Self-Inflicted Wounds: From LBJ's Guns and Butter to Reagan's Voodoo Economics.

• Author: Peterson, Wallace C.

On January 1, 1966, Hobart Rowen began his career with The Washington Post, where he has worked for 28 years as a reporter, senior economics correspondent, financial editor, and columnist. In 1965, economist Arthur Okun's "Discomfort Index," a measure obtained by adding the unemployment and inflation rates, was 6.1, the lowest level the index reached in the 33 years between 1960 and 1993.

Rowen joined the Post at the start of the long, slow economic and political decline of the United States. Today, Rowen says, "...America can no longer boast that it is number one. Indeed, we are the world's largest debtor nation, and many critics insist we have become a second-class power unable to lead the world by virtue of either our unmatched economic prowess or our political sagacity."

Though momentarily the nation is modestly recovering from the 1990-91 recession, the economic decline of which Rowen speaks is real. Since the late sixties, the real wage of the American worker has fallen, family income has stagnated, the gap between rich and poor has widened, and productivity growth, the ultimate engine for economic progress, has fallen to less than half its historic average.

The central thesis of Rowen's thoroughly documented book is in the title: Our wounds are largely selfinflicted. Specifically, Rowen says, the immediate fault lies with the last six presidents, each of whom failed at critical times to make the right decisions that would have maintained the nation's economic health.

Rowen is right that the decline began with Johnson, a flawed and tragic figure. Rowen relates in rich detail Johnson's economic duplicity, showing how in 1966 he concealed the exploding costs of the Vietnam War not only from the American public but from his economic advisors, trying desperately to find money for both the war and his Great Society. In 1966, military spending jumped by 21.6 percent over 1965, an $11 billion increase, which at today's prices would be nearly $50 billion. For political reasons, Johnson refused even to consider a tax increase (1966 was an election year), which Keynesian economics dictated and practically every economist in the nation supported.

With unemployment below four percent in 1966, the large increase in military spending without an offsetting tax increase was a sure-fire formula for inflation. The consumer price index jumped from a modest 1.6 percent rise in 1965 to a 5.5 percent increase by 1969.

Enter Richard Nixon, a more evil than...