Brad
2009-08-06 03:42:53 UTC
Travel with me back to yesterday, the early days of the Reagan administration, when taxes were being cut and spending increases were being curbed (the actual cuts were few), and when journalists were losing their heads about the supposedly catastrophic state of the economy.
The prevailing ethos in those days in the White House was somewhat sensible. The idea was that the recession had to be permitted to run its course. The late 1970s inflation coupled with recession had wrought dollar depreciation plus high unemployment and high interest rates. These were part of the adjustment process. No one doubted it.
Now, there was a time, only a few years earlier, when the Keynesian orthodoxy claimed the power to control the economy the way we control our cars. One could adjust the inflation up to drive unemployment down, and adjust the inflation down and pay the price in higher unemployment. It was a trade off, and the wise economists would decide what was socially optimal.
One can only marvel at the naïveté, but it all came crashing down with the advent of the simultaneous appearance of both inflation and unemployment, and Keynesian confidence was shaken to its core. The better members of the Reagan team were more realistic. They believed that the goal of government policy was to create the conditions for economic growth, and if that meant letting bad policies wash themselves away during the transition, so be it.
The journalistic establishment at the time hated them and their free-enterprise ideas. So, of course, all bad news was treated as not only worse than it really was, it was also blamed on the Reagan administration, as if it had the control over events that Keynesians imputed to government. So, if times were bad, who were to blame but the people in control?
Every day the headlines blasted away, as if the media establishment were trying to whip the public up into a hysterical frenzy against tax cuts. People were encouraged to blame That Man in the White House for all existing evil, and the nightly newscasts were filled with furrow-browed anchors doing stories on the poor suffering masses and their desperate plight. Their political agenda was aggressively on display, brazen beyond belief.
And then something amazing happened. The economy began to recover. Unemployment fell, inflation crashed, interest rates came down, and growth returned. The criticism later changed: the Reagan administration was accused of being too pro-growth and unleashing greed and "cowboy capitalism." But it fell on deaf ears, and Reagan won a landslide reelection in 1984.
Now, I'm not saying that Reagan was laissez-faire or that the economic recovery didn't owe something to a newly fashioned form of military Keynesianism. Rather, my focus here is on the spin: the press hated him, and exaggerated the failings of the economic structure in order to destroy policies it hated.
The contrast with the Obama administration can't be more stark. No one in these ranks said that malinvestments have to be washed out of the system and bankruptcies and unemployment must be tolerated for a time in order to get back on a growth. Nay, nay, they pulled out the old bag of tricks and claim that they only needed to loot the public of hundreds of billions and spend it on building up government, and then, wow, like magic, the entire economy would come back to life.