Bill Kristol: Reagan Revolution Isn't Over

The leading neoconservative talks about the GOP, Obama, the financial meltdown, and why it pays to be a contrarian in politics and the market

By Maria Bartiromo

Bill Kristol is not just another Republican pundit. Yes, he is the editor of The Weekly Standard, a conservative periodical. And yes, he writes an op-ed column for The New York Times as sort of the right-winger-in-residence. But Kristol, who co-founded the neoconservative think tank Project for the New American Century, has also helped influence American foreign policy and been a leading voice of one of the most powerful political movements of the late 20th century. I talked with him about the election and the fracturing of the Republican Party.

Maria Bartiromo: Is the Reagan economic revolution over?
William Kristol: No, I don't think so. What is Obama proposing? A hike in income tax rates from 36% to 39%? That's not exactly back to the pre-Reagan numbers. Despite the financial crisis, despite the obvious deserved hits that Wall Street is going to take and all that, the truth is free trade remains incredibly strong. You can't look at the past 25 years of world history—at what has happened in India and China, with hundreds of millions of people coming out of poverty and say: "Gee, let's move away from freer markets."

In a recent column in The Wall Street Journal, former Reagan speechwriter Peggy Noonan attacked Sarah Palin, saying that, among other things, she is a symptom of the vulgarization of American politics. You fired back with a Times column saying most of the recent mistakes of American public policy were brought to us by highly educated and sophisticated elites. What were those mistakes, and would you include the invasion of Iraq as one of them?
No on Iraq, but the mistakes include all kinds of policies that were pushed by faculties at Harvard and Yale and that turned out not to be so good for the country. But the thing I had most in mind was the financial crisis. I mean, an awful lot of incredibly smart and well-educated people invented very fancy financial instruments that they didn't fully understand, and that put a lot of ordinary people's savings at risk. It wasn't Main Street that invented mortgage-backed securities or decided that financial firms could be leveraged at 50 to 1. The public isn't always as knowledgeable as it could be, but generally speaking, the American public has a pretty good track record of using common sense. And I would say intellectuals and elites have a less good track record because they fall in love with various fads.

It's interesting that Barack Obama keeps talking about spreading the wealth, and yet sometimes he comes across as an elitist.
He is very much a product of Harvard Law School…and that's fine. But I do think he believes that if he gets the really smart guys in a room in Washington or New York, they can sort of retool the American economy. I don't think he has that fundamental, I would call it a Hayekian belief—after Friedrich Hayek, the great Austrian economist—in the limits of central planning, the limits of very smart people's abilities to figure things out. I do think Obama is instinctively very much a government-knows-best guy.

Is the case to fix this financial upset being made properly? One day we're going to buy the toxic assets of the banks; the next day we're going to buy stakes in these banks.
You don't want to second-guess people in this kind of crisis. It's pretty amazing and pretty unprecedented. But I sort of agree with your sense that they didn't think things through as much as they might have. It seemed crazy to go after the toxic assets first rather than to take care of the immediate issue of liquidity. And certainly the [government's] explanation of what they were doing was lacking. The idea that you can put out a two-and-a-half-page document in the middle of the night in a democracy and expect everyone else to say, yes, this is what has to happen, I think was bad. So it's taken a while for the markets to regain some faith that the Treasury and the Administration knew what they were doing.