In many respects, these days remind me of 1979, and I would argue that we don’t have the worst recession since the days of the Great Depression, but rather since the days of Jimmy Carter. I know the parallels are not exactly the same: for example, bond yields do not yet reflect the inflation we have experienced, and will experience.

I do remember taxes being cut (in three phases according to the wisdom of Dave Stockman), the price of oil falling, and, in 1982, perhaps the brightest investment outlook I can remember in my life.

I remember federal revenues rising, Congress consuming the taxes and then some. I remember Anne Gorsuch, Reagan’s EPA administrator being eviscerated for her attempts to diminish the powers of her domain. But in those days Robert Bartley was on the top of his game: he was proved right, and ever since folks like Paul Krugman and Laura Tyson have been sore. The first thing out of Ms Tyson’s mouth (as Clinton’s CEA chief) was “stimulus” and the first thing out of her mouth after Obama was elected was “stimulus,”
meaning just like Jimmy Carter, we should drop hundred-dollar bills out of airplanes, only this time there should be more tons, this time dropped correctly, using GPS, over defaulting mortgagees who live in favored precincts. Paul Krugman says the last $800 billion airlift was not enough.

Your real question is whether all this is just two steps forward, one step back. I don’t think “the Keynseans” will change their minds this late in their careers, but I smell rebellion out there, especially since many have figured out what these grand plans will cost them. Remember, Bastiat didn’t have a blog.