Book Review - Washington Post

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Washington Post – 3/26/2016


Which Nations Prosper? Those With Governments That Spend Much or Spend Little?

Review by Prof. Steven Pearlstein -- a Washington Post economics and business writer and the Robinson Professor of Public Affairs at George Mason University


A curious thing has happened in the three decades since Ronald Reagan swept into office declaring that government is the problem rather than the solution. Much to the chagrin of Reagan’s ideological heirs, government has continued to grow as Americans have demanded more education, better health care, and greater economic and physical security. Even as liberals have achieved these modest increases in spending and regulation, however, they have been reluctant — Bernie Sanders has been a prominent exception — to offer a full-throated defense of the idea that a wealthier and more complex society demands more government, not less.

That is precisely what Jacob Hacker and Paul Pierson aim to do in their latest collaboration, “American Amnesia.” In the century before Reagan, they note, the United States grew to become the world’s richest, most powerful and most admired country. And it did so, they argue persuasively, not in spite of the rapid growth in the size and reach of government, but precisely because of it — because government put a high school and college education within reach of all its citizens, because government made serious and systematic investments in railroads, highways and scientific research, because government protected investors and workers and consumers from the natural excesses of market competition and put an economic safety net under all Americans.

And it’s not just America. Across the world, the authors note, the richest countries invariably allocate a large share of their economic output to government, while the poorest tend to allocate the least. It is neither the government-run nor the free-market economies that prosper but rather the mixed economies that have proved to be the most durable and successful.

The economics of all this is pretty well established. But Hacker and Pierson are not economists — they are political scientists at Yale and Berkeley who mean to explain why and how the mixed economy became so unloved and its successes so quickly forgotten.

To illustrate the change, they start by comparing the actions and attitudes of George Romney — president of American Motors Corp., governor of Michigan, and secretary of housing and urban development in the Nixon administration — with those of his son Mitt Romney, a private-equity-fund manager who leveraged his fortune to become governor of Massachusetts and the Republican nominee for president in 2012.

The elder Romney, they write, understood that prosperity is not an individual achievement but is generated by the collective efforts of managers, workers, customers and the community at large. As a liberal Republican governor, he worked with Democrats to raise Michigan’s minimum wage, enact an income tax, double state spending for education and increase benefits for the poor and the unemployed. Paeans to “rugged individualism,” the elder Romney declared, were “nothing but a political banner to cover up greed.”

A generation later, a much more conservative Mitt Romney was helping to pioneer a different model of capitalism, one built on successful companies run by heroic, job-creating entrepreneurs whose only legitimate goal was to maximize profits for shareholders and themselves. And as he famously revealed while speaking to well-heeled political contributors, the younger Romney saw great danger in a welfare state that now had so many citizens reliant on government for their livelihoods that they would use their political power to impose burdensome taxes and regulations on genuine wealth creators.

In trying to explain this “breathtaking” transformation of business norms and political opinion, Hacker and Pierson fall into the common trap of trying to construct a simple narrative of cause and effect, good guys and bad guys. They largely repackage the familiar liberal tale of a disciplined, well-funded conspiracy to spread free-market propaganda through a network of right-wing think tanks and media outlets, eventually overwhelming the hapless mainstream press and reshaping the public debate. Meanwhile, using gobs of political money, the anti-government crusaders succeeded in driving out moderates to capture control of a Republican Party whose only goals now are to starve government of funds and force it into a permanent state of political stalemate and dysfunction — a dysfunction that further reinforces the message that government is inept.

It’s easy enough for the authors to find plenty of historical evidence to support this narrative. There is, for example, then-Rep. Newt Gingrich’s speech to the Heritage Foundation in 1988 in which he called for an assault on liberalism that “has to be fought with a scale and a duration and a savagery that is only true of civil wars.” And there is venture capitalist Tom Perkins’s suggestion that people who pay more taxes should get more votes. The reader, however, can find a much more deeply and freshly reported version of these developments in Jane Mayer’s new book on the Koch brothers (“Dark Money”), or a more cogent and original analysis of them in Washington Post columnist E.J. Dionne’s latest (“Why the Right Went Wrong”).

The problem with the standard liberal narrative is that it ignores some inconvenient realities, such as that Democrats and their allies have raised and spent as much money as Republicans in recent election cycles, or that Bill Clinton and Barack Obama each won two presidential elections and had notable success in achieving their policy goals despite relentless opposition from the conservative noise machine. The political scientists rightfully note that the reason Republicans have gained political traction is not because more Americans agree with their conservative policies but because Americans have become more distrustful of government. They seem to have a blind spot, however, for some of the valid reasons Americans have become so distrustful: misguided and costly wars, a soaring budget deficit, the failure of government policies to end persistent poverty, the botched rollout of Obamacare. They also ignore that the conspirators themselves — big business, Wall Street, the energy industry and the Republican Party — have suffered a similar decline in trust.

The more convincing part of Hacker and Pierson’s narrative concerns the transformation of the organized business community. They show how groups such as the Chamber of Commerce and the Business Roundtable went from being moderating political forces, whose leaders acted as stewards of the national interest, to becoming highly partisan special interest groups determined to boost corporate profits by buying elections and thwarting all regulation, degrading the country’s political and legal institutions in the process. Business leaders who are now horrified at the prospect of Ted Cruz or Donald Trump as president have only themselves to blame, the authors suggest, for creating the political dynamics and economic circumstances that have made those candidacies possible.

While much of “American Amnesia” turns out to be an unsatisfying rehash of recent history, its basic political insight is sound: The only way for Democrats to regain the political momentum is to purge from the American imagination the myth that the government that governs best is the government that governs least.