In a controversial New York Times piece that’s been receiving attention from both the left and the right, former Reagan budget director David A. Stockman recently argued that the federal government’s activist role in manipulating our economy for the past eight decades is responsible for our current dire financial straits.
Stockman dissects the history of abuses carried out by the Federal Reserve and notes, correctly, that the Keynesian policy of endless money printing to stimulate demand and promote liquidity leads to long-term, permanent inflation and an erosion of our currency’s value. He takes to task George W. Bush for recklessly expanding Medicare, Obama for his poorly targeted stimulus bill, and both for their role in the 2008 bank bailout. He notes that even so-called fiscal hawks like House Budget Committee Chairman Paul Ryan vastly underestimate the severity of our debt crisis and soft-pedal the steps needed to resolve it.
But Stockman gets a lot wrong, too, and the bulk of his error seems to stem from a renegade streak that reflects his desire to prove himself more sagacious than both left and right. To wit: any analyst who finds equal economic fault in both parties—labeling the problem “bipartisan,” as Stockman does—misunderstands the situation. Yes, the right deserves blame: Nixon decoupled paper money from gold; Reagan built up massive federal deficits; George W. Bush increased government spending more than any president before him. But Stockman justifies holding both parties equally accountable by inappropriately coupling spending cuts with raising taxes as solutions to mitigate deficits. Stockman falls into the trap—as do most liberals—of equating federal expenditures with tax cuts. In the liberal worldview, both entities are equivalent, because each involves spending in different forms—one on government programs that largely help the poor and middle class, the other on tax breaks that largely favor the wealthy.
But lowering marginal tax rates on high-income earners doesn’t involve spending; it involves not taking money that isn’t the government’s in the first place. Revealing either his confusion or his deliberate blurring of the issue, Stockman writes, “Washington is piling a soaring debt burden on our descendants, unable to rein in either the warfare state or the welfare state or raise the taxes needed to pay the nation’s bills [emphasis added].” Cut massive wasteful federal spending, gouge the rich—it’s all the same to Stockman.
Similarly, he bemoans Bush’s “giant expansion of Medicare and a tax-cutting spree for the wealthy… In effect, the G.O.P embraced Keynesianism—for the wealthy.” In other words, Stockman thinks letting the wealthy keep their money in the hope they’ll invest and create more wealth is the functional equivalent of burying money and paying people to dig it up.
At times Stockman rails against the size of the entitlement state, but he’s inconsistent in denouncing it. At one point he complains that Ryan’s “proposal for draconian 30 percent cuts over a decade on the $7 trillion safety net—Medicaid, food stamps and the earned-income tax credit—is another front in the G.O.P.’s war against the 99 percent.” Is Stockman Reagan’s former budget director or a closet Occupy Wall Streeter?
Stockman betrays further obtuseness when he complains that our two stubborn political parties, caught in “stasis,” won’t resolve our fiscal crisis in one fell swoop, but rather “in carefully choreographed crises over debt ceilings, continuing resolutions and temporary budget patches.” In other words, the country’s having to white-knuckle it through endless, panic-filled stopgap measures is equally the fault of Democrats who refused to pass a budget for four years and Republicans who desperately tried to get one signed into law during that period. Neither party is more to blame than the other.
Showing further solidarity with the left, Stockman writes that not only should we end deposit insurance and inexpensive Fed loans for Wall Street, but banks should be “banned from trading, underwriting and money management in all its forms.” So banks should have to shoulder all the risks inherent in their profession—a sensible idea—but government should arbitrarily restrict the scope and nature of their profit-generating activities? Isn’t that just the inverse of the problem we have now?
But what really undercuts Stockman’s case is the solutions he presents to resolve our crisis. While he suggests some sensible ideas involving smaller government, including reining in the Fed and replacing the welfare state with a modest means-tested safety net, he inadvertently reveals an odd, megalomaniacal desire for control. Under his plan, for example, Stockman would demand “the abolition of incumbency”; he would order “sweeping constitutional surgery” that would require “providing 100 percent public financing for candidates; strictly limiting the duration of campaigns (say, to eight weeks)… [and] overturning Citizens United…” Stockman is willing to throw out free speech—including our ability to spend money to advocate for political candidates and messages—in the process of saving the country. Why don’t we just let Stockman pick our leaders right now and be done with it?
Anyone who sees so little difference between the ideological foundations and policy contributions to our economy of our two major political parties—and who botches so many of the specifics in his exegesis of our current woes—either doesn’t have a grasp of the situation or is trying to mislead us. And Stockman’s restrictive, authoritarian solutions suggest that—as with Democrats and their congenital desire to manipulate other people’s wealth—he really just wants to tell us working-class schlubs what to do.
- Stockman Warns: The Bubble Will Burst Soon (valuewalk.com)
- David Stockman: So basically, the state has destroyed capitalism (canadafreepress.com)
- Reagan Budget Director: Republicans Are Leading Us To Another Massive Wall Street Crash (addictinginfo.org)
- David Stockman, Ex-Reagan Budget Director: George W. Bush’s Policies Bankrupt The Country (huffingtonpost.com)
- Stockman Warns of Crash of Fed-Fueled Bubble Economy (bloomberg.com)