Economic Facts Play Second Fiddle To Feelings

This feature, Economic Viewpoint, originated on Sept. 5, 1983, when then- Editor-in-Chief Lewis Young concluded that BUSINESS WEEK's readers needed a better perspective on the Reagan Administration's economic policy. I was chosen as the columnist for the new feature. My column ran every other week, sometimes in two full pages.

On May 6, 1985, a new policy was announced by Stephen B. Shepard, the new editor-in-chief: "Roberts' lively and provocative articles have made the feature a popular one. We have decided to build on that success. Beginning with this issue, Economic Watch [the feature's title until November, 1987] will appear in the magazine every week instead of only twice a month as it has in the past. To join Roberts, we have enlisted three other distinguished contributors."

After 16 years as BUSINESS WEEK's longest-running columnist, I'm writing my last column. Over those many years, I heard from more readers than I could answer. To make partial amends, I'm dedicating my final column to the three issues that brought in the most mail--the budget deficit, Social Security privatization, and Michael Milken. Readers whose local papers don't carry my syndicated column can find me at and monthly in Investors Business Daily.

RED INK. Many of my columns dealt with the deficit hysteria that threatened to wreck the supply-side plan for escaping from stagflation and worsening trade-offs between inflation and unemployment. Supply-side economists concluded that the malaise of the U.S. economy came from pumping up demand with easy money while discouraging output with high marginal tax rates. The inability of Keynesian economists to revive their demand-management policy opened a door for supply-siders.

President Reagan's plan was to reduce the growth rate of the money supply gradually while improving economic incentives. The Fed, however, believed that economic growth caused inflation and overreacted to what Chairman Paul A. Volcker saw as a massive fiscal stimulus. Volcker put the economy into recession before the tax cuts went into effect, and Reagan began deep in the deficit hole.

The red ink terrified Republicans, whose antideficit rhetoric had defined Republican economics since the days of Herbert Hoover. Budget Director David A. Stockman and Council of Economic Advisors Chairman Martin S. Feldstein argued that the deficit would force up interest rates, crowd out investment, and prevent an economic recovery. They wanted the tax cuts put on the back burner, repealed, or other taxes raised.

The deficit hysteria grew over time. Wall Streeters claimed the deficit would revive inflation and wreck the bond market. Economists blamed the deficit for a strong dollar that allegedly was deindustrializing America and for a trade deficit that allegedly was giving foreigners control over the U.S. economy.

I carefully answered these misconceptions, but Republicans read, "deficits don't matter," and the hate mail poured in. The years passed and the deficits persisted, but inflation and interest rates continued to fall. The U.S. economy continued to expand, and U.S. companies became the most competitive on earth. Today, the budget deficit has disappeared, but the trade deficit is larger than ever.

The facts and the Republicans passed by one another like ships in the night. Exhausted by deficit monomania, the Republican Party has lost its edge as the party of ideas, and its leadership is floundering.

The responses of New Deal Democrats to my articles on privatizing Social Security were as emotional as Republicans' responses to my deficit articles. Some readers hated the idea of a privatized pension system, and I'm grateful to them for making me aware before my debate with former N.Y. Governor Mario Cuomo on National Public Radio that Social Security isn't a subject that can be broached with facts and analysis. We're in a race between the passing of the New Deal generation and the collapse of Social Security.

The hate mail in response to my columns about junk-bond king Michael Milken was a third lesson in the feebleness of facts. Milken's persecution was the vehicle by which an ambitious U.S. Attorney became mayor of New York. Milken was tried and demonized in the media. To end the ordeal, Milken agreed to a six-count plea bargain of minor infractions that had never before involved any time in prison, and he was double-crossed. Despite the insistence of many readers, Milken was not convicted of insider trading.

As a columnist, I've found that giving people information may not work when they want emotional vindication. As the growing emphasis on feelings crowds out reason, facts will play a smaller role in public discourse.

Before it's here, it's on the Bloomberg Terminal.