You remember David Stockman, right? Reagan’s “whiz kid” budget director? He’s the man who engineered the last thirty years of Republican dominance by implementing The Reaganomics Strategy: borrow money from our children and from abroad to buy votes at home with the “I’ll cut your taxes” pander.
Stockman has never been the type to twirl his finger in his cheek and actually proclaim that Reagan’s economic vision had any roots in reality (aside from the political reality that “deficits don’t matter”). He’s repeatedly acknowledged–even as early as ’81–that the whole thing was a scam. (That’s not exactly the word he used, but…) Check out this Wikipedia page for details, and links to more.
Well now — after years as a top Wall Street private-equity and hedge-fund hotshot who’s very, very clear on how the world works — he’s demonstrating that clear-eyed side once again. Here he is on February 5, on PBS News Hour with Paul Salmon, commenting on “Starve the Beast”:
The lesson of the last twenty five years is that it doesn’t work.
Here’s the whole video. (Start about 6:30 to skip the fairly predictable indictment of the too-big-to-fail financial institutions and somewhat more surprising endorsement of Obama’s proposal to tax them.)
Stockman continues:
You can keep cutting taxes until you reach the point where this year, the year just ended, we spent 3.6 trillion and we only collected 2.2. We are now so far out of kilter that it’s irrelevant. Taxes are going to have to be raised. The beast needs to be trimmed back, but it can’t be starved enough to even begin to cope with our fiscal problem. And this is where I think all the politicians are faking, in both parties but the Republicans especially. The Republicans think their mission in life is to cut taxes. Sorry, game over. We’re now in the tax raising business, and we’re going to be in the tax-raising business for the next decade.
The bill is due. And yes, Virginia, there is a difference between the Democrats and the Republicans. The Democrats have certainly used and benefited from the pander (Clinton: “The era of big government is over”), but today’s Republicans still either believe or choose to pretend to believe in what Reagan’s own VP, the first George Bush, so aptly called “Voodoo Economics.”
Today’s Republican politicians are either 1) craven liars, or 2) intentionally self-deluded zombies, while most Democratic politicians are just limp-wristed, politically motivated collaborators. It’s pretty obvious which is worse. (I won’t get into the voters except to say that Democrats who vote against their own best interests do it because it’s the right thing to do–economically and morally–while Republicans who vote against their own–and everyone else’s–best interests do it because they’re idiots.)
It’s damned unfortunate that we have to raises taxes now, during a downturn that shows every sign of lasting for years, because raising taxes hurts economic growth over the short term. But after thirty years of magical thinking, it’s time to pay the bills.
The good news–for those of patient merit–is that in the long run, paying for the amount of government that’s necessary to maintain and promote prosperity results in (surprise) more prosperity.
Saving the best for last, there is this remarkable interchange in the Stockman interview, at about 2:00:
Salmon: Listening to you I’m struck by the fact that I can imagine critics on the left saying exactly the same thing.
Stockman: I’m mortified by that thought. But at some point you have to ask, what’s good policy?
Here’s one aggrieved citizen who wishes that point had arrived — that David had asked that question — oh, about twenty-eight years ago?
Comments
10 responses to “David Stockman on Starving the Beast: “It doesn’t work. Game over.””
Stop with the partisanship. Ted Kennedy and John Murtha, may their black souls roil forever, are just as much responsible for the out of control spending in government without finding a way to pay for it as any defense spending hawk.
Teddynomics, and Murthanomics, equally bankrupt.
@flipspiceland
Yeah, I guess that profligate, out-of-control spending explains why the U.S. government spends less as a share of GDP than any other large, prosperous country. (Even *with* our defense budget!)
Notice the company we keep (CIA data, 2007):
13. Sweden 58.1
14. Denmark 58.1
19. Belgium 56.0
20. Norway 55.8
23. Italy 55.3
24. Netherlands 54.7
25. Austria 54.3
26. Finland 54.2
27. Portugal 54.1
34. Greece 50.7
37. UK 50.0
41. Germany 48.8
43. Canada 48.2
47. Spain 47.3
51. New Zealand 46.6
63. Israel 43.6
64. Australia 43.6
69. Ireland 41.5
76. Switzerland 37.8
78. Luxembourg 37.5
103. Japan 30.9
107. South Korea 29.3
137. Taiwan 21.2
143. Chad 19.9
144. US 19.9
145. Cameroon 19.1
Update: I pulled the numbers for state, local, federal combined. Here.
I’d give Stockman credit for admitting that he was wrong earlier on and telling us what he has learned. Both parites have been guilty of capitulating to Wall Street, but obviously the GOP much more so than the Democrats. You can’t say they are equal in their greed or supine attitudes toward the plutocracy. The plutocracy controls the GOP; it has some influence in the Democrat party.
@Hal
Yeah Stockman’s kind of amazing because he knew at the time *exactly* the scam he was pulling, and he’s acknowledged it and explained exactly how he did it at various times in various ways and forums. (Notably in his book, The Triumph of Politics.)
Machiavellian? Way. Muddy-headed thinking? Not.
Well, except that he seems to have believed that his machinations would achieve Reagan’s goal of killing SS and Medicare. Was that a goal he personally believed in? I don’t know.
Some “whiz kid”. Tax cuts do not cause deficits. Under the JFK tax cuts, the Reagan tax cuts, the Contract with America tax cuts, and the Bush 43 tax cuts government revenues ROSE more than the rate of inflation EVERY year. But spending went up even more. Over spending causes deficits.
We are in an Obama economic malaise because industry and investors are pessimistic and unwilling to invest in the future. Why? Because they see more taxes on the horizon with the expiration of Bush’s tax cuts next year and a president who does not like big business or investors. So big business and investors are taking as much profit as they can this year so as not to be taxed higher on it in following years. It is therefore inevitable that by the end of next year the economy will be in worse shape than it is this year.
For an historic example see the Great Depression – same thing happened. FDR kept imposing more and more hardships on industry and investors and the depression lingered on and on. The absolute end of the Great Depression did not come about until 1946 when a Democrat majority congress finally said NO to Harry Truman who wanted to re-institute the New Deal after the war because he was afraid of a return to the depression era malaise with the closing of the war industries and return of soldiers seeking employment. What did that congress do instead? They CUT TAXES! By 1950 the economy was booming!
Want to get out of the Obama economic malaise? Obama should immediately announce that Bush’s tax cuts will be made permanent. This will add optimism and confidence to the market. If he called for even more tax cuts the economy would be booming inside of a year. And government revenues will rise again above that of the inflation rate. So then cut government spending at the same time and watch the deficit disappear too.
But if FDR is followed as an example expect the Obama malaise to linger on and on and on. Hopefully it will be ended with his defeat to a conservative in 2012…
@Ed:
Ed, I’m not really sure what you’re saying with this statement. Revenues rose pretty much every year since 1960 — because both population and productivity (hence GDP) were increasing. Population’s gone from 180 million to 300 million plus.
So putting aside all the faith-based statements that follow, I’m wondering what your actual assertion is re: the facts.
Are you saying inflation-adjusted taxes per capita increased following tax cuts? More than following tax increase, or less?
Or are you saying total revenues as a percentage of gdp (which statistic compensates for population growth) increased following tax cuts? More than following tax increases?
Do you actually know what you’re saying, re: the facts? Once you’ve got that sorted out, I’ll be interested to hear your interpretation of those facts.
Thx,
Steve
What’s so hard to understand? You said: “Revenues rose pretty much every year since 1960” Exactly! Deficits are almost always a result of over spending, not supposedly lost revenue from tax cuts.
Just evading/ignoring population? Should a country’s revenues stay flat while a its population doubles? Should England have the same revenues as New Zealand?
And BTW, it doesn’t look to me like your assertions re: tax cuts and revenue in the early 60s, 80s, and 00s are correct:
http://www.usgovernmentrevenue.com/downchart_gr.php?year=1920_2015&view=1&expand=&units=k&fy=fy11&chart=F0-fed&bar=1&stack=1&size=l&title=&state=US&color=c&local=s
http://www.usgovernmentrevenue.com/downchart_gr.php?year=1920_2009&view=1&expand=&units=p&fy=fy11&chart=F0-fed&bar=1&stack=1&size=l&title=&state=US&color=c&local=s
AFTER the tax CUTS dollar revenues went up each time – tax credits don’t count.
Here is the issue: You enthusiastically quote wonder boy as saying: “You can keep cutting taxes until you reach the point where this year, the year just ended, we spent 3.6 trillion and we only collected 2.2.”
That is pure crap. We did not reach $3.6T because of tax cuts. We got there because of intrusionist government and FDR-style stimulus and bailout spending. His whole assumption is that the spending can’t be helped and we can only control deficits through tax rates. Incredible nonsense!!! Next thing he’ll be claiming that FDR “created or saved” tens of millions of jobs. LOL!
[…] High ranking Reagan administration officials and long-time Republicans Bruce Bartlett and David Stockman have independently attacked the Republican Starve the Beast […]