Republican Economist John Taylor Wants to Relive Reagan's Glory Days

I would love to live in the alternate universe that Stanford Professor John Taylor lives in. According to his editorial/column/wishful-thinking-exercise

, the American economy would be gangbusters if the political class would cut taxes and regulations and let the free market work its magic...just like the magic period of the 1980s and 1990s. Taylor's thesis is simple: the political class was non-interventionist during the 80s and 90s, and that non-interventionism is what drove the economy to good things. For starters, if interventionism in the economy is so bad, why stop and go back to only the 1980s? We could go back and eliminate the growth in government of the interventionist 1960s. We could roll back everything FDR accomplished and set us back to the 1920s. That would take us all back to the non-interventionist heyday. Remember how great the economy was in the 1920s? That was the height of pure capitalism. The economy was explosive with growth; the rich did extremely well and the stock market was booming. Everything was great...well, until it exploded and left the country in a massive hole. (Sound familiar?) And yet, despite 30 years of proof that Reagan's Voodoo Voldemortnomics don't work for anyone outside the top tax bracket, we have the good Professor calling for more of the same policies. Taylor says, "Since President Obama took office, we've added on complex regulatory interventions in health care (the Patient Protection and Affordable Care Act) and finance (the Dodd-Frank Wall Street Reform and Consumer Protection Act). The unintended consequences of these laws are already raising health-care costs and deterring new investment and risk-taking." Once again, what color is the sky in this man's world? Health care costs were rising long before Obama was elected President. His health care plan, which hasn't even kicked in yet, will lower costs overall. You don't have to take my word on it or the professor's word on it. Click

and read straight from the Congressional Budget Office. As for Dodd-Frank and the CPA, I'm not sure what precisely the professor thinks

policy would look like or what, exactly, he would support. Taylor is by all counts against intervention in the economy, so clearly the bailouts were bad. But he's also against regulating Wall Street so it doesn't set the American economy up for destruction via complex and dangerous schemes. In other words, he doesn't want to stop them from destroying the economy and he doesn't want to help them when (not if, when) they blow up the economy. That leaves what — letting the economy die? Watching everything collapse and twiddling one's thumbs at the purity of one's political posturing? I am not willing to sacrifice the economic future of my child or your children to satisfy Taylor's reactionary, puritanical religious devotion to limited government at any cost. And believe me, Taylor's plan is as close to religious devotion to political ideals as one can get. He is as attached to markets and market ideology as the Pope is to Jesus Christ. "The way forward is not more spending, greater debt and continued zero-interest rates, but spending control and a return to free-market principles," Taylor wrote. Aah yes, those lovely free-market principles. Let's assume for a moment that the professor is correct in his assertion that the 1980s and 1990s were defined by non-intervention by the government in the economy (some would argue otherwise, but that is another column for another day). Were things really that great for the American economy? If you listen to the professor, sure! Things were great. The economy created 44 million new jobs. There was unprecedented economic growth. Ronald Reagan freed us all with that wonderful trickle-down economic theory. There were pony rides and ice cream cake for everyone. We all won! That's a wonderful story, and one day will rank up there with Harry Potter and Twilight as the three greatest fiction narratives of our lifetimes. The real story is that, depending on how you wish to look at it, the American people barely broke even in that time frame or flat out lost in that period. Since 1980, the American worker has seen (best case) a raise of 1.5%...in 30 years. Woo hoo? Hardly. How can it be true that the policies of the 1980s and 1990s, which led to such economic growth, benefited America but not Americans? Because the professor misunderstands America. Wall Street is not America. What is good for Wall Street is not automatically what is good for America. What reduces (however minimally) profits for Wall Street is not automatically bad for America. Economically, the period the professor speaks of as the ideal American economy was a disaster for everyone except Wall Street and the extremely wealthy. Take all of the economic gains of the last few decades. Where did it go? Believe it or not, more than 80 percent of the gains went to the top one percent. That's great for the top one percent and an absolute nightmare for the other 99 percent. Yet, there were some standard of living gains from the 1980s and 1990s that Americans experienced. What drove those gains, if not the gains from the economic growth? Well, in the 1980s, housing boomed. Equity from housing (either flipping houses when upgraded or flat out refinancing) gave Americans an asset-growth that fueled the economic engine of the middle class. Remember, real economic growth went almost exclusively to the top 1 percent. It was this paper asset growth in housing that led to the appearance of wealth gains and a good economy. The bubble burst, of course, in the early 1990s, leading to a recession. Economists at the time had ti backward. Since they saw housing as an asset that would always go up, price declines had to be caused by a disruption in the system; in this case, that disruption was the recession. What they didn't know, and we now know, is that housing prices can (and do) fall, and the decline in those assets will trigger a recession. The 1990s saw a similar boom bubble (technology/internet stocks) followed by a crash. In what way is this cycle — housing boom and bust, stock boom and bust — a positive model for an economy? In both cases, the economic gains that Americans made were not real, productivity-based gains in wages, but were paper gains, made to bubbled assets. Reaganomics was no panacea: it was, and remains, the ultimate Ponzi scheme. Professor Taylor should be ashamed for supporting it.