by Meg Jacobs, MIT
One of the key turning points in recent American politics came in the 1970s when the GOP succeeded in selling austerity as a necessary policy response to double-digit inflation. With the success of that claim, the Republican party blunted the sharpest weapon in the Democrats' arsenal. What was lost was not only electoral victory when Ronald Reagan defeated Jimmy Carter but also a reigning legitimizing vision of political economy for the Democratic Party. Since the 1930s, the Democrats had succeeded in political and policy terms by advancing Keynesian arguments, which legitimized public spending. To be sure, politicians on both sides of the aisle reaped political gains from government spending. But when the market conditions of the 1970s challenged the wisdom and effectiveness of fiscalism, the Democrats paid the price. This paper will explore how economists, intellectuals, and politicians across the political and ideological spectrum reacted and responded to changing economic conditions of the 70s with the result being the delegitimization of public spending. As we know, of course, reality did not always match rhetoric as became clear with the explosion of the public deficit in the 1980s. Still, in political terms, austerity replaced spending as the necessary and proper governmental policy. While we have many histories of the rise of the right and recently Dan Rogers has offered an excellent examination of the return of pro market ideas, we need studies that will lay out in detail exactly how the triumph of fiscal austerity as a reigning idea played out in American politics.