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.
