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The New American Economy: The Failure of Reaganomics and a New Way Forward Hardcover – October 13, 2009
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“Bruce Bartlett is a rarity in Washington, an honest man. In The New American Economy, Bartlett combines an informed insider's knowledge and an economic historian's perspective to create a compelling explanation of where supply side economics came from and what went wrong with Reaganomics.” ―David Cay Johnston, Pulitzer Prize-winning author of Free Lunch and Perfectly Legal
“Bruce Bartlett is right. The welfare state isn't disappearing. And if Republicans continue to try to roll it back the by using tax cuts to "starve the beast" or trying to privatize Social Security and Medicare, they're history. Wise thoughts from one of the creators of Reaganomics who has seen the light.” ―Robert Reich, Former U.S. Secretary of Labor, Professor of Public Policy, University of California at Berkeley
“Among today's conservatives, only Bruce Bartlett would have the courage and unconventionality to embrace John Maynard Keynes, much less to champion a big new tax. But here's the thing: he's right. Anyone seeking a new way forward for conservatism or the economy needs to start here.” ―Jonathan Rauch, National Journal
“Bruce Bartlett, who took the measure of President Bush in his New York Times bestseller, Impostor, has written another highly useful winner: The New American Economy. In this short, tough-minded and often amusing book, he lays out what the Obama Administration is doing to the economy and tells why it will work.” ―Richard Whalen, Senior policy adviser to Ronald Reagan and author of The Founding Father: The Story of Joseph P. Kennedy
“Bartlett is the rarest of all creatures: an honest conservative economist. He was one of the original supply-siders in the Reagan administration. However, he pursued it as economic policy, not religion, which meant that he changed his views when things did not turn out exactly as planned. Readers of all political perspectives will find this book valuable. It is a serious account of the economic history of the post-World War II era and provides thoughtful prescriptions on the way forward.” ―Dean Baker, Co-Director, Center for Economic and Policy Research
“Bruce Bartlett is something rare and admirable: a brave and intellectually honest man. He understands that the truth is rarely pure and never simple. An erstwhile protagonist of supply-side economics, supporter of Ronald Reagan and darling of the conservatives, he explains here why the economics of Keynes is, yet again, relevant and why the US will need extra tax revenue if it is to finance the rapidly growing burden of entitlement spending. Whether US conservatives like it or not, what the American people resolutely defend will have to be financed, . The answer, he argues, is a value added tax. He is right. Every serious analyst must know it.” ―Martin Wolf, Chief Economics Commentator, Financial Times
“In this remarkable book Bruce Bartlett attempts two daunting, even heroic tasks. The first is to persuade conservatives that John Maynard Keynes was actually one of them - a true conservative who saw that to manage the capitalist system was the price of protecting it, against the socialist challenge. The second is to persuade Republicans that their future lies with finally accepting the welfare state, financed, in keeping with supply- side principles, through a consumption tax. Bartlett here injects fresh thought into Reagan's legacy, and American politics will be much more civilized, and possibly also more competitive, if he succeeds.” ―James K. Galbraith, professor economics, University of Texas at Austin and author, The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too
“Bartlett offers the valuable perspective of a real inside witness . . . he is, moreover, a good economic historian and provides a well documented summary of the last 80 years of American macroeconomics.” ―The American Conservative
“Bartlett has had to concede the unpopular view that higher taxes will be inevitable, and makes the case that a value added tax (VAT), something like a national sales tax, may be the only way to generate the revenue that will be required to keep this ship afloat.” ―Booklist
“Do yourself a favor and read Bruce's new book. And know that Bruce is one of those conservatives who actually put principle over access to power. If you're a liberal looking for a real conservative to debate and read, you won't go far wrong with Bruce.” ―Andrew Sullivan, The Atlantic
“It is a significant work for any serious student of economics and perhaps the best general reference for anyone wanting a sober retrospective on the Keynesian phenomenon.” ―Library Journal
About the Author
Bruce Bartlett is an economic historian who has spent the last 30 years working in politics and public policy. He has served in numerous governmental positions, including as a domestic policy adviser to President Ronald Reagan and a treasury official under President George H.W. Bush. He is a weekly columnist for Forbes.com. and has written for The New York Times, Wall Street Journal, National Review, Commentary, and Fortune. He is also a frequent guest on The NewsHour with Jim Lehrer, Lou Dobbs' Moneyline, NBC Nightly News, Nightline, Crossfire, Wall Street Week, CNN, CNBC, and Fox News Channel, among others.
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I knocked a star off because the author was light on details for the new way forward, although I commend him for stating the glaringly obvious point that Congress refuses to admit: the "more tax cuts at any cost" approach is not a responsible tax policy.
And he had a hand in causing the problem that we're in today as he admits in his book. He also admits that they did it on purpose. It wasn't an accident. It was intentional!!
Over thirty years ago he was one of many who advocated what is popularly known as a "starve-the-beast" viewpoint. Politicians who didn't have the integrity or the strength of character to fight for cuts in spending believed that if they reduced income significantly, then other politicians would be forced to reduce spending. They believed that if they continued to run deficits and continued to run up the national debt, then eventually someone in the government would cut spending. As adviser to Reagan and Treasury official under Bush 41, Bartlett promoted this atrocious policy.
It didn't work. While they continued to push for tax cuts, they never fought for spending cuts. The deficit continued to grow and grow, and now we are in such a hole that it is going to take decades to climb out. And it was intentional. They ran up the national debt on purpose. He's not evil. History major Bartlett actually thought it was the best thing to do for the country.
So why should we pay any attention to Bruce Bartlett?
Answer: he has something to say. And what he says is quite frightening. The national debt is chump change when compared to the unfunded obligations for Social Security and Medicare. It's a very serious message that everyone in America should note. Former U.S. Comptroller General David Walker has been sounding this alarm for years. Bartlett should at the very least be given some credit for finally catching on.
Unfortunately his answer to the problem is pathetic and shallow. He's basically surrendering. Rather than fight the big spenders, he surrenders to them and advocates higher taxes. Whereas before he cowardly advocated the "starve-the-beast" outrage to avoid fighting the big spenders, now he just goes ahead and surrenders to them.
This book is just the next episode of Bruce Bartlett pushing his idea for a value added tax (VAT). In his previous book about the Bush administration and in his weekly Forbes column, Bartlett pushes and pushes his VAT idea. He is convinced that tax revenues must be increased significantly, and he is convinced that the VAT is the best way to do it. This book is just more advocacy for the same idea.
The book is a pleasurable read. He reviews from his perspective American macroeconomic history and policy from the Great Depression era through today. He explains how Keynes' theories were born and how they were manipulated and misunderstood and then misapplied, and he explains how supply-side economics was born and how it was manipulated, misunderstood and misapplied by ignorant leaders to the detriment of the nation. He blames this mostly on Bush 43.
The subtitle is misleading. "The Failure of Reaganomics" In the book he makes no mention of any failure of Reaganomics. Reaganomics was and is good. The problem was that it wasn't fully implemented. When we think of Reaganomics, tax cuts automatically come to mind. But Reagan was clear that cuts in spending were a necessary part of it. I remember Mitt Romney's speech when he suspended his campaign for President in 2008. I thought, "Wow. Mitt Romney." Politicians say wonderful things. Unfortunately, they don't always do those things. We got the tax cuts. But we never got the spending cuts.
Mr Bartlett starts out with a retrospective on the Great Depression and John Maynard Keynes. He confesses that he grew up professionally as a Keynes detractor, only to come around later in his career to realize that Keynes wasn't the one-dimensional figure he'd spoken out against - his policies had merit for their day, and his later writings calling for a return to fiscal conservatism, had gone largely unnoticed by Keynes' followers as well as detractors, including himself. Mr Bartlett does an admirable job of resurrecting Keynes as a conservative who sought only to save liberal democracy in the most expedient way. Here we get the most poignant lesson of the book.
The key theme in The New American Economy is that one size does not fit all. Mr Bartlett uses the person of Keynes as a teaching point. Keynes recommended a policy of government spending to lift the economy out of depression based on the need at the time, with the expectation that policy would change as the crisis du jour subsided; Keynes had no intention or expectation that policy makers would blindly apply one prescription to all ills. Through the rest of the book up to the concluding chapter, Mr Bartlett provides examples ad nauseum of the fact that blind prescription is what happened in fact. The parade of personalities and examples creates a muddle for the reader in the middle of the book, but the key themes are clear.
Mr Bartlett first outlines the "Keynesians" (who, he argues, bore little resemblance to what JM Keynes advocated); later he turns the pen on his own family - supply-siders in the 1970s who, like Keynes 40 years earlier, introduced a different approach more suitable to the crisis at hand. Following the success of Reaganomics (an ironic and self-serving assertion given the book's subtitle), supply-siders charted the same historical course as the "Keynesians" culiminating in Mr Bartlett's damning summary of GW Bush's performance as betraying the principles of conservatism and supply-side economics.
I'm unclear as to whether the final chapter is a contradiction of the rest of the book, or if it reinforces the key theme. Mr Bartlett abuses policy makers for their inability to contain spending, and advocates a Value-Added Tax as the next approach for the economic crisis we've borrowed ourselves into. He also beats the "save more, consume less" drum, which depends on an unlikely change in American behavior. The contradictions, of course, are with Keynes' advocacy of meaningful government spending (e.g., NOT tax rebates which are just saved - another contradiction?) and civic consumption to lift the economy out of recession/depression, and the fact that raising taxes in a recession is flat out bad policy. Perhaps, though, this is really saying no more than the 2008/2009/2010 economic crisis is different than - albeit similar to - the Great Depression, and requires a different approach. Mr Bartlett is not clear on this point.
The contradictions of the concluding chapter with the history lesson of the preceding pages left me feeling the book actually said nothing in its 200 pages. As a couple days have passed and I think back on the book, though, the key theme stands out more clearly, warning us of the dangers of turning economic policy into religion, even if the confusion and apparent contradiction of Mr Bartlett's "new way forward" hides it temporarily. "Religion" best describes my perception of today's political "dialog," and this cautionary tale is timely and welcome.