Stockman is also equally damning of the Democrats' and their Keynesian policies. But what this indictment by someone so close to the development of the Reaganomics ideology says about America, helps all of us better understand how America's toxic holy war of partisan-politics is destroying not just the economy but capitalism in the process. Unless this war stops soon, both parties will succeed in their collective death wish for each other at the expense of our freedom and prosperity.
Why should we focus on Stockman's message? It's already lost in the 24X7 news cycle. We live in a nation where our current President thinks it’s vitally important to sit on the mid day gossip couch with a gaggle of imbeciles and talk about Lindsey Lohan, Mel Gibson and Snooky. Talk about dumbed down – America and its leadership is Snooky Stupid.
Ask yourself: How did this great nation lose its moral compass and drift so far off course, to where our very survival is threatened?
This nation has arrived at the tipping point. Although we have plenty of external enemies, they are no longer the real threat. We are committing suicide. Democracy. Capitalism. American exceptionalisim, the so called American dream. All dying. Why? Because of the economic decisions of the GOP the past 40 years, says Stockman.
While the economic policy of the Democrats have dominated congress the bulk of the last 40 years, and we know what those policies are because they haven’t changed in almost 100 years: a blend of Keynesian, Progressive and Fabian socialist tripe. But it has been the Republican blunders and their inability to counter the Keynesians and Socialists with a sustainable capitalist alternate that has us on the ropes. Stockman’s argument makes for a powerful history lesson, because it exposes how both parties are responsible for destroying the U.S. economy.
"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. “ One has to admire that statement coming from a true conservative pedigree like Stockman’s. Much of the substantive content of the so called “Bush Tax cut” stand to be lost in the argument that the nation's wealthiest taxpayers be spared even a three-percentage-point rate increase.
With the nation's public debt soon to reach $18 trillion, Republican insistence upon salvaging the 3 % to the wealthiest 5% seems absurd. Meanwhile the Democrats would throw away the Bush cut in capital gains, hurting every property /equity investor. Compromise? Not with the partisian death match being played out on the Fox News 24X7.
In the past 40 years I have been watching politics, traditional Republican ideology has gone from the solid economic principle of balancing accounts in government, trade and the banking system to hype and slogans. It was believed and practiced that prosperity depended upon balance.
Stockman says there's a "new catechism", making a mockery of traditional Republican ideals. He says that this amounts to, "little more than money printing and deficit finance, vulgar Keynesianism robed in the ideological vestments of the prosperous classes." Worse, it has resulted in "serial financial bubbles and Wall Street depredations that have crippled our economy."
Nixon dumping gold started the U.S. spending binge and gets Stockman’s ball rolling. I have spent a considerable amount of time studying the relationship between the gold standard and the decline of the dollar. Stockman assaults the Nixon's gold policies for defaulting "on American obligations under the 1944 Bretton Woods agreement to balance our accounts with the world." This is a sound point and as the history reveals, America has been living beyond its means as a nation ever since. Stockman goes further saying, "borrowed prosperity on an epic scale ... an outcome that Milton Friedman said could never happen when, in 1971, he persuaded President Nixon to unleash on the world paper dollars no longer redeemable in gold or other fixed monetary reserves."
In Nixon’s defense, he had to pay for Johnson’s Great Society somehow, and the thought of rolling back the wave of entitlements was politically unthinkable at that time. Nixon was a coward.
Milton Friedman: "Just let the free market set currency exchange rates, he said, and trade deficits will self-correct." Stockman remarks that Friedman was wrong by trillions. And unfortunately "once relieved of the discipline of defending a fixed value for their currencies, politicians the world over were free to cheapen their money and disregard their neighbors." Without monetary discipline America was also encouraging "global monetary chaos as foreign central banks run their own printing presses at ever faster speeds to sop up the tidal wave of dollars coming from the Federal Reserve." Yes, the road to the coming apocalypse began with a Republican president listening to a misguided Nobel economist's advice. Sound familiar? Every Democrat President since has had their favorite Nobel laureate as well. So much for the value of a Nobel.
Stockman says "the second unhappy change in the American economy has been the extraordinary growth of our public debt coupled with warmongering. In 1970, US debt was just 40% of gross domestic product, or about $425 billion. When it reaches $18 trillion, it will be 40 times greater. Blame? Not that the Democrats weren’t spending big at every opportunity, but Stockman points out with the 20/20 clarity of non-partisan hindsight that "the Republican Party's embrace of the insidious doctrine that deficits don't matter if they result from tax cuts" exacerbated a three decade long rise in deficit spending by both parties.
Traditional Republicans supported tax cuts, but they had to be matched by spending cuts, to offset the way inflation pushes many taxpayers into higher brackets and to spur investment. The Reagan administration's hastily prepared fiscal blueprint, however, was no match for what Stockman cites as” the primordial forces -- the welfare state and the warfare state -- that drive the federal spending machine."
As one absorbs Stockman's indictment of how the GOP has "destroyed the U.S. economy," you're probably asking yourself why any conservative like me believe what sounds like a traitor to the Reagan legacy.
Party affiliation is irrelevant.
Stockman exposes a dangerous historical trend where politics is so partisan it's having huge negative consequences.
Does the GOP have a welfare-warfare state mentality? The NeoCon GOP does. The NeoCons have pushing the military budget skyward. Republicans on Capitol Hill who were supposed to be about cutting spending, ignored most of the Democrat domestic budget, the entitlements, farm subsidies, education, etc and in the end it was a new cadre of ideological tax-cutters who killed the Republicans' fiscal religion."
When Fed chief Paul Volcker crushed inflation in the '80s there was a economic rebound. But then says Stockman, "the new tax-cutters hooked Republicans for good on the delusion that the economy will outgrow the deficit if plied with enough tax cuts." By 2009, they "reduced federal revenues to 15% of gross domestic product," lowest since the 1940s.
Recently Bush made matters far worse by "rarely vetoing a budget bill and engaging in two unfinanced foreign military adventures." Bush capitulated on domestic spending cuts, signing into law $420 billion in nondefense appropriations, a 65% percent gain from the $260 billion he had inherited eight years earlier. Republicans thus joined the Democrats in a shameless embrace of a free-lunch fiscal policy. Therefore: Bush was a tax cutting big spender and not by any measure a conservative, but a true Neo Con.
Wall Street enters a 'vast and unproductive expansion'. Stockman : "The third ominous change in the American economy has been the vast, unproductive expansion of our financial sector." Anyone in business or even interested in business should have seen that Republicans have been oblivious to the hazard of financial markets flooding with freely printed money and deregulated of traditional restrictions on leverage and speculation. Wrong, not oblivious. Self-interested Republican loyalists like Paulson, Bernanke and Geithner knew exactly what they were doing and saw in the Democrat’s 2 decade long housing bubble just the means to the end they were seeking.
They wanted the economy, markets and the government to be under the absolute control of Wall Street's banks. They backed a foolish, left leaning power hungry Congress and Fed into bailing out an estimated $23.7 trillion debt. Worse, this bought and paid for congress have since destroyed any meaningful financial reforms by letting the banksters write the regulations. So Wall Street is now back to business as usual blowing another bigger bubble/bust cycle that will culminate in what Stockman calls the coming "American Apocalypse." When a character like a David Stockman uses the word Apocalypse, one better stand up and listen.
Stockman refers to Wall Street's surviving banks as "wards of the state." Finally I can disagree with him on a point: the opposite is true. Wall Street now controls Washington, especially the President. Unproductive trading is extracting billions from the economy with a lot of pointless speculation in stocks, bonds, commodities and derivatives. Wall Street banks like Goldman were virtually bankrupt, would have never survived without government-guaranteed deposits and what Stockman calls; "virtually free money from the Fed's discount window to cover their bad bets."
The New American Revolution; class-warfare coming soon says Stockman. Finally, thanks to policies of both Republican & Democrat, that let us "live beyond our means for decades by borrowing heavily from abroad, steadily sending jobs and production offshore," while "high-value jobs in goods production, trade, transportation, information technology and the professions shrunk by 12% to 68 million from 77 million."
As the apocalypse draws near, Stockman sees a class-rebellion, a new revolution, a war against greed and the wealthy. And he sees it happening soon.
The trigger will be the growing gap between the economic classes: No wonder. Stockman illustrates that during the last bubble (from 2002 to 2006) “ the top 1% of Americans -- paid mainly from the Wall Street casino -- received two-thirds of the gain in national income, while the bottom 90% -- mainly dependent on Main Street's shrinking economy got only 12%. This growing wealth gap is not the market's fault. It's the decaying fruit of bad economic policy."
Stockman’s bottom line: "The day of national reckoning has arrived. We will not have a conventional business recovery now, but rather a long hangover of debt liquidation and downsizing ... it's a pity that the modern Republican Party offers the American people an irrelevant platform of recycled Keynesianism when the old approach -- balanced budgets, sound money and financial discipline -- is needed more than ever."
Preaching to the choir here Brother Stockman, but I must admit that I am set back on my heals not by the message, but by the messenger.
But like messenger before him, will anyone get it? Most are helpless and would do nothing even if they could. They sit in the bleachers watching Snooky, sports and other bread & circus diversions. In fact, most Americans are so cynical that they just don’t care.
The politicians? They are now a class unto their own; the Political Class. They are so deep in the pockets of the Wall Street conspiracy that controls Washington they are part and parcel of the problem. The President on The View or their endless $100,000 a day vacations. Vacuous. Oblivious.
No, his message lost in the 24/7 news cycle, and even after final apocalyptic event, the next bigger global meltdown, the next Great Depression and through a historic class war, this deadly partisan game will continue unabated, just like a TV reality show.
