engineers, and its sober, realistic managers of profit-making enterprises, has standards of its own and they are in conflict with the ruling party. Americans who believe in individual enterprise, the sanctity of contracts, the protection of private property, and all those other values that are part of what David Brooks called the nation’s DNA are looking at the direction government is heading and, for the most part, they are not happy. Seeing the problem clearly will be the first step toward restoring the individuality and self-reliance that built a great nation. One further point: Inflation, when it comes as the result of today’s irresponsible government spending, will be a great political leveler. It is a tax no one can escape.
If Mr. Melloan sometimes sounds like an economic Cassandra, there are moments when Mr. Wesbury sounds like an economic Pollyanna. But after weighing the evidence and arguments he ably lays out in It’s Not as Bad as You Think, this reviewer was inclined to agree with the title, and with Mr. Wesbury’s closing assertion that, “the United States has created so much wealth and built such a robust system that taking it down is much more difficult than anyone thinks. In the end, the economy is really built on a rock.”
As a man who has been repeatedly ranked as a top economic forecaster, this guy should know what he’s talking about.