Former Director of OMB for Pres Reagan on how to fix economy

David Stockman, former director of the White House Budget Office under President Ronald Reagan, and widely credited as the architect of Reagonomics, is vehemently opposed to continuing the tax cuts instituted by President Bush. His op-ed piece in the NYT, and subsequent interview on NPR during the All Things Considered segment, comes as somewhat of a shock, but he's saying the same things that I hear repeated often from all of us about the sorry state of our economy and what needs to be done to fix it and I wonder if his words will fall on deaf ears in and outside of Washington - what do you think? There's more in the links, so please go read the articles in their entirety!

http://www.nytimes.com/2010/08/01/opini ... gewanted=1
Four Deformations of the Apocalypse
By DAVID STOCKMAN
Published: July 31, 2010

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. 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.

The first of these started when the Nixon administration defaulted on American obligations under the 1944 Bretton Woods agreement to balance our accounts with the world.

The second unhappy change in the American economy has been the extraordinary growth of our public debt. This debt explosion has resulted not from big spending by the Democrats, but instead the Republican Party’s embrace, about three decades ago, of the insidious doctrine that deficits don’t matter if they result from tax cuts.

The third ominous change in the American economy has been the vast, unproductive expansion of our financial sector...But the trillion-dollar conglomerates that inhabit this new financial world are not free enterprises. They are rather wards of the state, extracting billions from the economy with a lot of pointless speculation in stocks, bonds, commodities and derivatives. They could never have survived, much less thrived, if their deposits had not been government-guaranteed...

The fourth destructive change has been the hollowing out of the larger American economy. Having lived beyond our means for decades by borrowing heavily from abroad, we have steadily sent jobs and production offshore.

It is not surprising, then, that during the last bubble (from 2002 to 2006) the top 1 percent of Americans — paid mainly from the Wall Street casino — received two-thirds of the gain in national income, while the bottom 90 percent — mainly dependent on Main Street’s shrinking economy — got only 12 percent. This growing wealth gap is not the market’s fault. It’s the decaying fruit of bad economic policy.

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
Under these circumstances, 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.

http://www.npr.org/templates/story/stor ... =129052425
Stockman: Bush Tax Cuts Will Make U.S. Bankrupt
August 7, 2010

At the end of this year, the Bush-era tax cuts are set to expire. Republicans want them renewed; Democrats want to keep the tax cuts for the middle-class, but not for the wealthiest 2 percent of Americans. Now, Stockman says they're both wrong. And he says extending either of those cuts is tantamount to the government declaring bankruptcy.

So we're spending $3.8 trillion in defense, non-defense, entitlements, everything else, and we're taking in only 2.2 trillion. So we got a massive gap. You have to pay your bills; you can't keep borrowing from the rest of the world at that magnitude, year after year after year. So in light of all of those facts, I say we can't afford the Bush tax cuts.

RAZ: You seem to suggest that many of our economic troubles are the result of Republican economic policies over the past few decades. You are a Republican. You are a conservative. Why do you think Republicans are largely to blame?

Mr. STOCKMAN: Because the Republicans abandoned their old-time fiscal religion in favor of two theories, which I think are now proving to be both wrong and highly counterproductive and damaging.

One was monetarism, which said let the dollar float on the international markets. Let 12 men and women at the Fed decide whether to raise or lower interest rates, and use the Fed to try to run this massive economy. What they've done instead is run the printing press; they've flooded the world with dollars. The whole monetarist policy has been a mistake.

The second thing was the perversion of supply side.

I find it unconscionable that the Republican leadership, faced with a 1.5 trillion deficit, could possibly believe that good public policy is to maintain tax cuts for the top 2 percent of the population who, after all, have benefited enormously from this phony boom we've had over the last 10 years as a result of the casino on Wall Street.

RAZ: Do you hold President Obama and his economic policies responsible for some of this growing deficit?

Mr. STOCKMAN: Absolutely. The only thing worse than the Republican leadership position is that of the White House. I don't know how they think they're helping the economy by every month, coming up with a new plan to borrow tens of billions more, drive us deeper into debt.

RAZ: I wonder, David Stockman, where is your political home these days? I mean, where does somebody like you go?

Mr. STOCKMAN: Well, I don't know. I think I'm in the unwashed middle, let's say, with more and more of the American people. And one of these days, I think the public is going to speak in no uncertain terms - that we've had enough of this crony capitalism, and that we're going to have to now clean things up.

At some point, we're going to either be forced to do it by the global bond and currency markets, or the American people are going to wake up and demand it through an election that really cleans house in terms of both parties and the irresponsible behavior that each of them engages in today.

http://www.npr.org/player/v2/mediaPlaye ... =129052419 (if you want to listen instead of read the transcript)