PROLOGUE

Cycles

The great historian Arthur M. Schlesinger Sr., father of the late historian and presidential adviser in the Kennedy years, may have been the first to identify a cyclical pattern in American politics, one that swung between liberal and conservative poles in roughly twenty-five- to thirty-year cycles. The reason for the cycling, he suggested, was inherent in the imperatives of winning national elections. To put together a national majority, the thoughtful leaders of both the left and right parties—Schlesinger called them “radicals” and “conservatives”—each had to gain the support of a much broader constituency:

   The thinking conservative finds his chief allies in the self-complacency of comfortable mediocrity, in the apathy and stupidity of the toil-worn multitudes, and in the aggressive self-interest of the privileged classes. The honest radical draws much of his support from self-seeking demagogues and reckless experimenters, from people who want the world changed because they cannot get along in it as it is, from poseurs and dilettanti, and from malcontents who love disturbance for its own sake.¹

Political cycles turn when an extended period of either conservative or liberal hegemony brings the baser, more self-interested, or barmiest elements to the fore. The market and regulatory reforms introduced by economic and monetary conservatives in the 1980s, I believe, made a major contribution to the recovery of American competitiveness and economic energy. But as the cycle wore on, conservatism came to be defined by an opportunistic alliance between rapacious finance and militant evangelism. Now the global financial crash has discredited the financial freebooters, while polls suggest that a growing national majority has rejected the right-wing social agenda.

Under normal circumstances, Barack Obama’s election victory in 2008 would have initiated a new liberal political cycle that would shift national investment more toward our increasingly impoverished public sector—from bridges to public universities. But policy has been hostage to the large financial deficits stemming from two foreign wars, large tax cuts, revenue losses from the Great Recession, and stimulus spending to mitigate the effects of the crash.

As a solid energy- and manufacturing-based recovery gets underway, however, America’s international trade accounts will quickly move toward balance, even as rising incomes and quickening commerce boost federal revenues. Trade and budget deficits will shrink in real terms and cease to dominate the political discourse. A vigorously growing economy going into the 2016 election should lock in a liberal ascendancy for a considerable period. “Liberal” in this context doesn’t necessarily mean “Democrat”—Bill Clinton was a distinctly conservative Democratic president in keeping with the spirit of the period. To win national office during the liberal ascendancy, Republicans will make similar adjustments. But true conservatives shouldn’t lose heart. It is virtually guaranteed that by the mid-2030s or so, bureaucratization and other ills of the liberal gene pool will have ignited grassroots movements to throw the bums out. But for the next twenty years or so the public sector will be reinvigorated.

In the second part of this book, therefore, I look at two areas in which good public sector policies are critical—infrastructure and health care. Infrastructure almost speaks for itself. The level of infrastructure investment relative to GDP has fallen off dramatically, to the point where it could actually inhibit the industrial recovery.

Health care is a more complex case. It is now one of the country’s largest industries and largest single employer, and a field in which, by terms of the Affordable Care Act, the government will necessarily be playing a large role. It is not at all the “stagnant service” or economic “deadweight,” that some economists allege; rather it is a technology driver in both semiconductors and biotech, with a high rate of innovation-driven productivity growth—an industry beloved by venture capitalists, a prime target for federal research dollars, and a priority market for major businesses at GE, IBM, Hewlett-Packard, 3M, and hundreds of other companies. And according to Barron’s, the large pharmaceutical companies may be on the verge of a new round of high-productivity drug innovation, after years in the doldrums after losing patent protection on their last generation of blockbuster drugs. But at the same time, there are deeply engrained cost issues in American health care that must be solved if it is to fully realize its promise.

With reasonable policies, public-sector-driven infrastructure and health care will complement and stimulate the growth in the private sector and ensure that it is more or less balanced across the entire economy. The final chapters offer thoughts on making that happen.