The return of the ‘Misery Index’
The United States is currently experiencing its fastest rate of inflation, year over year, since mid-1982. Those of you who are old enough to remember that might also remember the…
American Experiment President John Hinderaker interviews acclaimed author Amity Shlaes about the lingering burdens of Big Government domestic policies from the 1960s.
Your new book, Great Society, turns out to be very timely because it seems to me that we are seeing a lot of echoes today of some ideas that many people thought were dead and gone after the 1960s.
That’s right. There are some wonderful books from the ’80s and ’90s that refer to the Great Society as a failure, yet so many themes of ’60s idealism are right back here today with young people supporting goals that were the named goals of the Great Society. For example guaranteed income, hike in the minimum wage, socialism, expanded health care for seniors, expanded health care for the poor, action in cities, Headstart. Activism generally as a solution for social ills.
Your book spans the Kennedy, Johnson, and to some extent Nixon administrations. I was surprised at how much talk of socialism was already in the air during the Kennedy years.
Well, you have a moment when the country feels absolutely prosperous, as we did just two weeks before this interview. The young people say, “We’re so prosperous. Ergo, we can afford …” fill in the blank. And there was a joke that Stalin said the only country rich enough to afford communism was the United States. That tends to be the way young people think. We can afford to share more because we’re so rich. That was the attitude then.
The Great Society programs tried not just to alleviate poverty, but to eliminate it. Was there an element of hubris in that?
Well, yes. President Johnson said, “Let’s not alleviate poverty; let’s cure it.” He used that verb cure, C-U-R-E. That was sort of the general attitude at the time, that poverty was curable. That is, America’s capable of anything, including getting rid of poverty. This is just a mopping-up action. So, think of the ambition of that. And that’s kind of similar to now. And it didn’t work out. Poverty is still with us. In fact, by some measures, the abatement of poverty slowed, flattened, particularly in the ’70s and ’80s, so the poverty rate went down when we had The War on Poverty of Lyndon Johnson. But it didn’t go down dramatically, after a few years it slowed, and here we are with poverty still.
Like the Vietnam War, the Great Society was administered by America’s best and brightest.
Many of us know the book by David Halberstam, The Best and the Brightest, which refers to people who advised. Kennedy and Johnson, particularly on foreign policy. They mapped the war in Asia, mapped Vietnam. They were so infatuated with their own planning and their own bird’s eye view that they never looked on the ground and saw the reality of Vietnam, that it was a guerrilla war, that it was subsidized and armed by the Soviets, and so on. Therefore, they missed a chance at peace and victory. But there was also a domestic crowd of the best and the brightest. There were the planners on the war side and planners on the peace side. At that time, government respected experts, especially social scientists. And the idea was that through knowledge in social science, we could obliterate poverty. If we hired smarter, nicer people, they would obliterate poverty, especially if they went to good schools. That was actually the attitude. It turned out poverty was pretty stubborn.
The Great Society era, of course, was also the Vietnam War era. And in your book, you talk quite a bit about guns and butter. How did the two together impact America’s finances and economy?
Guns is a proxy for defense spending. Butter is a proxy for domestic spending, especially entitlements. We live in an era of fallacy. Young people think that we spend more on guns than we do on butter. That’s not true and hasn’t been true for a long time. The TV actually tricks us by saying military spending takes a great share of discretionary spending. And people say, “Military spending is a great share of spending,” but they ignore that adjective “discretionary.” Discretionary spending is a category into which military falls, but it’s an increasingly small category of the whole budget.
Then there’s mandatory spending, not discretionary, which is increasingly large. And in that category fall entitlements. When you look at a pie chart of government spending, you’ll see entitlement spending is greater than defense spending. So, our entire discussion is off and was off even then, when we were spending much more on defense as a share of our spending. As a share of the economy, it was really the butter all along that got us in trouble. And the characters in my book, Great Society, began to realize that around 1970-71, which was when butter spending did overtake gun spending for the first time. And it’s been that way ever since.
And one thing that happened was an economic malaise and a flat stock market that lasted for a shockingly long time.
Americans consider an ever-rising stock market their birthright. Even now, as we’re taking the great 2020 plunge. Young people generally think the market will keep going up—it will go up when they buy their house, just like their house price, and it will go up again and then they’ll have a nice pension.
But that’s not what happened after the Great Society. Around the period of the Great Society, we were seeking to pass the thousand mark in the Dow Jones industrial average. We were pretty sure we were going to pass it. Every day, Richard Nixon talked to his staff and said, “Can today be the day, please? Just get it past 1,000.” We never did. Not during the entire ’70s.
How is it a stock market can stay below a number that it looked likely to cross for almost a generation? How is that possible? The reason was we had such anti-growth policies that we froze—we didn’t grow. And it was only in the period of Ronald Reagan (after some very tough adjustments by Reagan, President Carter and the Federal Reserve) that we began to grow again at a rate most of us consider normal in terms of markets.
There are dire consequences after a downturn if you don’t have pro-growth policies. That’s the message for us today, in the winter, spring of 2020, when everyone is hoping to get back to normal. If we really want to guarantee our markets will get back, it would be helpful to have more dramatic changes, such as the changes we finally applied even at the end of the ’70s, like a dramatic cut in the capital gains tax rate. So here we are, we have to learn from the Great Society. And what we’ve learned is our society has to be more pro-growth, more friendly to business.
When we hear the phrase Great Society, we think of social programs of the 1960s that failed and that have been abandoned. That really isn’t true, though. The fact is we are living with the legacy of the Great Society in ways that, especially in fiscal terms, are very problematic.
Joe Califano was an advisor to Lyndon Johnson. He wrote a pretty good book about the period stating, “We are living in Lyndon Johnson’s America.” By which he meant, today, we’re living in an America created by the Great Society, which was Lyndon Johnson’s program. And that is accurate. What do we live in that is of the Great Society? Public radio, Medicare, Medicaid, food stamps. And the general attitude—I think this is key—that litigation is often the answer for social justice. So we live with that program even as we say, the Great Society failed. And certainly, it did.
If you would rank all the Great Society accomplishments, I think you’d say right now Medicare didn’t hurt us that bad. My parents like Medicare, I hope to have Medicare. But Medicare is going to bankrupt our children. It’s going to deprive them of the opportunity to compound because they will pay more substantial taxes. Medicare will run out in 2026. It’s not a faraway date. It’s about when a child who’s entering university now will just have graduated, so what do we want to impose on them? It’ll be double or triple the taxes to make Medicare sustainable in the future. We never should have made that commitment.
And that was Johnson. What I find attractive about the Great Society—because there are attractive things—is the early emphasis on opportunity. There are not too many people who don’t approve of and admire the Civil Rights Act, the Voting Rights Act, the early laws that gave blacks the franchise. Those are good laws. But in the middle of the Great Society, we switched from seeking equality of opportunity to seeking equality of result. That would lead us to disparate impact lawsuits, affirmative action that sets Americans against Americans, interest groups who won’t permit reform in many areas. So that’s the later Great Society, and it imposes a pretty heavy burden on our social life. We, as Americans, are all divided because of the later Great Society.
We tend to associate the later Great Society with the Johnson administration. But your book is a good reminder that it actually continued under President Nixon.
Johnson was ambitious, Nixon was ambitious. And Nixon didn’t have huge Republican majorities in Congress to advance a Republican agenda. He had to work with Democrats. And so he said, “Fine.” Domestic policy for Nixon was negotiable, but it wasn’t where his heart was. He wanted to be in China, that’s where his heart was. So he agreed to all sorts of Democratic ideas, such as expanding food stamps and guaranteed income, which actually means spending more welfare money. The guaranteed income idea was, as today, a very virtuous sounding project. Give people money, not social workers, and they’ll find dignity, they’ll educate themselves and they’ll go to work. That was the idea. Nixon backed that. It didn’t become law, but he did back it.
It’s a remarkable thing that a Republican administration actually imposed wage and price controls.
It’s embarrassing to this day. Reagan was out there as governor of California, wryly commenting. He was a reality check who offered genuine free-market ideas. And eventually the electorate turned to Reagan.
Your book reminded me about the influential role that private-sector unions played at the time. That’s one thing that really makes it feel like a different era.
Yes, it does. When I’m out in the Midwest, I always speak about Walter Reuther, the leader of the United Auto Workers. That’s a name we don’t hear much anymore. But in the olden days, he was on the news every single night. Autos were the heart of the Midwestern economy, and UAW was a powerful, demanding union.
What younger people today may not realize and us older people may not recall is that public-sector unions were an insignificant force in that period. The big union was the private sector union, the industrial union. Workers, all of Detroit, were in a private-sector union. And together, Walter Reuther and Henry Ford colluded to make Detroit uncompetitive.
So if you want to know why Flint and Detroit went bankrupt later, it’s because our leadership, the private sector unions, the industrial unions and the auto companies who caved, made the wages and compensation packages of industrial workers so high that we were beaten out by foreigners.
We talked earlier about the fact that we’re living with the financial and social legacy of the Great Society. But your book points out we’re also living with a physical legacy of the Great Society in terms of architecture.
Yes. Architecture shapes our lives. We live in Lyndon Johnson’s architectural America. And indeed, the Kennedys’. In the olden days, when you built a government building, the people around the building might have had some say in the building. There was some concession to local feedback. But then there was a shift, before the ’60s but also in the ’60s. A document called, “Guiding Principles for Federal Architecture,” penned by Daniel Patrick Moynihan, said in effect, architects—experts, again—should decide what federal buildings look like and they should tell the government. The document had the effect of shutting the citizens out. Well, what was considered high architecture in the 1960s? Concrete cinder block, brutalist, modern, international style architecture. Pouring concrete is supposed to be cheaper than old-fashion masonry. I say supposed to be because when you pour concrete, you get an ugly building that starts to crack often after 10 years. Modern architecture is very unforgiving.
When age hits it, it looks terrible, and we rebuild it. A lot of the buildings we ruefully live with today come out of that period. Think of the Housing and Urban Development building in Washington, D.C. It’s so ugly, no one even wants to go on the Plaza. Jack Kemp called the place 10 floors of basement. It was conceived intellectually, but it’s hostile to humans.
You wrote a book a few years ago about Calvin Coolidge that got a lot of attention. And you’re now the chairman of the Coolidge Presidential Foundation. It strikes me that there’s a nice contrast between Calvin Coolidge, who kind of symbolizes the more modest view of the proper role and the powers of government, versus the hubristic view of the all-powerful and all-competent government that in some ways really peaked under Lyndon Johnson. What do you think about that?
What a contrast there is between President Lyndon Johnson and President Calvin Coolidge. President Johnson loved to legislate. It was said that Johnson put through laws the way other men eat chocolate chip cookies. Coolidge was much more cautious. This is a Republican president in the ’20s. He had written to his father while he was a young man, “It’s better to kill a bad law than to pass a good one.” Fewer laws were the rule Coolidge gave himself and the country. So, Coolidge vetoed quite a bit. For example, Coolidge came from a farming state, a very rough farming state, Vermont. The ag lobby thought he would support an agricultural subsidy—or at least not block it. Yet, Coolidge vetoed an agricultural subsidy twice in the 1920s. He vetoed veterans’ pensions even though he knew a lot of veterans. And this is when there was no Social Security. And he always said—I’m paraphrasing here—that we have no money to give a specific group that does not come from the whole of the people. The people cannot necessarily afford to serve this interest group. I find his views on government and the powers of government fascinating. One of the things we offer at the Coolidge Foundation is a scholarship to honor not only Calvin Coolidge but the scholarship candidates who acquaint themselves with Calvin Coolidge.
In her book Great Society, Amity Shlaes shows that planning policy implemented in the name of the collective hurts both the nation and the individual. The result of our collective projects was a new Silent Majority. Former Fed chairman Alan Greenspan has called the book “accurate history that reads like a novel.” Shlaes is the author of four other New York Times bestsellers, The Forgotten Man: A New History of the Great Depression, The Forgotten Man Graphic Edition (a full length illustrated version of the same book drawn by Paul Rivoche), Coolidge (a full-length biography of the 30th president), and The Greedy Hand: How Taxes Drive Americans Crazy