The Failure of Old Ideas
Bruce Bartlett's new book sounds pretty good:
As a domestic policy advisor to Ronald Reagan, Bartlett was one of the originators of Reaganomics, the supply-side economic theory that conservatives have clung to for decades.
In The Next Economics, Bartlett goes back to the economic roots that made Impostor a bestseller and abandons the conservative dogma in favor of a policy strongly based on what’s worked in the past. Marshalling compelling history and economics, he explains how economic theories that may be perfectly valid at one moment in time under one set of circumstances tend to lose validity over time because they are misapplied under different circumstances. Bartlett makes a compelling, historically-based case for large tax increases, once anathema to him and his economic allies. In The Next Economics, Bartlett seeks to clarify a compelling and way forward for the American economy.
That middle bit is rather insightful. Imagine a hungry person who comes up with the good idea that he should eat something. Midway through eating something, he finds himself full. Should he keep eating?
Probably not. But political movements have a tough time recognizing when they're full. After all, eating worked so well last time. Elections were won on a pro-eating platform. Supporters were convinced of the virtues of eating. This movement is now about eating. Or, as the case might be, lower taxes. Bartlett argues that conservatives were right about the need for lower taxes and less regulation in the 80s. He, after all, was one of them. But then they succeeded in lowering taxes and dismantling regulations. They left the country full. Since then, the problems requiring policy solutions have changed. But the movement's prescriptions haven't.
Conversely, I don't think Robert Rubin's proteges get enough credit for the flexibility of their performance in the past few years. During the early-90s, when a large deficit seemed to be crowding out private investment, Rubin and his deputies embarked on an aggressive campaign of deficit reduction. This sparked some pretty serious wars in the Democratic Party, as many considered Rubin unhelpfully obsessed with deficits at the expense of, say, social investment.
A decade later, the Obama White House is almost entirely staffed by Rubin's deputies: Larry Summers, Timothy Geithner, Peter Orszag, and Jason Furman were all part of Rubin's circle. But in 2008, the problem wasn't deficits. It was insufficient economic demand. And so the team developed a stimulus policy that jacked up the deficit but, in theory, also kickstarted a sluggish economy. It was also the single most important social investment in a generation. They may have been right on that policy. Or they may yet prove wrong. But they were pretty clearly focused on the current moment, not the ideas they originally defended in public life.
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