The Audacity of Hope - Barack Obama [74]
Not every government program worked the way it was advertised. Some functions could be better carried out by the private sector, just as in some cases market-based incentives could achieve the same results as command-and-control-style regulations, at a lower cost and with greater flexibility. The high marginal tax rates that existed when Reagan took office may not have curbed incentives to work or invest, but they did distort investment decisions—and did lead to a wasteful industry of setting up tax shelters. And while welfare certainly provided relief for many impoverished Americans, it did create some perverse incentives when it came to the work ethic and family stability.
Forced to compromise with a Democrat-controlled Congress, Reagan would never achieve many of his most ambitious plans for reducing government. But he fundamentally changed the terms of the political debate. The middle-class tax revolt became a permanent fixture in national politics and placed a ceiling on how much government could expand. For many Republicans, noninterference with the marketplace became an article of faith.
Of course, many voters continued to look to the government during economic downturns, and Bill Clinton’s call for more aggressive government action on the economy helped lift him to the White House. After the politically disastrous defeat of his health-care plan and the election of a Republican Congress in 1994, Clinton had to trim his ambitions but was able to put a progressive slant on some of Reagan’s goals. Declaring the era of big government over, Clinton signed welfare reform into law, pushed tax cuts for the middle class and working poor, and worked to reduce bureaucracy and red tape. And it was Clinton who would accomplish what Reagan never did, putting the nation’s fiscal house in order even while lessening poverty and making modest new investments in education and job training. By the time Clinton left office, it appeared as if some equilibrium had been achieved—a smaller government, but one that retained the social safety net FDR had first put into place.
Except capitalism is still not standing still. The policies of Reagan and Clinton may have trimmed some of the fat of the liberal welfare state, but they couldn’t change the underlying realities of global competition and technological revolution. Jobs are still moving overseas—not just manufacturing work, but increasingly work in the service sector that can be digitally transmitted, like basic computer programming. Businesses continue to struggle with high health-care costs. America continues to import far more than it exports, to borrow far more than it lends.
Without any clear governing philosophy, the Bush Administration and its congressional allies have responded by pushing the conservative revolution to its logical conclusion—even lower taxes, even fewer regulations, and an even smaller safety net. But in taking this approach, Republicans are fighting the last war, the war they waged and won in the eighties, while Democrats are forced to fight a rearguard action, defending the New Deal programs of the thirties.
Neither strategy will work anymore. America can’t compete with China and India simply by cutting costs and shrinking government—unless we’re willing to tolerate a drastic decline in American living standards, with smog-choked cities and beggars lining the streets. Nor can America compete simply by erecting trade barriers and raising the minimum wage—unless we’re willing to confiscate all the world’s computers.
But our history should give us confidence that we don’t have to choose between an oppressive, government-run economy and a chaotic