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The coming Bush bust.

Article Excerpt
NEOCONOMY: GEORGE BUSH'S REVOLUTIONARY GAMBLE WITH AMERICA'S FUTURE BY DANIEL ALTMAN PublicAffairs, 290 pages, $26.95

INNOVATION AND ITS DISCONTENTS: HOW OUR BROKEN PATENT SYSTEM IS ENDANGERING INNOVATION AND PROGRESS, AND WHAT TO DO ABOUT IT BY ADAM JAFFE AND JOSH LERNER Princeton University Press, 256 pages, $29.95

RUNNING ON EMPTY: HOW THE DEMOCRATIC AND REPUBLICAN PARTIES ARE BANKRUPTING OUR FUTURE AND WHAT AMERICANS CAN DO ABOUT IT BY PETER G. PETERSON Farrar, Straus and Giroux, 272 pages, $24.00

IS THERE A DEMOCRATIC VIEW OF economics? Under Bill Clinton, Democrats came to stand for fiscal prudence, welfare reform, and a fairly conventional view of foreign trade. Full employment was the main engine of a more equitable income distribution. Clinton also went along with the dismemberment of much of the regulatory state, some of which boomeranged when liberated financial markets erupted in scandals that are still reverberating.

The single most memorable policy of the Clinton era was Rubinomics--the premise that balanced budgets would allow lower interest rates, steady growth, and high employment. Federal Reserve Chairman Alan Greenspan was a willing partner, though he lived to regret the low interest rates when they fueled a stock-market bubble that was also enabled by an excess of deregulation.

Today, Clinton's entire approach has been reversed by George W. Bush, the surplus is gone, and Social Security is at risk, along with the stability of the U.S. economy. With Congress in Republican hands, nearly all of the Democrats' economic battles have been defensive.

The Republican story is that the economy thrives when entrepreneurship is unleashed: Cut taxes, therefore, reduce regulations, and market threes will do the rest. In this view, increasing the debt is no problem because we will grow our way out of it. Nor is a falling dollar worrisome because the world's investors are still attracted to America's dynamism: A cheaper currency makes our products more attractive in world markets, which will eventually moderate the trade deficit (and in any case, the central banks of China and Japan will keep buying our bonds because

they need us to buy their exports).

Today, the ostensible economic issues are the cause and cure of the budget deficit, the swooning dollar, and the...