Big One in 2008

This is from the latest issue of Forbes, and nicely encapsulates the upcoming debate in 2008; namely, which direction will the U.S. go? I have read other editorials which suggest, correctly I think, that the U.S. is in a generational battle between an FDR vision of the world and a Ronald Reagan vision of the world. These are fundamental questions that have huge implications for our future GDP growth rates, taxes, technological advances, and the types of policies we implement to try to solve big problems (Social Security, Medicare, healthcare, etc.)...

Big One in '08Steve Forbes 01.07.08, 12:00 AM ET
by Steve Forbes

The upcoming presidential election will be the most critical one since 1980. Back then Ronald Reagan decidedly defeated incumbent Jimmy Carter, ushering in radical new policies that would successfully set the course of this country for the next quarter-century. Unlike previous administrations, Reagan's dramatically cut taxes (the top income tax rate dropped from 70% to 28%). Reagan pushed government deregulation and reined in nondefense, nonentitlement spending. And, most important, he won the Cold War, an extraordinary victory that few experts had thought possible. We have been living off Reagan's dividends ever since.

What course will the country take now? Will we significantly simplify the tax code and cut tax rates, as Rudy Giuliani and some other GOP contenders advocate? Or will we raise taxes to stagnant, old-Europe levels, as all the Democratic presidential wannabes favor doing? Will we push for consumer control of health care or will we have a de facto socialized system, such as that Hillary Clinton is pushing? Will we turn Social Security from a liability into an asset by allowing people under the age of 50 to have personal accounts that are owned by them, not by Washington politicians--a system that will yield far greater returns than the current Social Security system could possibly do? Or will we go the Democratic way of heavier payroll taxes and reduced benefits?

Regarding foreign policy, will we take a broader, more vigorous approach to combating terrorism, deploying not only our military (which must be beefed up) but also a Reagan-like type of "soft diplomacy," such as far more effective use of radio and Internet broadcasts to troubled parts of the world? Will we push pro-growth economic policies that emphasize sound money, low taxes and property rights for developing countries or the detrimental high-tax, cheap-money policies of the current Treasury Department and the IMF?
Fundamental questions all.

While the mud will fly, there will also be a vigorous debate on where we go from here. How that debate is resolved will determine the course of our economy and the direction of the stock market. If the optimistic example of Ronald Reagan triumphs, we'll have sound, noninflationary growth, and we'll lead the world in technological innovation. The stock market will soar easily to new heights. But if the current Democratic platform wins, we are in for troubled times.
I am an optimist. I believe the spirit of Ronald Reagan still reigns in this land.