The most precarious legacy of the 1980s isn't resurgent greed but a larger threat-the related and unprecedented expansion of public and private debt, all dressed up in a cheery facade of responsible national policy-making.
Dangerously irresponsible may turn out to be a better description. The nation's resultant hangover, already being felt from California savings-and-loans to crumbling New England real estate, won't be resolved with a few spoonfuls of medicine. There's a worrisome chance that as the new decade unfolds the 1980s debt legacy could jeopardize the long and increasingly shaky U.S. business cycle teetering on financial dominoes, submerge the hoped-for "peace dividend" from Eastern Europe in a string of additional federal bailouts, further Japan's financial displacement of the United States and push this country back toward the uncertain political economics of Democrats and liberals.
In a rich political irony, the time has never been more ripe for someone on the political right to commandeer Barry M. Goldwater's 30-year-old title, "Conscience of a Conservative," for an indictment of relentless 1980s conservative willingness to scuttle past philosophies of fiscal responsibility. As deficits and debt became convenient-to pay for Japanese imports, perpetuate federal tax-rate cuts or pump up Wall Street's leveraged buyouts-top Republicans from former Treasury Secretary Donald T. Regan to economic theorist Milton Friedman began saying indebtedness wasn't a problem after all. From 1980 to 1989, as they talked, the U.S. national debt tripled from $900 billion to $2.8 trillion.
Some supply-siders actually expressed enthusiasm over debt as a sign of strength. Far from being a problem, America's ballooning international indebtedness of the late 1980s simply proved how anxious foreigners were to invest here. And mushrooming corporate debt wasn't a danger, either. On the contrary, managers of unleveraged companies were faulted for making insufficient use of their assets.
Embraced by many conservative politicians and members of the financial community, debt became respectable and even started leading the church choir. By 1989, corporate, consumer and mortgage debt was at record levels and financiers had pioneered an incredible new array of instruments to refinance everything from boats to recreational vehicles.
Few liberals-politically accustomed to debt and deficits since the New Deal-ventured to stand in the way. But the critical weakness was GOP willingness to abandon a half century of opposition in order to embrace supply-side and monetarist economic cure-alls and then rampant use of debt for speculation. This "economic engineering" of the 1980s may well be courting a failure akin to that of 1960s liberal "social engineering."