John Taylor writes Economics for the Long Run -Individuals should be free to decide what to produce and consume, and their decisions should be made within a predictable policy framework based on the rule of law in The Wall Street Journal, 1/25/12.
A big move toward more interventionist policies started in the mid-1960s, after more activist Keynesian economists came to town in the Kennedy and Johnson administrations, and it lasted through the 1970s in the Nixon, Ford and Carter administrations. We saw short-term stimulus packages, temporary tax rebates or surcharges, go-stop monetary policy with inflationary overexpansion followed by severe contraction, wage-and-price guidelines and controls. The eventual result was high unemployment, high inflation and slow economic growth.
This was followed by a shift toward more predictable policies and a more limited role for government starting in the Reagan administration and largely continuing into the George H.W. Bush and Clinton administrations. The result was lower unemployment and higher economic growth with long expansions and few recessions.
More recently—beginning during the George W. Bush administration but really taking wings in the current Obama administration—policy has returned toward more and more government intervention, with results we are all experiencing.
The clear lesson is to find and select those leaders, regardless of political party, who along with their advisers are most firmly committed to the principles of economic freedom and who know how to implement and maintain them.
Taylor also notes the need for some consistency in our policy. Reagan took long term solutions and we largely stuck with them thought successive administration of both parties. Short term fixes and stimulus , temporary tax breaks, that do not address the long term horizon makes it nearly impossible for most businesses to plan and invest. In fact the more they feel the game is rigged the less likely they are to play.
We are a victim of our own success. With a thriving economy we think we can solve any problem and afford any program, and we start to betray the very principles, such as economic freedom, that we used to build a solid economy.