Economics
From “Papering Over the Problem: Killing the Dollar to Save Bear Stearns”, from “The Cunning Realist”‘s Wilson Burman, in “The American Conservative”. Leaving aside some issues here and there and the Reagan love, a couple of key thoughts echo those I have had, ie; wait a decade and we’ll be blaming that president for problems time-bombed from this president.
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Anyone who works long enough on Wall Street knows, at least sub-conciously, that this is the way things work: if the going gets tough, a small coterie of unelected and mostly unaccountable officials in Washington will probably decide that your employer is too important to fail. […]
Inflation’s defining characteristic is expediency. It obviates sacrafice and postpones pain. That makes it a natural compliment to many political ventures, particularly unpopular wars. As early as 1965, Lyndon Johnson’s economic advisers worried about rising inflationary pressures. As Johnson resisted calls for new taxes, the deficit for fiscal year 1967 came in at $9.8 billion. By the time Congress and the White House finally agreed on a tax increase, in 1968, after years of escalation in Vietnam, the deficit was $25.2 billion and inflation was rampant.
Of course it got far worse over the next decade. Even as the seeds of inflation planted in the mid-1960s grew, Richard Nixon put pressure on Fed Chairman Arthur Burns to goose the economy for the 1972 election. That dynamic continued and worsened during the 1970s. By the early 1980s, Ronald Reagan was dealing with the consequences of decisions made by Johnson and Nixon over a decade earlier. Part of Reagan’s legacy was the latitude he gave Paul Volcker, as risky and painful as that was, to deal with these problems. Unless one believes that the next president will want to take the hit for Bush’s decision, or that soneone with Reagan’s mandate and courage is about to appear, whoever is in the White House a decade from now will probably confront the economic fallout from current policies. But by that time will anyone remember how it started? How many cursed LBJ or Nixon in 1979? The White House not only knows the answer, it’s counting on the nation’s forgetfulness.