Writing nearly 40 years ago, historian Ernest R. May warned of the dangers of misusing history for policy purposes. May was primarily concerned that policy makers drew the wrong lessons from the past.
In their opinion piece in yesterday’s Wall Street Journal, Glenn Hubbard, dean of Columbia Business School and an advisor to Mitt Romney, and Phil Gramm, a former US senator (R-TX) misuse history in another way: they misrepresent facts to support a partisan policy agenda
Hubbard and Gramm contrast the robust “Reagan Recovery” after the recession of the early 1980s with the tepid “Obama Recovery” following the current recession. They argue that a “Romney Recovery” would look very much like a Reagan recovery.
Hubbard and Gram’s argument is simple. The 1981-82 recession and subsequent savings and loan crisis resulted from the tight monetary policy conducted by then-Federal Reserve chairman (and Democratic-leaning) Paul Volcker. The subprime crisis occurred because the government (read: Democrats) intervened in the mortgage market, easing mortgage lending rules.
The 1981-82 recession was caused by tight monetary policy, however, the savings and loan crisis–which erupted nearly a decade later–was due in large measure to the policy of financial deregulation pushed through during the Administration of the very Republican Ronald Reagan.
And blaming the recent recession on easing subprime lending rules while ignoring the ruinous consequences of Republican George W. Bush’s tax cuts (combined with increased defense spending) and Republican Alan Greenspan’s excessively loose monetary policy isn’t so much a misuse of history as a willful ignorance of it.
The argument that Reagan’s fiscal policy set the economy up for robust growth is laughable. The economy picked up during the mid-1980s because Reagan ran huge deficits by cutting taxes and increasing spending. Any other interpretation is a misuse of history.