Short history lesson

Moral decay? Or deregulation?

Andrew Leonard is unhappy with my colleague David Brooks for suggesting that rising debt in America reflects moral decay. Surprisingly, however, Leonard doesn’t make what I thought was the most compelling critique.

David points out, correctly, that something changed around 1980 — that consumers started spending a larger share of national income and that debt began increasing. Although he doesn’t point this out, this was also when the federal government first began running substantial deficits even in good years.

David would have you believe that what happened then was a decline in Calvinist virtue. But, um, didn’t something else happen around 1980? Can’t quite remember .. someone whose name begins with the letter “R”?

Yes, Reagan did it.

The turn to budget deficits was a direct result of the new, Irving-Kristol inspired political strategy of pushing tax cuts without worrying about the “accounting deficiencies of government.”

Meanwhile, the surge in household debt can largely be attributed to financial deregulation.

So what happened? Did we lose our economic morality? No, we were the victims of politics.

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