Ten years ago next month, when the Dow was at 6,381.94 and the NASDAQ was at 1,300.12 -- last Wednesday they were 12,176.54 and 2,384.94, respectively -- Alan Greenspan warned against "irrational exuberance." But last Tuesday's election results were fresh evidence that two events which profoundly shaped American politics during the last two presidencies were episodes of irrational exuberance unrelated to economic behavior.
The Democratic episode was the Clintons' attempt to radically restructure and semi-socialize the 16 percent of the economy that is the health-care sector. The Republican episode was -- is -- Iraq.
The Clintons' health plan never even came to a vote in a Congress their party controlled. Two years later, President Clinton was silly to say that "the era of big government is over," but a different era was over. It was the era of confidently comprehensive, continentwide attempts to reform complex social systems.
Ten weeks before the 1994 elections, Martha Derthick of the University of Virginia wrote of the plan produced by Hillary Clinton's 500-person task force: "In many years of studying American social policy, I have never read an official document that seemed so suffused with coercion and political naivete ... with its drastic prescriptions for controlling the conduct of state governments, employers, drug manufacturers, doctors, hospitals and you and me."
The Clintons' health care plan validated the perception that their party was gripped by both intellectual hubris and intellectual sloth -- meaning, it was still in a New Deal and Great Society frame of mind. This perception contributed to the 1994 election in which Republicans gained 52 House seats (and soon five more from party switchers) -- ending 40 years of Democratic control of the House -- and eight Senate seats (plus two party switchers).
Last Tuesday, 12 years of Republican control of the House ended because of the Bush administration's foreign policy equivalent of the Clinton administration's overreaching regarding health care. Republicans should feel relieved: Considering that in November 1942, 11 months after war was thrust upon America, President Roosevelt's party lost 45 House and nine Senate seats (there were then just 96 senators), Tuesday's losses were not excessive punishment for the party that has presided over what is arguably the worst foreign policy disaster in U.S. history.