Christopher Caldwell wrote some -- well, let's call it what it was, pie-in-the-sky nonsense -- in the New York Times magazine recently. In looking to justify the Reagan-Bush tax cut policies and economic management, he wrote that recessions and slowdowns since 1980 were simply the birth pangs of this New Economy. To have overregulated or overtaxed Bill Gates twenty years ago, he argues, might have killed the golden goose.
Sounds fine if you know no history. But great new companies were not new to the 1980s, nor were new economies. There was a new economy in the 1950s and 1960s, too. In that period of high tax rates, a growing welfare state, and substantial regulation, companies like Xerox, Polaroid, Syntex, Merck, Merrill Lynch, and IBM took off and became giants. So did entrepreneurial phenomena like Johnson & Johnson and 3M and new steel companies like Nucor. The TV networks, NBC and CBS were built then as television swept the world, and ABC was started. And GDP growth was as rapid as it ever had been, recessions subdued, and wages rose very rapidly.
The Reagan-Bush policies of tax cuts and deregulation had little to do with entrepreneurial vibrancy. The notion is conservative wish-fulfillment made possible by historical ignorance.
But Caldwell was right about a more important issue. The anxieties of the 1980s and 1990s are not the anxieties of today. And the lesson for the candidates and the electorate is that, for all Bill Clinton's successes with the economy, his policies are not all relevant today.
The anxieties back then were not Caldwell's simplistic claims about economic transition. It was a period dominated by deep anxiety over international competition, inflation, high unemployment, budget deficits and stubbornly high interest rates. The Reagan policies never brought higher wages or much capital investment. And the budget and trade deficits kept soaring.
Times have changed radically. These times -- the times the next president will face -- are dominated by, above all, anxieties over low-paying and insecure jobs, but also high oil prices, rapidly rising healthcare costs, new international economic super powers, and an economy reeling from irresponsible strategies and stunning levels of corruption in the financial community -- brought to you by unintelligent, willy-nilly deregulation.
Brushing off the Clinton policies of deficit cutting and deregulation will not do the trick of creating the domestic jobs the nation needs. It's time for government to invest seriously in infrastructure, education, planning for efficient energy usage, and an adequate safety net. That will create jobs at home. It's time to turn its attention to smart re-regulation. It's time to fix healthcare in a way that above all gets those costs down.
And it's time, to tax higher-income individuals to pay for some of this, not to make deficit reduction the runaway priority of the nation. If there is ever a peace dividend from reduced fighting in Iraq, use that to invest also. Some fiscal prudence, yes, but we've neglected too much along the way.