Hollywood, not inside the Beltway, is the home for remakes, reboots and sequels.
But in The Great Money Binge: Spending Our Way to Socialism, author George Melloan is pining for an encore of President Ronald Reagan’s economic revolution.
But the sequel better happen quickly, because the damage being done to the U.S. economy is getting out of control. And unfortunately there’s no Reagan-like figure on the horizon to help spur the truly needed change back to more sound economic policy.
Melloan, who helped incite the Reagan Revolution from his desk at the Wall Street Journal, details the calamitous financial decisions made over the last few years by administrations past and present—but mostly present.
It’s not a pretty picture. Binge hits hard at the mistakes, describes their dangerous fallout and explains how we can avoid what could be another mid-70s economic malaise.
Binge tracks the start of the problem to President George H.W. Bush and the shattering of his “read my lips” pledge regarding new taxation. The Wall Street meltdown in 2008 simply put an exclamation point on the problem.
The media blithely blamed greed and capitalism run amok, but Melloan describes the causes in more penetrating detail.
“It was caused by the combination of irresponsible federal monetary policy and government intervention in the mortgage credit markets that spawned greed — on Main Street as well as Wall Street,” he says.
The credit crisis came about, in no small part, because of legislation meant to open up housing possibilities to those who couldn’t afford homes using conventional means. The subsequent housing boom and bust, followed by exploding foreclosures figures, sent the economy reeling.
Fannie Mae and Freddie Mac did their fair share, too. Melloan quotes former Treasury Department Counsel Peter Wallison, leading expert on Fannie and Freddie, who says, “Their actions created a frenzy of subprime mortgages or what are called weak or junk loans. This helped create a housing bubble.”
President Barack Obama’s so-called Stimulus Bill hammered the economy with a staggering debt. And while the President promised the legislation would deliver “shovel-ready” jobs, it actually proved to be Democratic wish-list fulfillment.
One too many interest rate cuts helped seal the deal, causing a credit expansion that preceded the 2008 debacle.
Meanwhile, progressives took aim at the Reagan legacy to smooth the way for their reforms, pinning the recent economic collapse on Reagan’s ’80s-era policies and President George W. Bush’s tax cuts.
Of these cuts that liberals love to hate, he says, “The record shows that millionaires paid substantially more in taxes in the years after the rate cuts than they had in the years before.” He adds, “The evidence that tax reductions sometimes are followed by higher revenues is irrefutable.”
Melloan says compliant news media helped make Obama’s ascent possible, covering “Hope and Change” at the expense of rigorous economic debate. Study after study, not to mention poll upon poll, show the press leans predominantly left and protects Democratic candidates and platforms.
That bias means that the huge expansion of government and President Obama’s willingness to frighten voters into seeing things his way get little critical attention. Consider Obama’s push for cap and trade legislation as a prime example of this.
Melloan augments his arguments with personal anecdotes, both about his experiences in the media trenches as well as what he learned about economics from his father’s farming business.
The chapter “Market Capitalism Wins Out” recalls the collapse of the Soviet Union and China’s willingness to embrace some capitalistic practices as proof of that system’s superiority. Still, there are “barbarians at the gate,” as he writes, countries and leaders who cling to discredited theories and growth-squashing tactics.
The public—and even some members of the media—have started to sour on Obama’s economic priorities. Humorists began parodying the President’s policies and now the liberal New York Times and Washington Post occasionally question Obama’s actions. Even Obama-friendly pundits like David Brooks aren’t so sure of their initial support for the young leader.
“This is an administration that has many lawyers and academics but almost no businesspeople in it, let alone self-made entrepreneurs,” Brooks has said.
The Great Money Binge ends on a hopeful note, declaring a faith in the economic vitality of the American people. But it won’t be easy, given the massive micromanagement of the last two years that incurred an array of future entitlements and debt.
And, for example, the optimism about tort reform as one way to reduce rising medical costs is merely hope at this point. That won’t change until the ideology in both Congress and the White House takes a red state turn.
Still, the Reagan Revolution showed the country can rally at just the right time to heal itself.
“The American political system constantly springs surprises, and sometimes they come when we most need them,” Melloan writes.
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