There’s no reason to compare his situation to Reagan’s c. 1982.
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Liberals were strongly opposed, however, and what they disliked was the rebuke to their statist ambitions. Supply-siders argued that government couldn’t just grow indefinitely without harming the economy. The great delusion of the Communists had been that it could. They thought government could take over everything and run things more efficiently by command than by the messy and wasteful methods of exchange, consent, and competition. Leftist intellectuals were not disabused of their fantasies of controlling the lives of others until the fall of the Berlin Wall in 1989.
Lots of strange ideas held the stage 30 years ago, just as they do today. Trained economists thought (some still think!) that economic growth is inflationary, for example. Savings disappear into an unproductive “sump” and so were discouraged. To this day the tax code rewards debt and punishes saving. Static revenue estimating at the Congressional Budget Office implied that increasing tax rates would not affect the volume of transactions, which is like assuming that failing department stores today could recover if only they would raise their prices across the board.
After Al Regnery’s party I went to an event for Tom Pauken’s new book, Bringing America Home. Pauken was the chairman of the Texas Republican Party and a Reagan appointee. I have known and admired him for years. He has always stood for the kind of conservatism that I think should have prevailed along with Reagan but somehow never did. In his new book he is critical of George W. Bush, Karl Rove, and the big-spending philosophy that made Republicans in Washington hard to distinguish from Democrats.
Lots of good people were at the party, including Ken Tomlinson, the former editor in chief of Reader’s Digest (now in bankruptcy!); Jon Utley; and others; but to me the most interesting guest was Bruce Bartlett, a former Republican Treasury official and today a Forbes columnist. He worked for Jack Kemp on the Kemp-Roth bill that formed the basis of Reagan’s 1981 tax cut. Then he wrote The Supply-Side Solution. Last October he published a rather different book, The New American Economy: The Failure of Reaganomics and a New Way Forward. Before that came Imposter: How George W. Bush Bankrupted America and Betrayed the Reagan Legacy.
I have been encountering Bruce at such events for years, so I asked him what had happened. The man who had helped formulate supply-side ideas had turned against them? I didn’t take notes but I think the essence of what Bruce said went like this:
The tax rate reductions of the 1980s were a good idea and the economy dramatically improved. But the influence of the supply-siders began to distort the economic debate. The old idea had been that spending increases would have to be paid for with tax increases. So the fear of new taxes was enough to hold spending in check. And it did. That was fiscal conservatism the old-fashioned way and the way Bruce likes it.
Supply-siders then encouraged the belief that spending didn’t matter so much; the important thing was to ensure that taxes were never raised. That became so influential that people stopped worrying about spending because supply-siders would always see to it that the accompanying tax increases were stopped.
But that encouraged the big spenders to abandon restraint. If conservatives only ever worried about tax increases (said Rove & Co.), then let’s go for the new spending on its own. Which is what happened. We got unfunded wars and drug subsidies for seniors. Result: today’s massive deficits. Obama entered the picture at that point, and the same problem was magnified still further. As a percentage of GDP, deficits today are about four times what they were in 1980.
Bartlett makes a case, although one should note that runaway spending showed up in Britain too. After Thatcher, the Labour Party did raise some taxes, but spending still raced ahead.
The bad news for Obama is that the advocates of tax increases are now in the saddle and he is their champion. New financial regulations — unintentionally, they will work to the advantage of the big Wall Street firms — will further discourage new employment.
Exacerbating the problem, the bad economic thinking of today has spread to Britain, just as the good ideas did when Mrs. T cut tax rates in 1981. Last year the top income tax rate in Britain was raised to 50 percent (from 40 percent), and Britain’s doltish new prime minister David Cameron, conservative in name only, has accepted that increase. The capital gains tax rate has also soared.
One dismal result will take years to play out. The financial hub of London known as the City will decline. Since Thatcher’s time, the City has been the preeminent financial center of Europe, a position that has now been kicked away. Switzerland’s tax structure is still good but friends in London tell me that the costs of moving there, including housing and schools, are prohibitive. Over time, international financial talent will leave London and reassemble in the Far East. This is just one reason why the recent British election result was so bad.
On top of that we have had the crisis of the euro, an elite project gone sour. The underlying problem is that all the countries in the European monetary union have broken the rules by running massive deficits. As here, living on borrowed money became a way of life, and that cannot last. The recent trillion-dollar euro bailout simply added new debt to old. European countries will talk about spending cuts (which may not materialize) and tax increases (which will). Then the crisis will reappear with a vengeance. The decline of markets in Europe will be a further drag on the U.S. economy.
It has been a generation since Reagan and Thatcher made their free market reforms, and good things have happened around the world. China and India have decentralized their economies and repudiated the command model. Across the world, this will bring great material progress in its wake. China, surely, is destined to become the world leader, just as the U.S. did 100 years ago. The U.S., too, will recover from its present malaise, but that will take a few years: not soon enough to save Barack Hussein Obama.
A man of faith in a godless age is hitting Americans where it hurts.
Mr. and Mrs. American Spectator Reader, let P.J. O’Rourke talk sense to your kids.
In Britain, defending your property can get you life.
The debacle of this president’s administration is both a cause and a symptom of the decline of American values. Unless Congress impeaches him, that decline will go on unchecked. An eminent jurist surveys the damage and assesses the chances for the recovery of our culture.
It won’t take long for conservatives to scratch this presidential wannabe off their 2008 scorecard.
The American Christmas, like the songs that celebrate it, makes room for everybody under the rainbow. Is that why so many people seem to be hostile to it?
Was the President done in by the economy, or by the politics of the economy?