“The New American Economy: The Failure of Reaganomics and a New Way Forward,”
By Bruce Barlett; Palgrave MacMillan,
New York, New York; 2009; 266 pages; $28.00.

There are probably more economic theories than there are economists. Author Bruce Bartlett is a blend of economist and historian. A domestic policy advisor to President Ronald Reagan and a Treasury Department official under President George H.W. Bush,
In the opinion of some Republicans, Bartlett betrayed party lines by eventually renouncing the economic theory most associated with Reagan: supply side economics. On the other hand, he didn’t do much to endear himself to Democrats when he put forward the concept that supply side economics appeared more like an idea that might have been put forward by New Deal Democrats under Franklin Roosevelt than Republican conservatives under Ronald Reagan.
In this book, Bartlett puts forward his position that the Great Depression of the 1930s and the Great Recession of 1908 through the present have more in common than either political party like to admit. He notes that President Herbert Hoover in 1930 was focused on monetary policy (mostly controlled by the Federal Reserve) to the virtual exclusion of fiscal policy (as implemented by Congress and the Executive Branches of government) and the velocity of the marketplace (the speed and frequency of commercial transactions that include everything from loans to food purchases).
According to the author, once again both Republicans and Democrats have missed something. He comments that although most economists remembered to include monetary and fiscal policy this time around, very few remembered the critical impact of velocity. One of the few who did was Ben Bernanke, a scholar of the Great Depression and the present chairman of the Federal Reserve. Bartlett doesn’t believe that Bernanke deserves the criticism leveled at him. That’s because he made every move he legally could to affect monetary policy as well as influence velocity. So far, the major banks have done little to increase velocity through loans to business and individuals. Also, the Congress is split into two (some say three or more) political positions concerning fiscal policy.
About half the book deals with how we got into this mess. The remainder is Bartlett’s view of how (or even if) we can get out of it. In his view there is little likelihood that we can escape substantial tax increases at the federal and state levels. He points out: “So obvious is the necessity of higher revenues to maintain a semblance of fiscal integrity that even some hard-core supply-siders have given up on the idea that deficits will lead to spending cuts by starving the beast [big government].
“Like it or not, they recognize that higher taxes are coming.”
He goes on to add:
“The real danger is that politicians will think they can get the revenue that is needed just by soaking the rich or imposing punitive taxes on politically vulnerable industries such as oil. But there isn’t nearly enough potential revenues from these sources to fill the fiscal hole that now exists even at confiscatory rates.”
Bartlett adds a wrinkle in his view of the future: the U.S. adoption of a value added tax (VAT). With tongue only partly in cheek, the author notes that until now, a VAT has been the kiss of death to those in Congress who have backed the concept. Even in countries where it has been in use or proposed for the past 30 years, it’s hard to find large groups of people backing it. He quotes a widely repeated saying by economist Larry Summer in 1988:
“The reason the United States doesn’t have a VAT is because conservatives view it as a money machine and liberals see it as a tax on the poor. We will have a VAT when liberals figure out that it is a money machine and conservatives see it as a tax on the poor.”
“The New American Economy” is a well-written book that points out how we painted ourselves into an economic corner, and why we are going to need years of bitter medicine to get us out. The book will probably not be among the most widely read works on what has taken place in the American economy.
Nevertheless, it is a plainly expressed explanation of the past, the present, and what could likely to be our future.

--Henry Holtzman

Here are the current top 10 bestselling books for business. The list is compiled based on information received from retail bookstores throughout the U.S.A.

1. “How the Mighty Fall: And Why Some Companies Never Give In,” by Jim Collins (HarperCollins…$23.99) (8)*
Why companies that fail usually die of self-inflicted wounds.
2. “Strengths Finder 2.0: A New and Updated Edition of the Online Test from Gallup’s Now, Discover Your Strengths” (Tom Rath…Gallup Press…$22.95)**
Discover your strengths and integrate them with your career.
3. “Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System - and Themselves”
(Penguin Group…$32.95) (2)
Does the size of a failing company dictate government rescue?
4. “SuperFreakonomics: Global Cooling, Patriotic Prostitutes, and Why Suicide Bombers Should Buy Life Insurance,” by Steven D. Levitt & Stephen J. Dubner (HarperCollins…$29.99) (1)
The author of “Freakonomics” strikes again.
5. “The Sellout: How Three Decades of Wall Street Greed and Government Mismanagement Destroyed the Global Financial System,” by Charles Gasparino (HarperCollins…$27.99) (4)
How greed and incompetence brought the financial system down.
6. “Outliers: The Story of Success,” by Malcolm Gladwell (Little, Brown & Co…$27.99) (6)
Why the cause of success can be linked to where you were born.
7. “In FED We Trust: Ben Bernanke’s War on the Great Panic,” by David Wessel (Crown Publishing…$17.54) (5)
What happened in “the Fed” during 2008 and 2009.
8. “A Whole New Mind: Why Right-Brainers Will Rule the Future,” by Daniel H. Pink (Penguin Group…$15.00) (9)
Pink’s four-year old book is attracting renewed interest.
9. “Linchpin: Are You Indispensable?,” by Seth Godin; (Penguin Group…$25.95)**
To survive in hard times become more proactive, not reactive.
10. “How to Smell a Rat: The Five Signs of Financial Fraud,” by Ken Fisher (John Wiley & Sons…$24.95) (7)
When an investment seems too good to be true, it usually is. A road map to a rich life with or without lots of money.

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*(1) -- Indicates a book's previous position on the list.
** -- Indicates a book's first appearance on the list.