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Reagan’s Budget Director: GOP Policies ‘Have Crippled Our Economy’

David Stockman, Reagan's OMB director, warns against maintaining tax cuts for the rich and other misguided economic policies.

John Nichols

August 3, 2010

These are irrationally partisan times.

The truth is not going to sway Republican Party stalwarts in arguments about matters economic.

To be heard, the truth must be spoken by the right right-winger.

No Republican, certainly no conservative Republican, is going to accept evidence from President Obama, Democratic congressional leaders, liberal journals of opinion, mainstream economists or non-partisan budget analysts that says the policies of Republican presidents and congresses – and the Democrats that go along with them—are most responsible for the economic troubles the United States is facing.

The very notion is dismissed as quickly as the scientific evidence of evolution and climate change.

No conservative worth his or her tea bags is going to accept a charge that Republicans are at fault for the fiscal dysfunction of the moment from anyone short of the Gipper’s "budget guru" – the man Ronald Reagan trusted as his director of the Office of Management and Budget.

Conveniently, David Stockman—the Reagan administration’s point man in the fight for supply-side economics who proved when it came to deficit issues to be even more conservative than the fortieth president – has weighed in on the matter.

What does this architect of Reaganomics say?

"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," Stockman writes in a lengthy analysis of the current economic condition published Sunday in The New York Times. "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."

Where are Republicans really wrong right at the moment? In proposing to maintain the Bush-Cheney administration’s massive tax breaks for the wealthiest Americans.

"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. 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," writes the former conservative congressman and OMB director, who shaped the "Reagan Budgets" of the early 1980s. "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."

Stockman’s complete article is here.

But genuine conservatives and Main Street Republicans – the ones who maintain a measure of loyalty to the American experiment – might want to ruminate a bit on the Reagan aide’s closing argument that the current crop of Republicans politicians are, in particular, guilty of "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. In the past decade, the number of high-value jobs in goods production and in service categories like trade, transportation, information technology and the professions has shrunk by 12 percent, to 68 million from 77 million. The only reason we have not experienced a severe reduction in nonfarm payrolls since 2000 is that there has been a gain in low-paying, often part-time positions in places like bars, hotels and nursing homes," writes Stockman. "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 man Ronald Reagan trusted with regard to economic issues concludes that: "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—as suggested by last week’s news that the national economy grew at an anemic annual rate of 2.4 percent in the second quarter. 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."

John NicholsTwitterJohn Nichols is a national affairs correspondent for The Nation. He has written, cowritten, or edited over a dozen books on topics ranging from histories of American socialism and the Democratic Party to analyses of US and global media systems. His latest, cowritten with Senator Bernie Sanders, is the New York Times bestseller It's OK to Be Angry About Capitalism.


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