There have been endless columns and discussions about our slow recovery from the Great Recession, and our recovery has been slow and the recession was great, and we should be doing better, and I take the Krugmanesque position that a bigger stimulus package would have left us in better shape, but. Yes, but. But why is it so astonishing that we aren’t back to early 2008 yet? 2008 was a slowly deflating bubble that then exploded. The “Bush prosperity,” that forgotten entity, was the product of low taxes, low interest rates, massive government deficits, and the misguided conviction that owning a home would automatically make you rich. The Clinton boom of the late Nineties was the product of a conviction that owning stock would automatically make you rich. The “six fat years” of the Reagan Administration were the product of low taxes, low inflation, and massive government deficit spending—Ronnie doubled the size of the national debt in real dollars in just eight years. The halcyon days of the Fifties and Sixties, which live obsessively in the mind of both the Left and the Right, were helped along by two wars, massive catch-up in investment that had been postponed for twenty years, thanks to the Great Depression and World War II, along with the fact that the U.S. was the only modern industrialized nation on the planet.
I don’t go in for the notion that past prosperity was just a “blip,” a one-time thing. The ever-expanding reach of modern science, coupled with free (though far from perfect, as Alan Greenspan, and the rest of us, learned to our sorrow) markets, will continue to generate economic growth around the world. But I also wonder why the best of times is always treated as “normality.” Stock prices in January 2000 were not “normal,” so it shouldn’t be surprising that, adjusted for inflation, we still haven’t returned to those heights. And the same goes for housing prices. It was “easy,” reading about the Great Depression, to know that FDR should not have slashed spending after winning re-election in 1936. Having now lived through a real economic crisis in real time, we can understand how hard it is politically to make the “right” decisions or to pursue any course consistently across two or three election cycles. FDR failed to solve the Great Depression in eight years, but won World War II in less than four. Because wars are so much easier to fight than depressions?
