By David Stockman, New York Times, July 31, 2010
IF there were such a thing as Chapter 11 for politicians, the Republican push to extend the unaffordable Bush tax cuts would amount to a bankruptcy filing.(Chapter 11 refers to the rule under which individuals and corporations file for bankruptcy.) The nation’s public debt — if honestly reckoned to include municipal bonds and the $7 trillion of new deficits baked into the cake through 2015 — will soon reach $18 trillion. That’s a Greece-scale 120 percent of gross domestic product, and fairly screams out for austerity and sacrifice. It is therefore unseemly for the Senate minority leader, Mitch McConnell, to insist that the nation’s wealthiest taxpayers be spared even a three-percentage-point rate increase.
More fundamentally, Mr. McConnell’s stand puts the lie to the Republican pretense that its new monetarist and supply-side doctrines are rooted in its traditional financial philosophy. Republicans used to believe that prosperity depended upon the regular balancing of accounts — in government, in international trade, on the ledgers of central banks and in the financial affairs of private households and businesses, too. But the new catechism, as practiced by Republican policymakers for decades now, has amounted to little more than money printing and deficit finance — vulgar Keynesianism robed in the ideological vestments of the prosperous classes.
This approach has not simply made a mockery of traditional party ideals. It has also led to the serial financial bubbles and Wall Street depredations that have crippled our economy. More specifically, the new policy doctrines have caused four great deformations of the national economy, and modern Republicans have turned a blind eye to each one.
While we are digesting this piece of insight, that literally pulls the mask from the face of the current Republican party, let us not forget that Mr. Stockman was President Ronald Reagan's Budget Chief, who presided over the most significant tax cut in U.S. history.
Now, while appearing on CNN/GPS with Fareed Zakaria yesterday, Mr. Stockman says the U.S. has been on a spending "binge" for the last thirty years, funding that spending by borrowing and if all the notes that are outstanding were "called" (payment demanded by the lenders) the situation would amount to an 'apocalypse.'
His strong recommendations for solving the debt and deficit crisis, and there is no doubt he believes the U.S. is in a financial crisis, is to BOTH cut spending and raise taxes.
His take on the grid-lock in Washington, where the Republicans merely want to cut taxes, and the Democrats want to increase spending, is that the country has become "ungovernable" (his word).
These observations are coming from one who once served as a Member of the House of Representatives from the state of Michigan, before working in the Reagan White House.
Whether or not the current leadership of the Republican party, (McConnell in the Senate, and Boehner in the House) are about to listen to the Stockman prescription for the American economy is anyone's guess. Certainly, the energy to make the Bush tax cuts permanent, for all categories of income, including the most wealthy, is like a steam-roller, and Stockman urges President Obama to declare publically and unequivocally, that any bill that makes the Bush tax cuts permanent for the wealthiest 1% will be vetoed.
Much of the Stockman criticism seems to be directed to the Federal Reserve, currently under Ben Bernanke, and one has to wonder whether Stockman is open to serving in the Obama administration.
It says here that President Obama might do very well to reach out to Mr. Stockman, bring him inside the tent and let him work with the Republican members of both houses of Congress to reach multiple accommodations on curbing government spending and raising taxes, in order to bring the U.S. fiscal imbalance into balance.
There are certainly precedents for a Democratic president to include Republicans in their administration. Prsident Clinton was well served by Defence Secretary William Cohen, and President Obama is currently well served by Defence Secretary Robert Gates. That list is much longer, if we search the history books.
It is the balance and the seriousness and the exposing of the current republican "theology" of tax cuts as the solution to all economic woes, based on their reading of the Reagan years that struck this observer.
"That is not what the Reagan tax cuts did or were intended to do," says Stockman. "The times and conditions were very different. If you run up the balance on your credit card, you are not able to go to the credit card company and ask for two more years to find the money to pay it off," he states categorically.
And that is his analogy for the situation in the U.S. financial situation at this time.
And what he accuses the Federal Reserve of doing is to continue to "print more money" that the U.S. doesn't have and can't pay back and will not be able to pay back for the foreseeable future. In order to bring the economy back, and to meet the current budget projections, the U.S. will have to generate some 250,000 new jobs each year, while it is currently generating some 50,000 new jobs each year, with no prospects of bridging that gap.
There is maturity, responsibility and fiscal experience on which both the maturity and responsibility are based in this "witness's presentation" to the U.S. decision-makers. While the jury is still out on the verdict to be reached by those decision-makers, David Stockman's name, reputation and recommendations could well serve as a road-map for the current administration and the Congress as both political parties seek to find a way out of the current economic crisis.