The new column today out from Paul Krugman, about Tom Piketty’s new book got me to thinking.
It must have been very, very difficult to be a Keynesian economist in the late 1970s in America, Europe, and England. Unemployment was high, inflation was staggering, and growth was stagnant. The ideas on the left edge of the economic spectrum seemed to have run out of gas. Taxes on the wealthy? High. Welfare programs? There were a lot. Economic stimulus? We did it, yet inflation was still high.
So, those right wing ideas of tax cuts were certainly worth a try. Hell, nothing else was working. Why not try all those wacky economic ideas out of the Chicago school being espoused by Martin Friedman’s disciples?
So we did.
Now, the idea that it was Keynesian economic ideas that were failing in the 70s was a bit silly in retrospect. The entire world was still massively dependent upon the strength of the US economy, and US economic policy was a mess due to the Vietnam war. We fought it on the credit card, and like all bills, it was time to pay. Had we not had the Vietnam war, it is entirely possible that the malaise that existed in the mid to late 70s wouldn’t have existed.
But… whatever. We tried right wing policies, and while we also simultaneously doing some left wing things (like Volker radically increasing interest rates to curb demand and thus break inflation’s back), and then the Soviet Union fell apart, and hello there, peace dividend.
In any event, changing from a left-ish style economics to a right-ish style of economics was really only possible because it appeared, right or wrong, that left-ish economics wasn’t working.
I keep hoping, sometimes beyond hope, that we are finally reaching that point with right-ish economics. It is one thing to talk about cutting taxes when the top tax rate is 70%. But when it is 35% for income, and 20% for investment income, that idea seems silly. It’s one thing to talk about cutting spending when the cost of borrowing money is 10%, it’s another thing to talk about cutting spending when the cost of borrowing is less than the rate of inflation, which means the money is basically free.
It does seem like the pendulum is finally, after 30+ years of doing things the right wing way, swinging back to the center. We did actually implement a form of health care that could eventually lead to everybody having insurance, even if it is kind of a mess due to the desires to keep the fantasy of “market based competition” alive. We are pulling back on military spending, even if we still spend way more than the next several countries (most of whom are allies) combined. And the Justice Department is finally looking at our crazy minimum sentencing laws around drug offenses, asking prisoners to apply for clemency, and adding staff to handle the claims. And, as Krugman points out, the rhetoric from the right seems especially hyperbolic and nonsensical.
So, are things turning around? I can only hope. On days like today (Friday), I’m hopeful. I’ll probably be cynical next Monday when I see yet more gobs of money being poured into politics thanks to the Roberts Court.