Posted on 10/06/2010 5:46:24 PM PDT by blam
David Stockman: U.S. Is In ‘Race To The Fiscal Bottom’
STOCKMAN SPEAKS OUT:
David Stockman, the former budget director during Ronald Reagan’s first term, speaks out on the Obama presidency, the state of the economy, the Bush tax cuts, and what the midterm results might do to the Democratic agenda.
Image credit: Ronald Reagan Presidential Library
October 6, 2010
By JENNIFER DePAUL
The Fiscal Times
It’s been nearly three decades since David Stockman was the brash and brilliant enfant terrible of President Reagan’s White House, but he hasn’t mellowed with age.
The Bush tax cuts are “unaffordable,’’ he says. Extending them would be a “travesty.” President Obama’s stimulus program was “futile.” Ben S. Bernanke, the Federal Reserve chairman, is undermining the whole economy. Today, Stockman says, “I invest in anything that Bernanke can’t destroy, including gold, canned beans, bottled water and flashlight batteries.”
Stockman, Reagan’s budget director from 1981 to 1985, initially became famous for his zeal in slashing government spending on almost everything except defense. Less government and lower taxes, he fervently believed, would ultimately mean more prosperity for everyone. But he will be best remembered for confessing, in an interview with William Greider for The Atlantic Monthly, his disillusionment with the “supply-side” economic policies that led to soaring deficits under Reagan. “None of us really understands what’s going on with all these numbers,’’ he declared, along with many other criticisms that nearly got him fired.
Today, Stockman is working on a book about the financial crisis, and he recently shared his thoughts with The Fiscal Times about some of today’s most pressing fiscal issues. No surprise — he’s as brutally candid as ever.
The Fiscal Times (TFT): What should the president and Congress do about the Bush tax cuts this year?
David Stockman (DS): The two parties are in a race to the fiscal bottom to see which one can bury our children and grandchildren deeper in debt. The Republicans were utterly untruthful when they recently pledged no tax increases for anyone, anytime, ever. The Democrats are just as bad — running their usual campaign of political terror on social security and other entitlements while loudly exempting all except the top 2 percent of taxpayers from paying more for the massively underfunded government they insist we need.
In effect, we undertook a national leveraged buyout, raising total credit market debt to $52 trillion, which represented a 3.6X leverage ratio against national income or GDP.
The fact is, the Bush tax cuts were unaffordable when enacted a decade ago. Now, two unfinanced wars later, and after a massive Wall Street bailout and trillion-dollar stimulus spending spree, it is nothing less than a fiscal travesty to continue adding $300 billion per year to the national debt. This is especially true since these tax cuts go to the top 50 percent of households, which can get by, if need be, with the surfeit of consumption goods they accumulated during the bubble years. So Congress should allow the Bush tax cuts to expire for everyone. By doing nothing, the government would be committing its first act of fiscal truth-telling in decades.
TFT: Should the government provide more stimulus for the economy, or cut spending to bring the deficit down?
DS: We are not in a conventional business cycle recovery, so stimulus is futile and just adds needlessly to the $9 trillion of Treasury paper already floating dangerously around world financial markets. Instead, after 40 years of profligate accumulation of public and private debt, and reckless money-printing by the Fed, we had an economic crash landing, which left us with an enduring structural breakdown, not just a cyclical downturn.
The only solution is a long period of debt deflation, downsizing and economic rehabilitation, including a sustained downshift in consumption and corresponding rise in national savings.
In effect, we undertook a national leveraged buyout, raising total credit market debt to $52 trillion which represented a 3.6X leverage ratio against national income or GDP. By contrast, during the 110 years prior to 1980, our aggregate leverage hugged closely to a far more modest ratio at 1.5 times national income.
The only solution is a long period of debt deflation, downsizing and economic rehabilitation, including a sustained downshift in consumption and corresponding rise in national savings.
Common sense, get out of debt, stop spending, cut everything federal until we back on solid ground and pass laws to never let the government have the peoples assets again..
Wrong answer.
It could just as easily have been Barack Obama, Harry Reid, or Nancy Pelosi who said this. What's this guy smoking? Letting people keep their own money is never "unaffordable". Government spending is unaffordable.
I have never understood the phrase “tax cuts are unaffordable.”
Shouldn’t it be the government spending that is unaffordable?
Two of Ronaldus Magnus’ worst judgment calls were [a] allowing himself to be persuaded to take on Herbert Walker Bush as his heir apparent and [b] hiring an incoherent little tax & spend boffin like Stockman. There had to have been more than one RINO mole in his inner circle.
David Stockman never met a tax increase he didn’t like. Never met a tax decrease he didn’t hate.
Spending has to go down in real terms, in nominal terms. A lot. Period. Departments have to go away. Period. All the folderol about tax increases is a way NOT to discuss the real issue. The government spends way, way, way too much money on stuff that makes no difference to anyone except piggies at the trough.
“The Bush tax cuts are “unaffordable,’’ he says. Extending them would be a “travesty.”
That’s you version of common sense.
The fact is that David Stockman has not had a public presence for decades and he is saying lots of things to trash in today’s environment the very kinds of things that his boss Reagan would have done - like the “Bush” tax cuts.
He wants the public limelight again and the media will give it to him if he trashes anything GW Bush did.
He’s looking for one final attempt as a public policy “statesman”; a “legacy” before he’s ignored again for another 30 years - which is what should happen.
There are smarter people than him saying some of the good things he is saying, before he’s said them, doing a better job of saying them and not trashing GW Bush just to get the media working for them.
CLintoon and bama have had solid rat majorities for two years at least....if the pressure wasn't on in the 90's against hillary's health care "plan" and if the Pubs hadn't taken over the Senate and House, Toon would never had the economy that he is credited with....and with bama, he's had rat majorities and the pubs have been powerless, thus look at the damn mess where in now...
but you know the ruling class has got to have its way...
Yes it should be limitation of government spending that is first used to government spending, I obviously read the article to quickly, you are right..
I am at fault, I read the article too quickly...as far as I am concerned there should be no taxes at all on income..
And budgets should be balanced by law..
OOps too quick again, been hectic morning here..smile...
There should be no taxes on income at all by law, that way the government can’t play the class warfare game as easily..
Government spending is the cause of deficits to be sure...
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