David R. Henderson  

The Single Most Consequential Political Act since 1955

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If you ask me, the single most consequential political act of my lifetime is likely to be President Obama's decision to throw the Bowles-Simpson recommendations under the bus. That may have destroyed the last chance to prevent a budget train wreck. Yet Rauch believes that Obama is one of the good guys, a professional able to compromise.
So writes Arnold Kling.

I think he has a contender. And obviously the context Arnold must have in mind is a political act in this country and how it affects this country. Otherwise, the fall of the Berlin Wall and the consequent end of the Soviet Union on Christmas day of 1991 have to count above Arnold's choice.

So sticking with that context, let me give my contender that I think is more important than his: George H.W. Bush's decision to make war on his erstwhile ally Saddam Hussein. While that war looked cheap to America at the time (only about 150 U.S. lives lost and a large percent of the budgetary cost paid by some Arab nations and Japan), one unintended consequence was the 9/11 attacks. Those, in turn, led to a dramatic increase in financial regulation, a dramatic drop in civil liberties, and a dramatic drop in the freedom to travel.

So, dear readers, what say you? What are your contenders? Keep in mind that I don't want it for your lifetime but for Arnold's. I was born in 1950, he in 1954. So how about the most consequential political act in 1955 or later.

As co-blogger Bryan says, please show your work, that is, give your reason(s).


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CATEGORIES: Economic History




COMMENTS (38 to date)
Robert Park writes:

For economic impact, I nominate Eisenhower's initiation of the interstate highway system.

khodge writes:

I'm going to have to see some definition of "compromise" that makes sense of any action taken by President Obama.

James D. Miller writes:

Deng Xiaoping taking control of China in 1980. Without his leadership China would likely be much poorer and weaker than it is today.

khodge writes:

Easily the sequester...everything political that has happened in my lifetime has happened in the context of "making politics work." The sequester is the one thing where neither party blinked and marked virtually the only time in the last half century where either party could honestly lay claim to making a real effort to reign in an uncontrolled federal bureaucracy.

Thomas writes:

9/11 was pretty insignificant. What was important was the political decision to invade Iraq, restrict civil liberties, etc.

[Mistyped email address revised.--Econlib Ed.]

E. Harding writes:

1. 1965 Social Security amendments.
2. Voting and Civil Rights Acts.

Toby writes:

I fear that this exercise might run into the problem of when a decision can be said to have caused something...

I find it a bit too far-fetched to argue that George H.W. Bush can be said to have caused events more than a decade later. Plenty of other factors that were at work there. How much of it can really be attributed to George H.W. Bush's decision? And what about the decisions that could have been taken that we have not seen by Bill Clinton in between or any other politician in the 90's? Someone not acting might have been an even more consequential political act, but we will never know.

Varioius writes:

The creation of Medicare. Actuarially speaking (i.e., in net present value terms) Medicare is by far the biggest liability on the nation's balance sheet

Phil writes:

I find it interesting you chose GHWB repelling Iraq out of Kuwait over the son's ill-advised and unprovoked invasion of Iraq. Please explain why the father's actions were a bigger mistake than the son's.

Nicholas Weininger writes:

Wait, seriously? Most consequential since 1955? There's a long, long list ahead of Bowles-Simpson. Some items off the top of my head, in addition to those commenters have mentioned already:

The Tonkin Gulf resolution.

Medicare and Medicaid, without which there would have been no need for Bowles-Simpson.

The Rockefeller drug laws which ushered in the era of mass incarceration.

The 1982 Medicare payment formula changes which contributed crucially to US health care costs rising faster than the rest of the world's.

GHWB's decision to condition further loan guarantees to the Soviets (needed for their grain purchases) on their letting Eastern Europe go in peace.


Kevin Erdmann writes:

I second Nicholas, with the addition of the Civil Rights Act of 1964, with two separate subtopics that led to distinctly different influences:
(1) Title VII
(2) The rest of the act

Sieben writes:

I won't offer a nomination, but I think there's likely to be a large bias in favor of older events. There's been decades and decades for the consequences of medicaid and drug laws to be fleshed out. The total consequences of recent financial legislation are far from obvious.

Daniel Kuehn writes:

Can you explain how that caused 9/11?

I think W Bush's invasion of Iraq is up there because of its extraordinary cost to us and the enormous destabilization and loss of life in the region.

Health reform has the potential to have a lasting impact on making life more humane in the US much like the New Deal before it.

That's my lifetime. I think the Civil and Voting Rights Acts are contenders for the period you note. JFKs handling of the missile crisis. In the grand scheme of things the moon landing will be seen as the beginning of a new epoch in human history.

Tom Nagle writes:

It's really stretching to blame 9/11 on GHWB's decision to lead a war to drive Saddam back from Kuwait. Certainly Jimmy Carter's decision to train and arm radical Islamists to fight the Soviets in Afganistan was both earlier and more directly related to Al Qaeda's capability to wage war on the west. And from a moral perspective, funding a war to re-impose servitude onto the female population and death on the non-Muslims of Afganistan simply to tie down the Soviets was an immoral use of force that disrupted the lives of Afgans' who just wanted to live in peace. In contrast, GHWB's was a limited war to expel
Saddam from Kuwait which, although a monarchy, was much more liberal and respectful of human rights than was Saddam.
Finally, the only way George HW can be held responsible for the US Government's idiotic and morally irresponsible response to 9/11--the invasion of Iraq--would be for not smothering George W at birth before he could do so much damage. But how could he have known that his eldest son would turn out to be such an idiot.

David R. Henderson writes:

@Phil,
I find it interesting you chose GHWB repelling Iraq out of Kuwait over the son's ill-advised and unprovoked invasion of Iraq. Please explain why the father's actions were a bigger mistake than the son's.
For two reasons: (1) the less important one is that the first Gulf invasion led to the second one. Without Senior doing his thing, Junior would have been unlikely to do his; (2) the war on Iraq in 1991 led to U.S. troops being stationed in Saudi Arabia and to sanctions on Iraq enforced mainly by the U.S. Those were two of Osama bin Laden’s three main recruiting tools.

JK Brown writes:

It's not a single event but I would say the deregulation in the '70s and '80s. It did turn around the horrible economy created starting with the New Deal. That permitted us to push the Soviets economically and through military build up. It could be argued to have opened the small crack that personal computing was able to slip through before regulation caught on. Where's the internet with those old phone receiver modems?

Here is an assessment of regulation from 1950:

"Is the big and successful corporation its own master, then? Not quite.

"To begin with, it is severely circumscribed by the government. as Professor Sumner H. Slichter has said, one of the basic changes which have taken place in America during the last fifty years [1900-1950] is "the transformation of the economy form one of free enterprise to one of government guided enterprise....The new economy," says Dr. Slichter, "operates on the principle that fundamental decisions on who has what incomes, what is produced, and at what prices it s sold are determined by public policies." The government interferes with the course of prices by putting a floor under some, a ceiling over others; it regulates in numerous ways how goods may be advertised and sold, what businesses a corporation may be allowed to buy into, and how employees may be paid; in some states with Fair Employment laws it even has a say about who may be hired. "When a piece of business comes up,' writes Ed Tyng, "the first question is not likely to be 'Should we do it?' but 'Can we do it, under existing rules and regulations?' "He is writing about banking, but what he says hold good for many another business. Furthermore, in the collection of corporate income taxes, withholding taxes, social security taxes, and other levies the government imposes upon the corporation an intricate series of bookkeeping tasks which in some cases may be as onerous as those it must undertake on its own behalf. Thus the choices of enterprise are both hedged in and complicated by government. "

BC writes:

I'm not sure whether this constitutes "an act", but I would say by far it was the election of Reagan in 1980. (I guess one could convert this to an act committed by one person instead of millions of voters by changing it to Reagan's decision to run.) It has been noted here and on other blogs that in the 1970s, it was still quite common for economists to advocate price controls and all sorts of interventions, which is unimaginable today. The triumph of free-market ideology over the ensuing 35 years has been truly transformative considering the path that we were on before. Even those on the Left now recognize the supremacy of markets over command-and-control (and as a result have really been struggling for decades now to find and articulate market-based principles that are consistent with their desire for bigger government). It should also be noted that in 1980 it was still conventional wisdom in many circles that Reagan was too "extreme" to be elected. Maybe, Iran's taking of American hostages was the actual enabling act.

hanmeng writes:

@Toby,

I agree.

Somewhere a butterfly flapped its wings.

Mike Buckland writes:

I'll go with the passage of the National Defense Education Act of 1958. Signed by Eisenhower, this act set the federal government as the sole source for all things higher ed in the US.

A couple of the many pieces of this legislation:

1>. It set up most of the suite of agencies that still have lots of input into what research the government will fund. NASA and DARPA were parts of this act.

2> It set up the idea that the government should be funding most research and development. Grants and fellowship funds to universities to encourage research began here.

3> The beginning of the federally guaranteed student loan was here. This allowed talented students to advance their learning. For some it allowed a better life than they would have without the ability to borrow to study. For others it means a life long debt for 4 years of vacation from life.

In essence this act was the beginning of federal control of the higher education system. It's the beginning of the massively expensive bureaucracy as well as the wonders of a college education in reach of all. Of the great things coming from a better educated workforce and the lives destroyed by debt. The beginning of an unbelievable cost spiral of education and technology for the masses.

Philo writes:

The last action that, had it been different, would have averted the Vietnam War. I don't know which action this was, but I'm pretty sure it occurred later than Jan. 1, 1955.

J Storrs Hall writes:

November 22, 1963, Dallas, TX, by Lee Harvey Oswald.

Before this, presidents could walk down the street like normal people and you could buy a gun mail-order. No other single instant marked a greater leap along the path from republic to empire.

Pajser writes:

It seems that you talk about USA political events only although it is not specified in Henderson's post. I would expect that libertarians think in international terms by default.

Any case, the most consequential act in USA history from 1955 to now is decision to believe to Soviets and negotiate during Cuban missile crisis.

patrick k writes:

Tear down this wall....

Hazel Meade writes:

The decision of the "State Committee of the State of Emergency" to attempt overthrow Mikhail Gorbachev on August 19, 1991.

Because that action lead directly to the collapse and dissolution of the USSR, which made America the sole super-power.

Trevor H writes:

I can't answer without tying myself in epistemic knots which I guess is kind of the fun.

The string of causality from the 1st Iraq war to the second isn't clear. If you look at the plausible policy alternatives available to Bush in 1990 besides going to war, they likely still included economic sanctions and significant troop presence in Saudi. Meaning 9/11 is still a likelihood even with a more peaceful resolution of 1990.

And while the first Iraq war was certainly necessary to set the stage for the second, it was hardly sufficient. We had an administration that was determined to fight in Iraq again and capitalized on a public that was ready to go kick someone's, anyone's, ass.

Kling may yet be proven correct, but that's quite speculative. It implies that we've now passed the point of no return with respect to solving the nation's structural fiscal imbalances. I'm far from convinced about that.

My instincts are to go with the decisions to launch the war in Vietnam or the second war in Iraq for the obviously terrible impacts both of them had on the nation and the world.

What about the positive side? The 70s/80s deregulation and the civil rights movement are good candidates, but not so satisfying to me as they're mostly about undoing prior harms done by government.

Landing a man on the moon was a stunning achievement not possible by private enterprise whose impact will be felt by humankind for centuries. I can think of some drawbacks, but I'll go with that.

Andrew writes:

Easy, Al Gore inventing the internet...

LTPhillips writes:

JFK's assassination, which resulted in LBJ's presidency, the Great Society, greater involvement in Vietnam (Southeast Asia), and economic policies that made stagflation in the 1970s possible (inevitable?). Nixon's victory, a result of LBJ's policies, also resulted in rapprochement with China, is probably the most important geo-political event in the post WWII era, with the exception of the implosion of the Soviet Union.

RCurry writes:

I'm with LTPhillips.

Except for what follows "Nixon's victory, a result of LBJ's policies..."

His victory "also resulted in"...Nixon taking the dollar all the way off the gold standard.

SJ writes:

Roe v. Wade seems like a pretty major one domestically. There have been something like 58 million abortions in the US since 1973. Abortion was and is a highly contentious issue, and it probably would have remained illegal in large swaths of the country without the court's intervention. So even if you don't care one way or another about the morality of the issue, the demographics results would seem to matter a whole lot.

Moebius Street writes:

America's drug laws were mentioned above, but I'd like to be a little more specific. I think that Nixon's official recognition of a "War on Drugs" paved the war for its erosive effect on civil liberties; the corrosion of the professional police force and its relationship with the public; and the export of those policies across the world, causing upheaval and suffering everywhere.

Mark V Anderson writes:

The terrible Supreme Court cases of the '70's, headlined by Roe V Wade of course. Also Duke Power, which forbade intelligence tests by employers. There was case whose name I forget which forbade government support of any school if that school also was religious. There are a few more I believe, that I don't remember.

Zeke writes:

1. Choice to not regulate Internet and subsequent reversal by FCC.

2. Chevron decision. Created massive legislative abilities for regulatory bodies. Really strengthened the grip the modern regulatory state has on american life.

3. The 86 IRC -- still feeling the benefits of that base broadening and rate reduction agreement.

Fralupo writes:

Easily the Space Race. Launching Sputnik, Laika, Gagarin, Glenn, the Apollo missions, etc. took humanity from ants crawling on the Earth to potential masters of a vertical horizon. Can you imagine how our economy, technology, military, and politics would be different if we couldn't see from higher than the upper atmosphere?

Ever-improving weather forecasting alone... I can't imagine what hurricane season was like back before that.

David R. Henderson writes:

@Zeke,
Thanks. Those are all good candidates. I think you mean TRA, the Tax Reform Act, right?

Edgar writes:

China's legalization of private enterprise in 1978 resulted in the single largest increase in human welfare in all of history. Not only did the welfare of the Chinese population nearly instantly begin to skyrocket but that of China's trade partners as well.

Zeke writes:

@ Prof. Henderson,

Yes, the TRA. IRC is just short hand for the internal revenue code, so the IRC of 1986 meant the code created in 1986. It was such a major change in the tax law that the modern code is still referred to as the 86 code, as amended.

Sorry for the confusion.

David R. Henderson writes:

@Zeke,
Thanks.

LD Bottorff writes:

I have a great deal of respect for Arnold Kling and not much for President Obama, but how has Pres. Obama been different from previous presidents when it comes to ignoring plans to control the budget? George W. seemed content to let economic growth take care of the budget (and it was on track to do that, but you can never count on growth continuing). Clinton got lucky enough to have a Republican Congress that was interested in slowing the growth of spending - until Speaker Hastert took over. GHWB didn't want to risk a shutdown during a military action, but he still could have tried to enact some long-term agreements. Ronald Reagan gave up on controlling spending early in his presidency.
The Bowles-Simpson recommendations would have been politically costly for President Obama. Failing to act on the recommendations was just par for the course.
I vote with Edgar.

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