Given that title, I’m not sure I need to write a post, since no one will read this post which is really a comment on Simon Wren-Lewis’s post “Left, Right and Macroeconomic Competence.” I thought this title was less openly twitty than “Commenting on Wren-Lewis,” but I will go on to comment on Brad DeLong commenting on another post by Wren-Lewis.
Mainlymacro has been even more a must read than usual and, it seems, has been very stimulating. the post on Macroeconomic Competence is excellent.
Wren-Lewis starts by saying it is unfair to the right to act as if US Republican presidents are representative. Then he looks at the UK and three alleged policy mistakes. One choice seems odd to me.
three major macroeconomic policy errors over this period, all of which occurred when the Conservatives were in power. However that alone proves nothing: Labour was in power for fewer years and might have been lucky. 
The period starts with Margaret Thatcher and the brief experiment with monetarism. Here you could use the inflation/unemployment contrast – the policy succeeded in getting inflation down very rapidly, but at high costs in terms of unemployment, which persisted because of hysteresis effects.
The 1990 recession can also be linked to left/right influences. The rise in inflation that preceded the recession (and to some extent made it necessary) was partly down to Nigel Lawson’s tax cuts. I have been told by one insider that the key wish at the time was to cut the top rate of tax, but it was felt that to do this alone would be politically damaging, so tax cuts were made across the board. That was not the only reason for the late 80s boom – there was also the decline in the aggregate savings ratio that in my view had a great deal to do with financial deregulation – but it was a factor.
I am especially relatively ignorant about the UK, but I had a different story for the late 80s inflationary boom and subsequent recession. My story is that the 1987 stock market crash made the lady who wasn’t for turning, turn. I think that Thatcher feared a second great depression and demanded expansionary monetary policy by the non yet independent Bank of England. In any case, there was sharply expansionary fiscal (and I think monetary) policy and an inflationary boom, followed by a recession.
According to the conventions of both academic macro and policy makers, this was a bad mistake (they mistake they always fear). It is also the time when the Western border of schlerotic old Europe moved from the Atlantic to the English Channel. In 1985, the UK was the number one example of hysteresis, Eurosclerosis and all that. In the 90s it was the number two example of relatively healthy “Anglo-Saxon” economies (I typed the scare quotes, because I, like most anglophones, am not Anglo-Saxon).
I think the UK policy errors of the late 80s showed that “hysteresis” is Greek for “tight monetary policy” — that the extremely persistent unemployment problem was tractable, if one were willing to accept temporarily slightly higher inflation.
I’d tend to guess that the error was inducing an un-necessary inflation fighting recession in 1990, not inducing an inflationary boom in the late 80s.
Attempting to reduce my exteme ignorance, I went to FRED and slapped together this graph. I use the 3 month gilt rate as a safe short term interest rate, because it was easy to find. The 3 month nominal rate minus lagged CPI inflation is my index of monetary policy (the deviation from a super simple sub-Taylor rule). The registered unemployment rate follows with a lag of about one year (longer than the standard pre-hysteresis 6 months but not very long).
My reading of the graph is “keep the safe short term real interest rate below 5% (5%!) and you’ll be OK”.