At the very start of Ronald Reagan's presidency, David Stockman debunked the myth that Reagan and the modern Republican Party were dedicated to small government.
In 1981, the 35-year-old Stockman gave up his Michigan seat in Congress to become the new president's budget director. A vocal critic of what he continues to call the "welfare-warfare state,"? Stockman had signed on because he believed in the limited-government principles that Reagan so vigorously espoused. Once inside the White House, however, Stockman became disenchanted. In his first year as budget guru, he gave an interview to journalist William Greider that became the basis for an explosive Atlantic article in which Stockman admitted that Reagan's tax cuts for most Americans had been a "?Trojan horse' used to bring down the top rate. In his 1985 memoir, The Triumph of Politics, Stockman chronicled and criticized Reagan's reluctance to fulfill his campaign promise of shrinking the size and scope of government and balancing the budget. During Reagan's two terms, the budget was never balanced, net government spending was never cut, and the gross federal debt tripled.
Last fall Stockman was the GOP defector du jour once more, arguing against extending George W. Bush's tax rates in The New York Times and on 60 Minutes, The Colbert Report, Parker-Spitzer, ABC, NPR, and MSNBC. Stockman's argument "â?that it's irresponsible to cut taxes when cumulative U.S. debt is steadily mounting as a percentage of GDP"â?is based on the principle that budgets can be balanced only when revenues meet expenditures. If we are not willing to actually shrink government spending, he says, then we should pay full freight now, rather than forcing our children and grandchildren to foot the bill.
Here is what didn't come across in Stockman's media blitz: Since writing The Triumph of Politics he has, in his words, "completed his homework"? by reading such libertarian economists as Ludwig von Mises, F.A. Hayek, and Murray Rothbard. He thinks the Troubled Asset Relief Program (TARP) was a crony-capitalist boondoggle, that the bailouts of GM and Chrysler were unconscionable, and that stimulus spending is a hoax. He sees the abandonment of the gold standard in favor of floating exchange rates as the root cause of both the country's fiscal problems and the 2008 financial crisis. He says Rep. Ron Paul (R-Texas) is the only politician today "who gets it,"? and he's hopeful that Paul's growing influence may begin to shed light on "the scholastic arrogance"? of the Federal Reserve. He is still against the welfare-warfare state, and he still thinks government should be cut down to size.
After leaving the White House, Stockman joined Salomon Brothers and the Blackstone Group before creating Heartland Industrial Partners, a private equity firm. In December, Nick Gillespie, editor in chief of reason.com and reason.tv, sat down with Stockman in his Greenwich, Connecticut house for a wide-ranging discussion of politics and economics, both past and present. A video version of this interview can be viewed and downloaded at reason.tv.
reason: You've emerged as a fierce proponent of letting all of the Bush-era tax rates expire and going back to the Clinton rates. Why do you want to revert to higher tax rates?
David Stockman: In pure philosophy, lower tax rates would be better. The problem is that we've had a 30-year referendum on spending"â?every aspect of the welfare state. We made a tiny bit of progress in '81 that was restored over the course of the next couple of decades. Then we finally had Republican government in the Bush era, both in the Congress and in the White House, and nothing was cut. Everything was ratified. In fact, they added to Medicare through the drug benefit.
reason: Bush raised total federal outlays about 60 percent in 2010 dollars.
Stockman: That's exactly right. So now we're at the point where we have this large welfare state that seems immutable politically and this expanding warfare state that both parties seem to want to fund. In that environment, you're kidding yourself if you think cutting taxes today is really cutting taxes. We're simply deferring massive tax increases into the future, unfairly and immorally putting huge debt burdens on future generations, and that is just wrong.
(Article continues after the video.)
reason: There's a presumption there that if we raise more federal revenue, it would actually go to fund existing programs, as opposed to just expanding into new areas.
Stockman: That's always a risk, but I think there isn't much pressure for structural expansion of the budget right now, and there hasn't been for years"â?other than the one or two initiatives during the Bush period.
reason: Does there need to be, though? Medicare is set to continue to expand, particularly after 2020. So there doesn't need to be a politician saying, "Let's create whole new entitlements,"? because we've got ones that are on autopilot to explode.
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Stockman admitted that Reagan's tax cuts for most Americans had been a "?Trojan horse' used to bring down the top rate.
Because bringing down the top rate had nothing to do with the largest peacetime economic expansion in history? Or because Stockman believes that only the rich got richer?
We can't cut spending? Yo' fuck Stockman.
Why fuck Stockman, because he's right? We apparently can't cut spending based on the fact we haven't.
Just because we haven't been able to cut spending yet doesn't mean it can't be done.
How is Stockman "right" when Nick has repeatedly shown how you don't need to increase taxes to balance the budget? True, from Stockman's employers point of view, unlimited "revenues" are most preferable.
Just because we haven't been able to cut spending yet doesn't mean it can't be done.
Right; and just becuase we haven't created Utopia yet doesn't mean it can't be done. We just need the right people to lead us poor sheep to green pastures.
Well that is good news...that means we won't die!
Bullshit. Budgets are balanced by cutting revenue and talking about cutting spending.
Also, cutting defense spending is less of a priority because the Pentagon isn't full of uppity poor people who need to learn their place.
Needs more DURR and less HURR.
Eh, I thought the DURR was about right. You have to be careful about overdoing it. The idea (I've been told) is to look like an idiot. Too much DURR and you give away the store.
But the DURR is the real meat of the matter. The HURR is sort of the side-dish. The best scalloped potatoes ever can't salvage a terrible steak.
Very true, but I'm sure you've heard the expression "small potatoes make the steak look bigger." That's an axiom of steroid users. And trolls.
His name is Robert Paulson.
Ah, the role Meat Loaf was born to play. You ever notice one of the rules of Fight Club was "no shirt, no shoes" yet Bob wore a shirt during his fight?
His tits were big enough to be weapons. He wore a shirt in order to not have an unfair advantage.
It might have been to protect himself. From two black eyes.
If we are not willing to actually shrink government spending, he says, then we should pay full freight now, rather than forcing our children and grandchildren to foot the bill.
This is enough to show that Stockman is an economic-illiterate.
As has been demonstrated by Steven Landsburg (and no doubt many others), the only thing that matters (from the perspective Stockman brings) is how much you spend, not when you pay for it. You can do the math yourself, but it's pretty simple: you can cut taxes now and "pass the debt onto the grandchildren" or your can raise taxes now and "pay full freight" in the current generation, but each amounts to the same net wealth left for "the grandchildren." If you raise taxes now, you leave less capital and interest to the next generation (because it's confiscated now), and if you cut taxes now, you leave them more capital and interest with which to pay those later debts. It's a perfect wash.
I thought you were quoting Steve Landesberg.
Still pimping that get rich quick Keynesian scheme, I see. You know, the financing of government spending really does crowd out private investment, and it exacerbates even more pressure on actually meeting consumer demand during a down turn. Just sayin', Stockman is not the illiterate in anything here.
Ah, but he is the illiterate. Taxes crowd out private investment to the same degree that government borrowing does. At the end of the day it's the spending, whether you finance it by taxes or debt.
Not if you are paying interest on the debt and the share of the total that belongs to interest keeps increasing. Same as with a credit card. Except that I can't debase the currency and pay with cheaper dollars. I have to wait for the Fed to do that for me.
Jeebus H. Christ but you guys are slow (and yes, I'm including sr7). Here's a hint for you: if you (Mr. Taxpayer) have $100 and you let it earn interest at 1% for a year, you'll have $101 after one year. That's the same rate of interest as the debt is accruing. So now, $100 of debt is also going to take $101 to pay back, after the same one year period. So, you can pay it now ($100), or later ($101), but in the latter case you, Mr. Taxpayer, has earned interest in the $100 you were allowed to keep (by not being taxed). Do I need to bring out the sock puppets?
he's mentioned debasing the currency. So if inflation is approx. 3%, but you owe 1% in interest, then you will see a reduction in your debt. Sure, the amount will go up, but the value of it is lowered. So, you actually have lower debt. It works only if the interest is lower than the rate of inflation. Works great for those taking on debt, but it hurts those who save.
So it doesn't matter how much the bank pays in interest on deposits or charges on loans as long as they only lend the same amount of principle?
You can buy treasuries. You can loan (to the government) at the same interest rate the government borrows (from you). I thought this was obvious.
If that taxpayer dies in July, than who meets his debt obligation come next January? The debt burden is still there, but he is dead. His kid then? His kid didn't vote for the maroons voting for this government like his retarded pop did, why does he have to fork it over when he was going to put that buck in his college savings fund. I guess it is alright that no one pays it, eh? Except, that is not how it works. It is an expenditure, and it is coming out of someone's behind, as I pointed out below:
After that it was off the races. When the debt super-cycle apogee came in 2007, it took $4 trillion of debt growth to produce a gain of just $700 billion of GDP. At the point, the debt-to-income growth ratio had climbed to 6.0X, and shortly thereafter the man from Citigroup finally stopped dancing.
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