Chapter 2 of Toomey's Road to Prosperity

Partial review of The Road to Prosperity: How to Grow Our Economy and Revive the American Dream, by Patrick J. Toomey and Nachama Soloveichik. NY: Wiley, 2009.

A few years ago I wrote a lengthy multi-part review of Rick Santorum’s book. I’d like to do something similar for Toomey’s Road to Prosperity. Each post will discuss one or more chapters of the book with a post at the end with a linked list of all the entries and some final thoughts.

The second chapter "Lessons from History," (pp. 25-49) does indeed spell out Toomey's view of American economic history. Toomey believes the Great Depression was caused by government policy set in place by Pres. Franklin Roosevelt, in particular "the mismanagement of monetary policy by the Federal Reserve Bank" (27). The book says deflation can only be caused by "a contraction in the supply of money relative to the overall volumes of goods and services. Since the Federal Reserve controls the supply of American money, deflation, like inflation, is always the fault of the Fed. (28)." After outlining Hoover's mistakes (continuing to spend on public works projects, raising tariffs, turning on Wall Street with a vengeance, and so on).

Enter FDR who introduced numerous regulations "price controls; minimum wage rules; health requirements; child labor laws; and production quotas" (31). The fiend! Toomey, however, thinks "mandatory wages and work hours for instance, made some labor too costly and thereby increased the ranks of the unemployed"(32). Here again Toomey invokes the specter of the private sector innovations and spending that would have occurred had not the government intervened with regulations and taxes. While acknowledging that FDR's alphabet soup programs (CCC, WPA, etc) put people to work he thinks that had FDR not moved money from the private sector to the public sector, the private sector would have righted the economy on its own, and possibly sooner.

FDR is also presented as a class warrior, blaming the economic problems on the wealthy. His policies are presented as the primary cause of the prolonged depression. There is no mention of the Dust Bowl or agricultural problems, other than farm subsidies. There is no discussion of international events.

Skipping ahead the book moves to the Reagan years. Since Reagan followed the economic principles set out in the first chapter it is no surprise that Toomey views these years as a time when "these gains directly resulted in a better standard of living for virtually all American -- including the poor" (38). The good times lasted until mid-2008, but it is all attributed to Reagen with little mention of the Clinton or Bush years. Jimmy Carter does get some credit for signing a few deregulation bills. Lower taxes and deregulation are credited with starting and maintaining the economic boom.

Then we shift to free trade, which led to "the greatest period of prosperity in the history of the United States" (43). NAFTA, CAFTA, and other free trade agreements led to increased trade. No mention of the effect on employment. Again Bush and Clinton are given passing mention but the lion's share of the credit goes to Reagan.

To add an international flavor Toomey outlines the growth of the Irish economy during the same time period (1980's, 1990's, and 2000's). This also is attributed to lowering tax rates and government spending. One specific example given is the deregulation of the airline industry and the rise of Ryanair to compete with Aer Lingus. There is no mention of the economic downturn in Ireland in 2008 or of other economic problems there, nor the positive effect of EU membership or government subsidies to lure in foreign countries. For an alternate, brief view, see the wikipedia entry on the Celtic Tiger.

My concern with this chapter is that it provides an extremely cursory history and explanation of some very complex topics. It also does not take into account outside factors, such as climate issues, global economic issues, income disparity (while Ireland's overall economy improved during the Celtic Tiger days it did not do so evenly), the entry of women into the workforce, and so on.

The rest of the chapters of the book each concern specific economic topics.