Seven Bad Ideas by Jeff Madrick

Author:Jeff Madrick
Language: eng
Format: mobi, epub
ISBN: 9780307961198
Publisher: Knopf Doubleday Publishing Group
Published: 2014-09-29T22:00:00+00:00

Inflation targeting was not the only result of the fear of a return of high inflation. Next came the irrational focus on the budget deficit, which was widely considered inflationary. In the 1970s, the United States had produced its first significant deficits, though, as a percentage of GDP, they were small compared to the deficits under Reagan. Nevertheless, such deficits, aided by Friedmanite economics, were long after associated with inflation in the public’s mind. “Tax-and-spend” Democrats were mocked. Reduced social spending made America a far harsher place than it had been in the 1960s.

The people were more easily swayed by the rhetoric of free markets and the fear of government spending. Serious economists resorted to Say’s law to explain why deficits were harmful. Friedman and right-wingers like Reagan led economists and politicians in pulling off this sleight of hand. They turned the fear of and the suffering caused by inflation into an argument against government programs altogether. In his final debate with Jimmy Carter before the fateful 1980 presidential election, Reagan said, “We don’t have inflation because the people are living too well, we have inflation because the government is living too well.” His popularity ratings, not that much higher than Carter’s at the time, immediately went up. This was the same misdirection used after the financial crisis of 2008, when a soaring federal deficit aroused fears about government social spending.

The painful and panicky economic climate of the 1970s was the main cause of antigovernment attitudes in the United States. But many have also correctly blamed the animosity toward Lyndon Johnson over the Vietnam War and his bold social programs for the ideological turn toward conservatism. In 1964, Johnson used spurious information about North Vietnamese attacks in the Gulf of Tonkin to win approval of a resolution to use military force in Vietnam without a declaration of war. The Vietnam War dragged on tragically, of course. Johnson’s commendable domestic legislation—including the Voting Rights Act, the Civil Rights Act, and the War on Poverty, which launched Medicare and Medicaid—ignited racial animosity because some saw these social programs as handouts to Americans of color. Moreover, war spending deprived Johnson of the money to make his Great Society work, according to his widely respected biographer, Robert Caro.

Johnson was followed by the dislikable Richard Nixon. The Watergate break-in led to his resignation, but he also failed to bring the Vietnam War to the quick end he had promised. This, along with his secret bombing of Cambodia, seemed like dissembling to many. Although he won reelection by a wide margin over the antiwar Democratic idealist George McGovern, he was never truly popular, and he hardly inspired confidence in government.

In recent years, there has been a growing literature on the concerted organization of the right and business interests into a powerful lobbying and public relations force in the 1970s. The Heritage Foundation, the American Enterprise Institute, and the Cato Institute all gained influence in these years through research that justified cuts in taxes and regulations. Many

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