And they’re all in the room with us.
This evening I saw an interview I didn’t expect with David Stockman, probably best known for his role as Director of the Office of Management and Budget under Ronald Reagan, youngest Cabinet level officer in our modern history.
Maybe some will know him for coming up with the bumper sticker description of the “starve the beast” strategy of shrinking government by cutting its revenues (taxes).
You can see the success of that “starve the beast” slogan in its “too much taxing and too much government” version today in the roomful of Medicare and Social Security collectors who spent a thousand dollars each to go to Opryland and complain about paying too much in taxes.
A friend was over while the interview played, and she said “he’s not talking about the elephant in the room.” I had to ask: “Which elephant?”
She replied by saying the off-budget pursuit of the Iraq war was unbelievable spending, ignored by the tax cutters. When she asked how much it cost, I replied “About $10 billion a month, but there’s really a whole herd of elephants in that room.”
My personal favorite: The off-budget “borrowing” from the payroll tax surplus, which ran into the $400 billion per year neighborhood since 2001, each year amounting to more of this “emergency” borrowing than the total for the 35 previous years. Not coincidentally, those trillions of first-dollar taxes taken from every worker who gets salary or wages, and every self-employed worker were roughly equal to the income tax cuts for the top 10% of the income strata, a group that often pays zero toward Social Security or Medicare.
Or how about the huge increases in welfare for agribusiness, or the free drugs passed out as Medicare Part D (yet another welfare program) with the list price agreement that blew all sense of reason out of government purchasing to pad the pockets of pharma companies perfectly happy to sell the same drugs to the VA or Walmart or even CVS for far less.
The biggest problem is the “deal” that allows otherwise honest conservative folk to rationalize taking thousands or tens of thousands of dollars in payments and services under the fiction that their pennies invested decades ago paid for those benefits. No. The excess above the invested dollars and intervening earnings are all current income being transferred to the takers from the payers, and the payers are the people collecting wages for full time or part time labor, or running very small businesses.
Imagine my surprise when Stockman went on to say that he has more criticism for the Republicans than their opponents!
He focused on the AIG counterparty bailout (not AIG itself, you see) as the single worst policy decision of the last 100 years.
He also said that we had gone way too far in our tax cutting, and that it was destructive having gone so far. The interviewer pointed out that he was sounding like a Liberal. He seemed genuinely chagrined to admit that his former faith in supply-side economic theory had failed so miserably.
He wrote in an Op-Ed this week that he supports the tax on the biggest banks and the Volcker recommendation that banks with either government deposit insurance or access to the Fed window should not be allowed to participate in proprietary trading, hedge fund investing, or private equity investment.
The producers of the show did their form of humor by juxtaposing Stockman’s picture with his polar philosophical opposite, Nobel Economist Paul Krugman, and reminded Stockman of Krugman’s support for the same mega-bank tax to discourage the “too big to fail” mentality, which is really a passive form of extortion.
Like the California earthquake fund suggested right after the Kobe earthquake in Japan, if you build the fund up long enough, it can pay for The Big One when it comes. If, on the other hand, Citi or Wells goes down the tubes in the next year or two, there won’t be enough cash in the till when it happens.
He lays out in more detail in how our political theories have royally screwed up our real economy. I’ll be adding his book to my library when it comes out.
You can check out how Stockman blames the financial meltdown on failed political theories right here. I don’t agree with everything he says, and I think he misses some key points (e.g. borrowing from the Social Security Trust Fund). Still, it’s good to see a man come to his senses that we might call the chief engineer of the conservative Ponzi scheme his boss Reagan sold so well.