In a story in the Sunday Times of London, former Secretary of Labor Robert Reich, a leading spokesman for liberal economics, says this about the Obama budget:
It is the boldest budget we have seen since the Reagan administration, and drives a nail in the coffin of Reaganomics. We can basically say goodbye to the philosophy espoused by Ronald Reagan and Margaret Thatcher.
There is no question that President Obama’s budget, and his economic plans more broadly, are an effort to drive a nail through the philosophy espoused by Reagan and Thatcher. And so it’s worth asking: What exactly is the philosophy Obama intends to bury?
On one level, it is obvious and something many people can recite almost in their sleep: limited government, lower taxes, less regulation, and sound money. But what is less well understood, and in many respects more important, is the philosophical underpinnings of Reaganism and Thatcherism.
Margaret Thatcher gave voice to those views in two significant speeches. The first was to the Zurich Economic Society on March 14, 1977. In her address, Mrs. Thatcher warned against politicians who express a belief that private enterprise had a major role to play in the economy “but their deeds extended government into almost every part of business life.” She warned about how the nationalized sector of the economy was being extended, including plans for taking over banks. Reminding us that “in the mixed economy, as in a cocktail, it is the mix that counts,” she said. “The state sector has come to dominate the mixed economy. Its insatiable demand for finance has inhibited the operation of the market sector. Yet the public sector can only live on private enterprise, on whose surplus it relies.” She said that “the inability to foresee from the centre where the next innovation will come is a key failing of the planned economy.” And she said this, as well:
Collectivists may flatter themselves that wise men at the centre … can make better decisions, and waste fewer resources than a myriad of individual decision-makers and independent organizations all over the country. Events in Britain have shown that, wise or not, those at the centre lack the knowledge, foresight and imagination required. They are overworked and overwhelmed… How shaken and disabused are many of these intellectuals today. And rightly so, for we are now facing the crisis of Socialism: economic failure, social and political tensions; a decline in freedom of choice in education, health, economic activity.
On March 3, 1980, Thatcher (now Prime Minister) delivered an address whose main burden was placed on the role of the state and the right of the individual to freedom from state interference. “The first principle of this government… is to revive a sense of individual responsibility,” she said. She went on to say, “What we need is a strong state determined to maintain in good repair the frame which surrounds society. But the frame should not be so heavy or so elaborate as to dominate the whole picture. Ordinary men and women who are neither poor nor suffering should not look to the state as a universal provider.” And she then listed the layers of illusion that “has smothered our moral sense”:
The illusion that government can be a universal provider, and yet society still stay free and prosperous. The illusion that government can print money, and yet the nation still have sound money. The illusion that every loss can be covered by a subsidy. The illusion that we can break the link between reward and effort, and still get the reward.
This is the philosophy that President Obama and his team of propeller heads are seeking to discredit and reverse. The President, facing an economic crisis that demanded action (particularly in the realm of our financial system and credit flow), used this opportunity to attempt a staggering power grab by the federal government. His plans would enlarge its reach and scope beyond anything in our lifetime. And so Barack Obama — supremely ambitious, young, and new — has revived an age-old debate over how the economy works. He is casting his lot with collectivists and statists; his intent is to put us on a glide path to European-style socialism. Unless he is able to suspend the laws of economics, I rather doubt Obama will succeed. As a result, he may end up not repudiating Thatcherism and Reaganism, but revivifying them.
