The American Spectator : Bends in the Curve

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Bends in the Curve

By Aram Bakshian, Jr. from the May 2010 issue

Reading the two books reviewed here should help to keep the Republicans thinking straight.

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.

About the Author

Aram Bakshian, Jr. served as an aide to Presidents Nixon, Ford, and Reagan and writes frequently on politics, history, gastronomy, and the arts.

Letter to the Editor View all comments (16) | Leave a comment

Kitty| 5.25.10 @ 6:40AM

'...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." '

From your mouth to God's ear.
...

tacho universal| 5.25.10 @ 8:58PM

Just want to say your article is striking. The clearness in your post is simply spectacular and i can take for granted you are an expert on this field.

Dan Hirsch| 5.25.10 @ 8:31AM

Too big to fail?

If a small company fails, and because of its default, pulls a bank down;

then the failure of the company and the bank pull a city down;

then the failure of the company, the bank, and the city pull a county down;

then the failure of the company, the bank, the city, and the county pull a state down;

Then, would not the failure of the company, the city, the county, and the state pull a nation down?

THERE IS NO SUCH THING AS TOO BIG TO FAIL, IF FAILURE IS PREVENTED, IT JUST GROWS LARGER UNTIL IT HAPPENS.

Cf. Chuck Darwin

There IS no such thing as a free lunch, EVER.

JimH| 5.25.10 @ 8:44AM

In a truly free economy if a business fails the assets are aquired by others who presumably will use them more efficiently.

Ken (Old Texican)| 5.25.10 @ 8:48AM

Aram,
Our economy is built on the blood sweat and tears of those of us who have built it and sustained it too.

The thing that truly frightens me is our younger folks entering adulthood may never have the opportunity to experience anthing other than gubmint "soup lines". Those are a soul-killing experience.
Those youngsters may never get to see first hand the alternatives of true independence and earned liberty. They are in danger of slipping quietly from mommie's basement...to the government's basement......without a clue....but carrying a vote.

Purpleguy| 5.25.10 @ 10:13PM

Tell that to the graduates of 2010 ... they'll be lucky if they find a job, and you talk as if we were in the 1950's. If they are able to make it on their own, it will be by their independence and pursuit of liberty - other than liberty from their boss, of course. The lessons are learned in every generation, just that the teaching tools change over time.

Tim*| 5.25.10 @ 11:14PM

Obama ,The Economic Gravedigger .
" The net job loss since the start of January 2009 would be 1.8 million, the sum of 4.7 million lost jobs in 2009 and 2.9 million potential jobs created in 2010.

At 9.9 percent, unemployment is higher than in any of the Bush years (when unemployment peaked at 7.2 percent), even after Obama’s $787 billion stimulus program and other large spending bills. The administration’s 2011 budget forecasts that unemployment will stay near double-digit levels for the next two years, because labor-force participation is at 1986 levels; almost 2 million people are still on the sidelines waiting to come back into the labor force, raising the unemployment rate when they do. According to the Bureau of Labor Statistics, 46 percent of the unemployed have now been out of work for 6 months or longer — the highest since the Bureau of Labor Statistics started keeping records in 1948. "

Petronius| 5.25.10 @ 9:53AM

Nothing scares politicians more than the prospect of more people having accumulated wealth than not. For then the populace would truly exert real control.
So the RINO's willingly helped the liberals kill all economic growth. The statists who hold us in thrall want us to believe that success and prosperity will only be attainable through them. Well it is written in the sagas: "if it be so ordained, another way will be found." I have two words for the taxaholics and control freaks who sit on that hill in D.C. looking down their despotic snoots upon the rest of us: black market.

Spike| 5.25.10 @ 11:15AM

"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."

That rock, is the Constitution of the United States, and our system of government. Remove that system, and the economy becomes the sim-world of Utopia, for the master planner. Both writers, I presume, assume that the "rock" is everlasting. It is not. Freedom and Liberty is but one generation from extinction. Are we in the midst of that generation?

Never let a crisis go to waste. And, if necessary, create your own crisis.

Purpleguy| 5.25.10 @ 10:22PM

President Obama, with some help from President Bush before him, have saved capitalism for this country. Y'all are nuts to think he is promoting socialism. You do know the progressive left is not all that thrilled with President Obama - you do know that, right? He has NOT been far left, despite all your howling. He was for offshore drilling, no public option, ramping up Afghanistan, and so far no Comprehensive Immigration Reform, no repeal of Dont ask Dont tell, and Elena Kagan. None of those make the left happy.

Tim*| 5.26.10 @ 12:52AM

GM , Crysler , FNMA , FHLMC , A.I.G. Bailouts , Obama Stimulus Ain't Free Market Capitalism .

The Health Scam , “Obama did fight for the public option – and he lost.”

Illegal Aliens Amnesty
Cap & Trade

Card Check

Gays In Military

# Voted against banning partial birth abortion. (Oct 2007)
# Rejects free market vision of government. (Oct 2007)
Vouchers don’t solve the problems of our schools. (Oct 2008)
FactCheck: Yes, Obama endorsed Illinois handgun ban. (Apr 2008)
Willing to meet with Fidel Castro, Kim Jung Il & Hugo Chavez. (Nov 2007)

Marc Jeric| 5.25.10 @ 6:20PM

American economy based of private enterprise is a true marvel of resiliency and success. But it is being cut to death by successive attacks that become more serious as the time goes by. It has survived Wilson, Roosevelt, Carter, Clinton...but Abu Hussein al-Nairobi is a different enemy. He is a true revolutionary marxist in quest for permanent power via massive nationalizations: automobile, banks, mortgage, health, insurance, and coming up shortly with oil & gas, coal, electricity companies nationalizations. Unionization of all engineering and construction companies will come up after these. Newspapers and television are largely in communist hands, and he is working to control talk radio and Fox and wall Street Journal. Amnesty of 15 million illegal Mexican Indians will tip the people on the dole toward the permanent voting majority. After a while we will have mock elections with only one slate on the ballot - just like in that communist hell from which I escaped 57 years ago.

Purpleguy| 5.25.10 @ 10:25PM

Fearmongering you could have left behind 57 years ago.

Nick| 5.25.10 @ 11:30PM

Yes, don't learn anything from Mr. Jeric, who excaped from a communist/socialist hell-hole, PurpleJackass.

Just keep on being the Useful Idiot which you excel at so well.

DatsunMark| 5.25.10 @ 9:02PM

As "The Who" said in Wont Get Fooled Again: "meet the new boss same as the old boss."
This next election is about the future of the Republic and we better not count our *Reverend Wright* chickens before they're hatched. Over confident pundits, republican leaders are going to blow it. It's up to you and your efforts as free people to hold these clowns accountable (I'm talking our clowns... not theirs) As Ben Franklin responded to a lady whom asked about what governement was created at the convention; "a Republic...if you can keep it."