Over the years, I have described myself politically as a “Jacob Javits* Republican.” For those of you unfamiliar with the Senator from NY, Javits was a social progressive, a fiscal conservative, “a political descendant of Theodore Roosevelt’s Progressive Republicanism.”

After he “retired” in 1980, the GOP took a very different turn: The emphasis on Fiscal conservatism was lost. Balanced budgets were no longer a priority. In terms of electoral politics, the embrace with the Religious Right was a deal with the devil. It married the party to a backwards combination of social regressiveness and magical thinking. Ideology trumped facts, and conflicting data and science was ignored.

In short, the party became more focused on Politics than Policy.

I bring this up as an intro to David Stockman’s brutal critique of Republican fiscal policy. Stockman was the director of the Office of Management and Budget under President Ronald Reagan. His NYT OpEd — subhed: How the GOP Destroyed the US economy — perfectly summarizes the most legitimate critiques of decades of GOP economic policy.

I can sum it up thusly: Whereas the Democrats have no economic policy, the Republicans have a very bad one.

The details are what makes Stockman’s take so astonishing. Here are his most important observations, of which I find little to disagree with:

• The total US debt, including states and municipalities, will soon reach $18 trillion dollars. That is a Greece-like 120% of GDP.

• Supply Side tax cuts for the wealthy are based on “money printing and deficit finance — vulgar Keynesiansism robed in the ideological vestments of the prosperous classes.”

• Republicans abandoned the belief that prosperity depended upon the regular balancing of accounts — government, trade, central banks private households and businesses.

• Once fiscal conservatism was abandoned, it led to the serial financial bubbles and Wall Street depredations that have crippled our economy.

• The Nixon administration defaulted on American obligations under the 1944 Bretton Woods agreement.

• Who is to blame? Milton Friedman. In 1971, he persuaded President Nixon to unleash on the world paper dollars no longer redeemable in gold.

• According to Friedman, “The free market set currency exchange rates, he said, and trade deficits will self-correct.” What actually occurred was “impossible.” Stockman calls it “Friedman’s $8 trillion error.

• Ideological tax-cutters are what killed the Republicans’ fiscal religion.

• America’s debt explosion has resulted from the Republican Party’s embrace, three decades ago, of the insidious Supply Side doctrine that deficits don’t matter if they result from tax cuts.

• The GOP controlled Congress from 1994 to 2006: Combine neocon warfare spending with entitlements, farm subsidies, education, water projects and you end up with a GOP welfare/warfare state driving the federal spending machine.

• It was Paul Volcker who crushed inflation and enabled a solid economic rebound — not the Reagan Supply Side Tax cuts.• Republicans believed the “delusion that the economy will outgrow the deficit if plied with enough tax cuts.”

• Over George W. Bush 8 years in office, non-defense appropriations gained 65%.• Fiscal year 2009 (GWB last budget): Tax-cutters reduced federal revenues to 15% of GDP — lower than they had been since the 1940s.

• The expansion of our financial sector has been vast and unproductive. Stockman blames (tho but not by name): 1) Greenspan, for flooding financial markets with freely printed money; and 2) Phil Gramm, for removing traditional restrictions on leverage and speculation.

• The shadow banking system grew from a mere $500 billion in 1970 to $30 trillion by September 2008 (see Gramm, above).

• Trillion-dollar financial conglomerates are not free enterprises — they are wards of the state, living on virtually free money from the Fed’s discount window to cover their bad bets.

• From 2002 to 2006, the top 1% of Americans received two-thirds of the gain in national income.

I find it fascinating that the most incisive criticism of the irresponsible GOP policies has comes from two of its former stars: Bruce Barlett and now David Stockman. Sure, Krugman, Stiglitz, DeLong and others have railed against Bush policies for years. But it seems to take an insider’s critique to really give the debate some punch.

Its funny, but when I criticize Bush, I get accused of being a liberal Democrat (I am not). I am simply giving my honest perspective of an utterly ruinous set of irresponsible policies that did lasting damage to America. The critiques of Obama does not generate the same sort of reaction. I suspect brain damaged partisans of the left suffer from somewhat different cognitive deficits than brain damaged partisans of the right.

Here’s to hoping that reality-based economic policies are somewhere in our future.


Note: Brain damaged partisan comments will be unceremoniously deleted


Four Deformations of the Apocalypse
NYT, July 31, 2010


* If you want a better idea of Javit’ politics, he was an early advocate of civil rights and an opponent of discrimination and segregation. Javits was against government involvement in medical decisions — he oppsoed legislation on birth control, abortion, etc. — unlike some of today’s so-called Libertarians hypocrites. He was unhappy with the witch hunt atmosphe during the Cold War, and publicly opposed funding the House Un-American Activities Committee.

Fiscally conservative, he was for low taxes, a balanced budget, but also supported modest regulation to prevent the private sector from running amuck. He supported low taxes, a balanced budget, reduced military spending, no overseas wars unless absolutely necessary to defend the country. He supported the initial foray into Viet nam, but switched, becoming an early Senatorial opponent of the war in 1967.

Most of all, he was a pragmatic, bi-partisan Senate member, who worked across the aisle with both sides to produce legislation for the public good. The Javits Convention Center in NYC is named after him, as are numerous buildings in various SUNY campuses, as well as a Federal Fellowship Program.

In 1979, he was diagnosed with Lou Gehrig’s disease, and lost the GOP primary to political sleazeball Alfonse D’Amato.

Category: Politics, Really, really bad calls, Taxes and Policy

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

162 Responses to “Stockman: How the GOP Destroyed the U.S. Economy”

  1. You won’t get an argument from me that the GOP fumbled the fiscal football

  2. Keane says:


  3. Rescission says:

    Great Post.
    We surely need to hope that one day soon we can have some leadership that lives in economic reality.
    After watching GWB spend so much money and increase the deficit, no balancing of the budget, I will never forget how sick to my stomach I felt watching McCain and Obama during the Presidential debates. Both men were so clueless when it came to economic policy. I knew we were in trouble whoever won the election.

  4. Disgusted CEO says:

    I am a former Red State GOP supporter who helped raise significant money for George W. Bush’s campaign in 2,000.

    I left the party because of Bush’s fiscal policies. He has done lasting damage to the nation, but I am forced to agree with Stockman that it was a long time coming.

    Bruce Bartlett was the first Republican to call him out Bush for his irresponsibility, and was vilified by the party for it.

    (This post got me to finally comment)

  5. constantnormal says:

    “Here’s to hoping that reality-based economic policies are somewhere in our future.”

    Now THAT IS “magical thinking”.

    Dream on, BR. Before we can have such a renaissance in Bananamerica, we would first have to see a rebirth of critical thinking and honest debate, instead of partisan demonizing and polarization of the sheeple.

    We are A Very Long Way from that happy situation.

    Your blog is one of the few remaining places where such activities are taking place. Thanks.

  6. troubled times says:

    Good stuff from both Stockman and Barry. I also recall Senator Javitz, he was too legit to succeed in todays world . ..I would add the press is also quilty of politics over policy. Can you imagine Stockman or Barry on the Glenn Beck show ? Both would most likely call the man a buffoon and walk off. I would love to see it !

  7. dougc says:

    Move over St Paul, rosey scenario Stockman also had an epiphany. 30 years after being one of the authors, along with Kudlow and Laffer, of Reagan’s tax and trade policies, he now says it wasn’t a good idea to cut taxes and increase spending because the budget deficits will be huge. He now recognises that free trade policies have resulted in a lower living standard for the woking classes,
    He bemoans the huge wealth gap but doesn’t point out that the Reagan tax cuts,lowering the top marginal rates, went mostly to the wealthy and the Reagan tax increases, social security and user fees, were paid by the working classes.
    He should of titled his editorial “Mistakes were made but no by me”, it appears to be working for Greenspan.

  8. MikeinMass says:

    Not much to add on Stockman’s piece but I will say I read it before noticing who the author was. I nearly fell off the chair when I finally checked who wrote it.

    re: Sen. Javitz – a true statesman while still alive. Although I leaned Dem in my younger days, growing up in RI there was no more of a statesman than John Chafee. How I wish these guys were still around.

  9. franklin411 says:

    Two points:

    1. Theodore Roosevelt was a Socia-list and un-American. Why? Because he was a Progressive, and the Progressives were radical Socia-lists, according to Republican Sen. Jeff Sessions.

    2. When Stockman ran the numbers for Reagan’s 1981 tax cut through the OMB’s computers, the result showed that it would result in massive deficits, massive windfalls for the corporate fat-cats, and a shrinking middle class. What did Stockman do? Why, what any Reaganite would do–he rigged the computer so it looked like the tax cuts were a free lunch! Stockman got religion relatively quickly and the truth came out in a December 1981 article, linked below:


  10. jbminn says:

    Have you considered running for office, Barry?

    It would be interesting (and v. telling) to see how a larger, more heterogeneous audience (i.e. a voting public) responded to your positions. While I mostly agree with you (been reading/lurking for a while), the true test of a constituency’s desire for change is conducted at the balloting box. It’s easy to take a stand here & get support, because your readers tend to be a self-selected group. We’re here because we’ve chosen to listen to you.

    I’d love to see passionate, intelligent, qualified bloggers become passionate, intelligent, qualified *candidates*.

  11. Jack Damn says:

    Reading Mr. Stocman’s article makes me feel entirely hopeless.

  12. alfred e says:

    “Here’s to hoping that reality-based economic policies … .”

    That’s almost a contradiction in terms. Given our post-modern rejection of most reality-based anything.

    We can, though, guarantee reality-based politics. And that will override all else. BananAmerica.

    What ever happened to the gentler mea culpa days? Now everyone seems quick to provide revisionist history proving “it wasn’t me” . As noted above, this is Stockman’s thinking. Change of heart? I think not.

    It’s as if everyone wants to ensure their epitaphs are not left to others.

  13. troubled times says:

    If and when Larry Kudlow comments on the Stockman piece could someone post it ? Larry was / is zombie like follower of the Bush doctrine “when in dought , look confident , make it up “

  14. Winston Munn says:

    Let’s see, we got our economic policies from Chicago and our President from Chicago – I suppose that explains why the nation is starting to look like the Cubs.

  15. wildebeest says:

    Yeah this is good stuff but unfortunately there are no signs that anyone in the GOP “gets it.” Or at least if they do “get it” they won;t say publicly because that would take them “off message.” What this all amounts to is that there is no competent leadership currently and no prospect of competent leadership on the other side of the isle. Very depressing.

  16. constantnormal says:

    Stockman also seems to have drunk rather deeply from the magical thinking gold-is-money fountain. Curious to note that having a gold-backed currency did not stop the many, many banking panics and depressions that litter the economic history of the Bananamerican Republic, most notably the Panic of 1873, Panic of 1893, and the Great Depression. Go figure.

    It turns out that it is just as easy to spend more than one should, whether the currency is backed by gold, or is backed only by wishful thinking. And under a gold-backed currency, the remedy for such over-spending is, more often than not, a devaluation of the currency, by adjusting the gold backing.

    But regardless of Mr Stockman’s foray into the world of magical thought, his desire for “balanced budgets, sound money and financial discipline” is laudable.

    It’s just that these are not independent attributes … financial discipline leads to balanced budgets, which in turn leads to sound money. It matters not how the “money” is facilitated.

    Of course, once the official money has been trashed, then any number of escape routes rise in (comparative) value: commodities (including gold and silver) and sound(er) foreign currencies are the easiest and most portable ways to preserve assets.

  17. constantnormal says:

    Winston, are you referring to the “third term of Dubya”?

  18. Mannwich says:

    I literally just read this article while drinking my morning cup ‘o Joe, and thought for sure that you’d post this one. Need more of this kind of thing from the 3-5 rational thinkers left on the right. Of course, the right will disown them all like they always do to any dissenters, but so what? Keep it coming the Bartletts and Stockmans the world.

  19. call me ahab says:

    Its funny, but when I criticize Bush, I get accused of being a liberal Democrat

    there is nothing wrong w/ being on the liberal side of things- as Jesus said-

    the truth shall set you free

    great post by the way- I wonder if GOP’ers are seeing the error of their “supply side” ways and realizing that tax cuts w/ no budget cuts is just more of the same nonsense we call Keynesianism

  20. rozdelrio says:

    I’ve lived in a pocket of these people for quite a while. They don’t necessarily know, understand or care about W’s economic or other policies. The only issue is-does he have R or D besides his name?
    Almost no one of either party supported Bush’s big deficit spending, but the mass media has refused to make it an issue, and in fact for years would say almost nothing negative about W. You got close to the point when you said “science was ignored”. Science is truth, and truth isn’t even considered a desirable or good thing by W apologists.
    I wonder how many people would have supported a Bill Clinton spending and budget nightmare like we have had since 2001?

  21. Patrick Neid says:

    you hear what you want to hear and you see what you want to see….

    —-It is also 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. Just let the free market set currency exchange rates, he said, and trade deficits will self-correct. It may be true that governments, because they intervene in foreign exchange markets, have never completely allowed their currencies to float freely. (Ya think?)

    —-In fact, since chronic current-account deficits result from a nation spending more than it earns, stringent domestic belt-tightening is the only cure. (Not a chance)

    —-In 1981, traditional Republicans supported tax cuts, matched by spending cuts, to offset the way inflation was pushing many taxpayers into higher brackets and to spur investment. The Reagan administration’s hastily prepared fiscal blueprint, however, was no match for the primordial forces — the welfare state and the warfare state — that drive the federal spending machine. (no shit Sherlock)

    —-Through the 1984 election, the old guard earnestly tried to control the deficit, rolling back about 40 percent of the original Reagan tax cuts. (the economy was now in a robust recovery aided by the original tax cuts)

    —Then, after rarely vetoing a budget bill and engaging in two unfinanced foreign military adventures, George W. Bush surrendered on domestic spending cuts, too — signing into law $420 billion in non-defense 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. (shameless embrace od Democrat policy–the NYTimes actually printed this!)

    —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 and if they hadn’t been able to obtain virtually free money from the Fed’s discount window to cover their bad bets. (coming dangerously close to the Fannie and Freddie model)

    — 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. (recycled Keynesianism–Krug’s panties are in a bunch)

    Not conveiently mentioned in this lament by Stockman was the Congressional makeup of the time. I’ll assume that the blame makers and finger pointers know what the role of the House of Reps is.

    Congress (Years) # Reps. Democrats, Republicans , Other Vac. Del./Res.

    (1977-1979) 435 292 143 0 0 3/1
    (1979-1981) 435 277 158 0 0 3/1
    (1981-1983) 435 242 192 Independent (1) 0 4/1
    (1983-1985) 435 269 166 0 0 4/1
    (1985-1987) 435 253 182 0 0 4/1
    (1987-1989) 435 258 177 0 0 4/1
    (1989-1991) 435 260 175 0 0 4/1
    (1991-1993) 435 267 167

    Today’s ratio is 257 vs 178….


    BR: Really? You really want to exonerate the GOP ?

  22. jonathanb says:

    One of the worst outcomes of the Republican’s lack of seriousness on economic issues has been that the Democratic Party has lost its one and only sparring partner. It’s hard to shape up when your opponent refuses to get in the ring with an intention of fighting clean. John Boehner and Mitch McConnell beget Nancy Pelosi and Harry Reid.

    Obviously though things are much more complicated than I make them out to be. My sense is that the Christian right, the gun lobby, and the tax crazies (Norquist, David Koch), etc. have all used each other to gain power. Thus we end up with a Republican party that is consistently wrong (and extreme) on every issue – and anything but conservative (guns in Starbucks!). I also think that the worst consequence of this is the ceding of economic policy to the lunatic fringe. I would be a centrist Democrat under most circumstances, but guys like Santorum, Sessions, Cornyn, Cantor (the list goes on) make me a raging liberal. And let’s not even get into the talk radio which every day erases billions of brain cells of its listeners.

    The best thing that could happen for everyone would be for someone like Bloomberg to challenge for Republican votes. Imagine the Democratic party having to respond to reasonable attacks! Who wouldn’t enjoy that?

  23. Now all we need is an article on how the democrats can’t/refuse to save the economy


    BR: The GOP is married to a disproven economic that “coincidentally” happens to benefit their biggest donors.

    I am not really sure what the Democrats economic thesis actually is . . .

  24. jonathanb says:

    And to Patrick Neid’s thoroughly helpful comments: Are you making the case that the “Reagan” tax cuts were actually the “Tip O’Neill” tax cuts? That’s one perspective!

  25. Haigh says:

    It’s appealing to blame a couple of old white guys, Bush and Friedman. But the responsibility lies with the American voter who sent fiscally irresponsible congressman and senators to DC, mirroring their own debt financed spending sprees.

    If the only way we return to fiscal responsibility is to hit a sovereign debt crisis, then the tax cuts are effective at accelerating the arrival of the inflection point. Do American voters deserve better?


    BR: Perhaps, but the reason I won’t run for office is that I day things like “The voters are foolish, misinformed and easily fooled.” That truth doesn’t win many votes . . .

  26. carleric says:

    In 1999 my family (native Texans all) warned me about George Bush and they were right. I am not so sure that Javits was a reasoned, intelligent middle-of-the-roader as protrayed here. I seem to recall it differently but so be it. As for David Stockman, he got religion in the early 80s and got out. Beginning with Ronald Reagan Republicans abandoned their classical, historical stance towards government and since that time have become ever more political whores for Wall Street joining their Democrtic brethern….I wonder when someone will ever figure out that John Maynrd Keynes had no clue…..just another economist wandering in the wilderness…..

  27. cn,

    you’re out w/: “…Curious to note that having a gold-backed currency did not stop the many, many banking panics and depressions that litter the economic history of the Bananamerican Republic, most notably the Panic of 1873, Panic of 1893, and the Great Depression. Go figure…”

    be safe, and assured, to know that ‘Banking Malfeasance’ can occur irrespective of the Nature of the underlying ‘Unit of Account’..
    mal·fea·sance (ml-fzns)
    Misconduct or wrongdoing, especially by a public official.

    [Anglo-Norman malfaisance, from Old French malfaisant, malfeasant, present participle of malfaire, to do evil, from Latin malefacere; see malefactor.]

    mal·feasant adj. & n.

    The American Heritage® Dictionary of the English Language, Fourth Edition copyright ©2000 by Houghton Mifflin Company. Updated in 2009. Published by Houghton Mifflin Company. All rights reserved.

  28. shocked monkey says:

    policies from Chicago and our President from Chicago – I suppose that explains why the nation is starting to look like the Cubs.

    as in-

    the hapless United States, plenty of adoring Americans, but they are always left dejected and disappointed. Maybe we need a new manager and a whole new team.

  29. wileycoyote says:

    Great Post, great article. Conservatives (GOP) lost their way a long time ago. I clicked on “critiques of Obama” looking for any recent posts of you criticizing Obama and or any of his policies and it went nowhere. Where can I find your critiques of Obama?


    BR: There are tons, but start with these:

    Obama Reform Plan Fails to Fix Whats Broken (June 18th, 2009)

    Tactical Error: Health Care vs Finance Regulatory Reform (September 9th, 2009)

    Why the Obama White House Cannot Reform Wall Street (October 21st, 2009)

    When Did Obama Sellout To Wall Street? (December 11th, 2009)

    I have been especially critical of his Rubin protege economic team

    Geithner, Summers Lead FOMC Vacancy Search (March 2nd, 2010)

    Volcker: We Need Radical Regulatory Reforms (June 25th, 2009)

    The 14 Most Strident Critics of Obama (April 30th, 2009)

  30. Tarkus says:

    “In terms of electoral politics, the embrace with the Religious Right was a deal with the devil. It married the party to a backwards combination of social regressiveness and magical thinking. Ideology trumped facts, and conflicting data and science was ignored.”

    To get elected, Reagan specifically went after the votes of the Southern Democrats. He was successful, and Karl Rove/GW Bush cemented that conversion to the GOP. They then took over the party. Thus, Rove became “The Architect” of the GOP’s destruction. Any hope of winning must now include convincing the general populous of their ideology, and we’ve already seen what that does.

    Of course, the Democrats are too busy being clueless to notice…

  31. Joe Friday says:

    Patrick Neid:

    “Through the 1984 election, the old guard earnestly tried to control the deficit, rolling back about 40 percent of the original Reagan tax cuts. (the economy was now in a robust recovery aided by the original tax cuts)”


    The national economy tanked after Reagan’s massive tax cuts for the Rich & Corporate were retroactively enacted late 1981, and only recovered after Reagan started signing LARGE tax increases late in 1982 and every year after that.

  32. radioman says:

    >Here’s to hoping that reality-based economic policies are somewhere in our future.

    My prediction is this may happen at least 2 generations AFTER we kick the federal government out of education. Kids–future voters–are no longer taught to think for themselves. They’re so busy memorizing junk to make their test grades higher there’s no time to actually learn anything. So they just BELIEVE what they’re told, and vote accordingly.

    Isn’t it odd America led the world in everything–science, technology, industry, medicine, democracy, economics–until they starting trying to improve the schools and increase test scores relative to the rest of the world???

  33. VennData says:

    As a Volker/Buffett Democrat – I tend to prefer politicians who don’t run for office, ‘oxy-moronic,’ I know, but hear me out:

    The GOP doesn’t have time to switch their inherently conflicted (cut taxes/cut deficits) economic agenda for 2010 mid-terms…


    … GOP Senate Minority Leader Mitch McConnell’s only ‘contribution’ to the world was keeping as much money in politics as possible…


    …and with recent Supreme Court support…


    …McConnell knows one strategy: ‘No.’ So with Mitch’s parochial base leaning Rand Paul’s way…


    …and the campaign in full swing…


    …the Democrats are running on their – many – accomplishments and as the economy (and global equities) grinds higher over the next few years, the GOP must take power from McConnell and his support team and go from the ‘Party of No…’


    …to the ‘Party of No Tax Cuts’ or their chances in 2012 will be slim.

    In other words, the mid-terms will be close and hard fought, but any pyrrhic GOP victories will be at the expense of 2012 as a gridlocked Congress means deficits will climb. For the first time in a long time, gridlock won’t be good.

    It bares repeating: Gridlock won’t be good with $1T structural deficits. …especially for debentures.

  34. call me ahab says:


    here’s a critique of Obama from BR-

    Obama Reform Plan Fails to Fix Whats Broken

    I give BR grief because I think he leans liberal but doesn’t embrace what we already know- but- doesn’t mean he isn’t critical of bad policy (from time to time)

  35. “• Who is to blame? Milton Friedman. In 1971, he persuaded President Nixon to unleash on the world paper dollars no longer redeemable in gold.”

    I’m surprised that Stockman doesn’t bother to assert (doesn’t know?) that the Post-’71 “convertibility” was ‘to Oil’ (aka The Petro$).

    Maybe, you know, if He’s interested, He’ll find the FedRes’ own Studies illuminating..

    as: http://www.newyorkfed.org/research/current_issues/ci12-9/ci12-9.html

    and, generally: http://search.yippy.com/search?input-form=clusty-simple&v%3Asources=webplus&v%3Aproject=clusty&query=PetroDollar+Recycling

    LSS: Our, the U.S.’, reliance on the PetroDollar has been one the key determinates of our National Policy since its inception.

    as has been said: “Hard to find a Cure, if you can’t tell what ails ya’..”

  36. KentWillard says:

    Self-righteous rather than righteous.
    Nationalistic rather than patriotic.
    Propaganda rather than information.
    Partisan rather than independent.

    And always fear. To many, there is no difference between the juxtapositions above.

    How to communicate past the hatred and ignorance???

  37. Winston Munn says:

    constantnormal Says: Winston, are you referring to the “third term of Dubya”?

    No, more like 4th and long.

  38. RW says:

    I’ve been trying to trace down a series of research studies that demonstrated if surveys on economic and social opinion were very carefully crafted — no bias, buzz words, etc. — that the majority of American voters were in fact economically conservative and socially liberal: They had hard heads and soft hearts. Not having any luck locating it but the idea is intuitively satisfying.

    In any case, as Alan Blinder noted some time ago, too much of our policy-making has either been soft hearted and soft headed or hard hearted and hard headed. Pretty close to the mark it seems to me.

    Personally though I’d love to see an end to the ill-informed claims that government spending or ‘stimulus’ is always Keynesian — not quite as ignorant as applying the word “socialism” to anything and everything perhaps but equally silly — for the record, one last time, anyone who actually reads Keynes knows his theory was fundamantally about employment and the destructive impact chronic or structural underemployment could have on an economy and a country. Keynes NEVER recommended government spending when the economy was normal or expanding, only when it was contracting and unemployment rising viz “The central argument of The General Theory is that the level of employment is determined, not by the price of labour as in neoclassical economics, but by the spending of money (aggregate demand). [Keynes] argues that it is wrong to assume that competitive markets will, in the long run, deliver full employment or that full employment is the natural, self-righting, equilibrium state of a monetary economy. …One implication of The General Theory is that a lack of competition is not the fundamental problem and measures to reduce unemployment by cutting wages or benefits are not only hard-hearted but ultimately futile.” http://tinyurl.com/2dpxssz

    It is probably more accurate to argue that politicians and power brokers like to cover or mask what they are really doing with a good theory of some sort or other and will bastardize any theory that is close enough to serve their purposes. Keynes theory served that function for awhile as long as citizens didn’t read him (and he is difficult to read) but Friedman served it better although not a perfect fit and then Arthur Laffer came along and, holy cow, a perfect fit for the powers that be: Easy to read and perfect for bumper stickers; cutting taxes and increasing spending for special interests was good for the economy and removing regulations and official oversight made it all work, oh yeah! Arbeit macht frei!

    That said, who cares what folks call it: Any movement in public thought towards the far more accurate identification of government spending during both good and bad times (particularly in the form of tax cuts and special interest subsidies) with supply-side economics, crony capitalism and lemon socialism is welcome. Maybe if enough folks get the message we’ll actually climb out of this hole instead of digging it deeper.

  39. ruetheday says:

    He’s correct about the nonsensical Republican belief that whatever the problem, tax cuts are always and everywhere the only solution. He’s also right about the expansion of the financial sector. However, he loses me when he starts pining for the gold standard.

  40. HEHEHE says:

    Fantastic summary. It’s deficit spending not a “tax cut” when you cut taxes and do nothing to cut spending, which is what Reagan did and what all the subsequent administrations have continued to mimic. That clown Cheney and his “Reagan proved deficits don’t matter” comment makes me want to hurl. Yeah they don’t matter to some 70 year old with one foot in the grave but they certainly do to his granchildren.

  41. wileycoyote says:

    Thanks Ahab. I come here because I think BR and all the posters are extremely knowledable and fair when it comes to calling out both sides- I just couldn’t remember any recent criticisms os Obama’s economic policie from BR I don’t think either party has anything new to offer us, just the same old rhetoric.

  42. Jack says:

    Wait, wait, wait…you mean it’s NOT illegal immigrants, welfare mothers and tax/spend policies that screwed us?

    Oh no, oh no oh no……

  43. S Brennan says:

    Barry, I wouldn’t get your hopes up too high, Barack has fully embraced Friedman-esque/Reaganism we saw that with him whipping for TARP & a Stimulus program who main component was tax cuts to those who needed it least.

    However, it’s good to see Freidman, purveyor of a religious/economic doctrine that justified the raping of the powerless exposed. I remember watching Freidman’s preaching during an often repeated 12 part series, with one hour segments the religion of tax cuts for the rich and the empoverment of government re-making it into the tool of large moneyed interests.

    Ironically, while that Friedman boy talked and talked as he took us around the world showing how much better our lives would soon be if we followed his corporately amplified pipe music, he ignored Argentina. It was well known and discussed, that Argentina had followed his tax advice in the early 1900′s and suffered a massive fall in national wealth and stature. But such is the thinking of “economic minds”…select only data that agrees with you and exclude all the facts that directly contradict your pet theory.

    That is why an economics degree is a Bachelor in Arts…not science, just as when you swing a hammer, it does not make you a carpenter, it follows, just because you can fit terms into a calculus equation…that does not make you a scientist, or engineer. Economics would have to go through the equivalent of a Copernican revolution before economists should be considered more than an appointed astrologer to the imperial courts.

  44. troubled times says:

    I think its important to point out the Bush economic policy was highjacked by Bin Laden. We needed to show his attact on Wall Street failed. The wind up is we attacked his, Bin laden’s life long enemy in Iraq and than committed suicide by kissing Dick Grasso’s ass, another great American hero according to Larry Kudlow.


    BR: Iraq? Massive Tax Cuts? Prescription Drug entitlements — all bin Laden’s doing ?

    I normally do not allow the comment stream to be polluted by absurd silliness, but given that you must have a foolish comment generating machine, I wanted the rest of the readers to see it for ridicule.

  45. Petey Wheatstraw says:

    Stockman pissed in the pool first. Now he complains that it’s a cesspool. No shit, Dave, and thanks for the contribution.

  46. Taylor says:

    The sad fact is that we have a political party owned lock, stock and barrel by the Wall Street barons, and we have another party that is batshit insane.

    I would like to see the current sad echo of the party of Lincoln go the way of the Conservatives in Canada. An election that left them with two seats in the House of Representatives sounds about right. Without the party of the batshit insane threatening to tear the country apart, the Democrats could finally break up into the New Deal progressives (represented by some of the new senators like Franken, Brown and Whitehouse) and the party of the Rockefeller Republicans (represented by the current and last Democratic presidents). Then we could go back to a rational national discussion of policy choices.

    Unfortunately I suspect that tribal politics is the original vampire squid with its tentacles wrapped around the throat of the country, and people too stupid and bigoted to let go of it. The only outcome I see in the future is increasing regional differences exacerbated by resource shortages (especially water), leading eventually to a breakup of the union. You can already hear NJ voters asking why their tax dollars are subsidizing welfare states like Ben Nelson’s Nebraska, while he cuts their unemployment benefits.

  47. troubled times says:

    Bush didn’t claim Iraq was , in part, behind 9/11 ? We didn’t spend piles of money , borrowed money in Iraq because of Bin Laden ? We didn’t goose the markets and economy with the hopes we could say Bin Laden failed ? …Fine, heap the ridicule on.


    BR: You can claim whatever you want, but reality has this nasty habit of intruding . . .

  48. Joe Friday says:

    troubled times:

    “I think its important to point out the Bush economic policy was highjacked by Bin Laden.”

    Except, according to the NBER, the national economy officially entered recession months BEFORE 9/11, but AFTER the first round of Bush tax cuts for the Rich & Corporate.

    That Osama is one pretty tricky guy.

  49. The NBER cycle dating committee has the recession beginning March 2001, and ending November 2001 — 2 months after 9/11

    For the record, the NBER addressed the economic impact of the terror attack, although i disagree with them:

    Q: The NBER has dated the beginning of the recession in March 2001. Does this mean that the attacks of September 11 did not have a role in causing the recession?

    A. No. Before the attacks, it is possible that the decline in the economy would have been too mild to qualify as a recession. The attacks clearly deepened the contraction and may have been an important factor in turning the episode into a recession.

    Post 2000 tech Bubble/market crash, we were having a recession regardless.

  50. Petey Wheatstraw says:

    constantnormal Says:

    Stockman also seems to have drunk rather deeply from the magical thinking gold-is-money fountain. Curious to note that having a gold-backed currency did not stop the many, many banking panics and depressions that litter the economic history of the Bananamerican Republic, most notably the Panic of 1873, Panic of 1893, and the Great Depression. Go figure.

    At the times you cite, they did allow fractional reserve and leveraged purchases/manipulation. Under those conditions, regardless of monetary basis (or lack of one, as we now have), someone is going to take huge losses. It’s one thing to have a relatively fixed quantity commodity as a restraint on your money supply _ it’s another ball game entirely when you allow that commodity to be synthetically inflated.

  51. crankitto11 says:

    Awesome, simply awesome.

    Thank you for the link, Barry.

    Definitely agree with you about Bruce Bartlett, as well. A recent interview of his in the Economist is similarly incisive and devastating:

    Hope Stockman is prepared for the blowback from the right wing Fair and Balanced Spin Machine. He did the unforgivable, by revealing the charlatan behind their curtain, pretending to be the Wizard of Gip.

  52. call me ahab says:


    but can’t a person have a revelation later in life- much like Tolstoy’s Ivan Ilyich- looking back and realizing that everything he had done was wrong?

  53. gms777 says:

    Depressing essay. Trip to woodshed required for everyone.

    But I am reminded of Lincoln’s Second Inaugural…


    While certainly not excusing the South, he makes clear that he thinks both sides were to blame by pushing the problem down the road. We all need to bind up our wounds and work together to prevent this situation from getting much, much worse….

  54. Chief Tomahawk says:

    “Here’s to hoping that reality-based economic policies are somewhere in our future.”

    HA! That’s like saying the “Jersey Shore” show really exists on MTV for the flashback story to air 30 years from now when they all have gained 40+ pounds and aged commensurately, only the cast hasn’t figured this all out yet.

  55. DL says:

    While we are trying to decide which party to blame, it is worth noting that the “debt disease” afflicts many countries around the world.

    We’re just going to keep piling on more debt until the creditors put a stop to it.

    The end won’t be pretty.

  56. Chief Tomahawk says:

    I wonder how Larry Kudlow will react to the criticism of Milton Friedman?

  57. S Brennan says:

    This Milton Friedman Child,

    with special thanks to Reaganism-Bush [the 1st], Bush [the 2nd]-Obama [Bush, the 3rd] & honorable mention to Clinton for allowing the Supreme Court to usurp their role [on several occasions]


    The crisis of middle-class America – Edward Luce July 30 2010

    “…It only takes about 30 seconds to tour Mark’s 700sq ft home in north-west Minneapolis. Cluttered with chintzy memorabilia, it was bought with a $50,000 mortgage in 1989. It is now worth $73,000. “At one stage we had it valued at $105,000 – and we thought we had entered nirvana,” says Mark. “People from the banks kept calling, sometimes four or five times an evening, offering equity lines, and home improvement loans. They were like drug pushers.”

    Solid Democratic voters, the Freemans are evidently phlegmatic in their outlook. The visitor’s gaze is drawn to their fridge door, which is festooned with humorous magnets. One says: “I am sorry I missed Church, I was busy practicing witchcraft and becoming a lesbian.” Another says: “I would tell you to go to Hell but I work there and I don’t want to see you every day.” A third, “Jesus loves you but I think you’re an asshole.” Mark chuckles: “Laughter is the best medicine.”

    . . .

    The slow economic strangulation of the Freemans and millions of other middle-class Americans started long before the Great Recession, which merely exacerbated the “personal recession” that ordinary Americans had been suffering for years. Dubbed “median wage stagnation” by economists, the annual incomes of the bottom 90 per cent of US families have been essentially flat since 1973 – having risen by only 10 per cent in real terms over the past 37 years. That means most Americans have been treading water for more than a generation. Over the same period the incomes of the top 1 per cent have tripled. In 1973, chief executives were on average paid 26 times the median income. Now the ­multiple is above 300.

    The trend has only been getting stronger. Most economists see the Great Stagnation as a structural problem – meaning it is immune to the business cycle. In the last expansion, which started in January 2002 and ended in December 2007, the median US household income dropped by $2,000 – the first ever instance where most Americans were worse off at the end of a cycle than at the start. Worse is that the long era of stagnating incomes has been accompanied by something profoundly un-American: declining income mobility.

    Alexis de Tocqueville, the great French chronicler of early America, was once misquoted as having said: “America is the best country in the world to be poor.” That is no longer the case. Nowadays in America, you have a smaller chance of swapping your lower income bracket for a higher one than in almost any other developed economy – even Britain on some measures. To invert the classic Horatio Alger stories, in today’s America if you are born in rags, you are likelier to stay in rags than in almost any corner of old Europe.

    Combine those two deep-seated trends with a third – steeply rising inequality – and you get the slow-burning ­crisis of American capitalism. It is one thing to suffer ­grinding income stagnation. It is another to realise that you have a ­diminishing likelihood of escaping it – particularly when the fortunate few living across the proverbial tracks seem more pampered each time you catch a glimpse. “Who killed the ­American Dream?” say the banners at leftwing protest marches. “Take America back,” shout the rightwing Tea Party demonstrators. ..”

  58. Super-Anon says:

    You know it’s unfortunate but when Obama first got elected it sounded like there were some “fiscally responsible” people on the “left” starting to warn about deficits and stuff like that and then they were told to shut up because that was at odds with “Krugman Economics”.

    Note now that a year or so back Krugman said on Charlie Rose that “politically deficits don’t matter” now heading in the elections polls are showing that deficits as the number one issue on voters minds.

    I think the “left” simply made a huge strategic mistake in allowing the “right” to take ownership of the whole cause of fiscal conservatism instead of embracing it themselves. Now I think it’s far to late for them to do so.

    Also I think it’s strategically wise of presumably “fiscally conservative” movements like the Tea Party to distance themselves from the Republicans for the time being (even if it’s just a short-term ruse). It adds to their credibility, makes it more difficult for the opposition to criticize them, and appeals to supporters Ron Paul’s ideas (like myself).

    I argued a long time ago that Krugman would be the death of Obama simply because the idea of borrowing and spending your way out of a credit crisis is indefensible.

    While socially and environmentally I agree with a lot of the causes on the left I think they’ve been so badly outmaneuvered by the right in recent months that it calls into question the viability of the Democrats as a political party.

  59. Paul Jones says:

    No, the Democrats also have a very bad economic policy, keep filling the bucket up with water, even though it has a hole in it.

    Fix the bucket, and everything will work out.

  60. super_trooper says:

    Clearly Stockman is a liberal. How about stop complaining and come up with solutions. Why speak up now? Oh yeah by the way, an old nazi just, finally, figured out the holocaust was a bad thing.


    BR: Stockman has been dissing Supply Side nonsense for > 20 years

  61. S Brennan says:


    “fiscally responsible” people would be calling for

    1] Tax increases on those whose incomes have tripled in the past thirty years while those lower 80% who have been treading water would get their ever increasing payroll taxes cut.

    2] Getting out of Iraq…there’s at least 150 billion a year saved.

    3] Getting out of Afghanistan…there’s at least 100 billion a year saved.

    4] Raise SSI & Medicare limits…the whole idea that only the first 100,000 of income is taxed is regressive in the extreme.

    5] Expand medicare to 100% of the population, rich people buy supplemental insurance to get that extra measure of care that they are “entitled to”.

    6] Expending such sums that are necessary to create technologies that greatly reduce our need for petroleum based internal combustion engines [sorry Barry, they gotta go] so that the biggest factor in our balance of trade and hence our dependence on foreign treasury purchases that stunt the economy are removed.

    Some times you have to spend money to save money…

  62. call me ahab says:

    Oh yeah by the way, an old nazi just, finally, figured out the holocaust was a bad thing.

    now that’s funny-

    but I am sure there were others who never came to that conclusion-

    just following orders and carrying out policy

  63. Vilgrad says:

    Stockman is right. Both parties have combined to destroy this country. A 3rd Party is needed.

    I’m sorry to be the bearer of bad news. There are no easy solutions. There are only painful, more painful, and really really painful solutions. Both mainstream corrupted political parties have had the chance to put the country back on a prudent fiscal path. They have both failed miserably. One party will spend the country into oblivion and the other country will try to democratize the world with their military machine. There are no fresh ideas from either party. There are the same old stale ideas and rhetoric.

    I’ve been waiting for someone to distinguish themselves as a straightforward leader who will level with the American people and tell them the TRUTH. There is only one totally truthful politician in Washington DC. His name is Ron Paul. He is trapped in a Republican Party run by neo-con warmongers. Chris Christie, the governor of NJ, has the guts and demeanor to satisfy the requirements of a new leader, but the hacks who run the party will not allow him to become the face of the party. Paul Ryan, Congressman from Wisconsin, has the brains and ideas to help save the country. The party hacks will pretend to adopt his ideas to get elected in 2012 and then go back to the same old policies.

    Both parties are captured by corporate lobbyists, the military industrial complex and Wall Street. Lobbyists spend $40 billion per year “convincing” politicians that their ideas should be implemented. Politicians DO NOT represent the people. They represent those who give them the most money. Radical earth shattering change is needed to save this country. Incremental steps won’t work. We need a leader wielding a sledgehammer.

    The ONLY way to save the country from financial collapse is to take on the largest expenditures. They are:

    $895 billion for Military spending
    $730 billion for Social Security
    $491 billion for Medicare
    $297 billion for Medicaid

    These 4 areas total $2.4 trillion per year out of $3.8 trillion. This is 63% of all Federal spending. A real leader would tackle these areas. A 3rd party candidate with gonads would propose the following ideas:

    When George Bush took office in 2000 the annual Defense (funny name) Budget was $380 billion. Since that date CPI has increased 25%. On an inflation adjusted basis, the Defense Budget should be $475 billion today. Essentially we are paying an additional $420 billion PER YEAR to fight the phantom WAR ON TERROR. This is nothing but a fraud perpetrated by the neo-cons and now the neo-liberals. My plan is to declare victory in the War on Terror. No one knows what victory means anyway. Withdraw ALL the troops from the Middle East, Germany, Japan and Korea. Let them blow themselves up if they want. Not our problem. Germany, Korea and Japan can pay for their own defense. Tell the Pentagon they have $475 billion to allocate and not a dime more for the next 10 years. SAVINGS = $420 billion

    John Hussman has a fantastic idea regarding Social Security. This idea would benefit the working class and stick it to the rich. “Drop the rate substantially, but include all income – wage and non-wage. Three-quarters of Americans pay more in payroll taxes than in income taxes. By reducing the wedge between the hourly amount earned by employees and the hourly cost paid by employers, this strategy would create immediate incentives for employment. Moreover, it would raise more revenue because at present, even Warren Buffett only pays Social Security taxes on the first $106,800 of income.” This idea would be an immediate boost to the economy as the average worker would take home more pay. Revenue from Social Security would increase by $200 billion.

    On the cost side of Social Security, life expectancy, amount of wealth, and market incentives would need to be introduced. Anyone over 55 years old would get just what they were promised. Workers from 30 years old to 55 years old would see the age they were entitled to collect SS rise from 67 to 76 depending on their current age. Anyone whose net worth is in the top 5% of all Americans would not receive SS when they retire. Workers just entering the workforce would be given the option of a significantly scaled down benefit or a private account to be managed by themselves. These steps would make the system viable forever. It would not cut costs in the near term.

    Paul Ryan’s common sense approach to Medicare would be: For those under 55—as they become Medicare-eligible—it creates a Medicare payment, initially averaging $11,000, to be used to purchase a Medicare certified plan. The payment is adjusted to reflect medical inflation, and pegged to income, with low-income individuals receiving greater support. The plan also provides risk adjustment, so those with greater medical needs receive a higher payment. The proposal also fully funds Medical Savings Accounts (MSAs) for low-income beneficiaries, while continuing to allow all beneficiaries, regardless of income, to set up tax-free MSAs. Enacted together, these reforms will help keep Medicare solvent for generations to come. This proposal, along with eliminating the fraud within this system would save at least $200 billion per year.

    Paul Ryan’s healthcare plan would reduce costs, keep the high quality, and keep it out of the government’s clutches: It provides a refundable tax credit—$2,300 for individuals and $5,700 for families—to purchase coverage (from another state if they so choose) and keep it with them if they move or change jobs. It establishes transparency in health-care price and quality data, so this critical information is readily available before someone needs health services. State-based high risk pools will make affordable care available to those with pre-existing conditions. In addition to the tax credit, Medicaid will provide supplemental payments to low-income recipients so they too can obtain the health coverage of their choice and no longer be consigned to the stigmatized, sclerotic care that Medicaid has come to represent. This plan would save $200 billion per year.

    There are two options to simplify the tax system. Americans spend $11 trillion per year. They pay $1.1 trillion in income taxes per year. The tax code is 17,000 pages long. By scrapping the entire income tax and replacing it with a 10% VAT, the country would get the same revenue with individuals being freed from the tax code. The other option is essentially a modified flat tax as proposed by Paul Ryan: This highly simplified code fits on a postcard. It has just two rates: 10% on income up to $100,000 for joint filers and $50,000 for single filers, and 25% on taxable income above these amounts. It also includes a generous standard deduction and personal exemption (totaling $39,000 for a family of four), and no tax loopholes, deductions, credits or exclusions (except the health-care tax credit). The proposal eliminates the alternative minimum tax. It promotes saving by eliminating taxes on interest, capital gains, and dividends. It eliminates the death tax. It replaces the corporate income tax—currently the second highest in the industrialized world—with a business consumption tax of 8.5%. This new rate is roughly half the average in the industrialized world and will put American companies and workers in a stronger position to compete in a global economy.

    The Deptartment of Education and the Department of Energy were both created by Jimmy Carter in 1979. Since this time student test scores have plummeted, the cost per student has skyrocketed, and we graduate more morons into society than ever. Since this time, our dependence on foreign oil has doubled, no nuclear power plants have been built, no refineries have been built and peak oil has been completely ignored. For this outstanding performance, we spend $78 billion per year for the Dept of Education and $36 billion per year for the Dept of Energy. If we survived from 1789 until 1979 without these departments, we can make do without them again. They are miserable failures and must be scrapped. Annual Savings = $114 billion.

    Every department and every program and every government worker would be required to take a 10% reduction across the board. Annual savings = $100 billion.

    Legalize marijuana for adults and then tax the shit out of it like tobacco and alcohol. Unknown revenue increase. Reduction in prison costs for minor drug offenses.

    By my estimation we’d be pretty damn close to a balanced budget. It would entail pain and sacrifice to achieve a balanced budget. The pain and sacrifice today would ensure that our children and grandchildren have a tomorrow. Some practical issues to tackle in order to fix the culture of Washington DC would be:

    Term limits of 12 years for all Representatives and Senators. Politics is not a career. They are serving the people and then returning home to their chosen profession.

    Lobbying and lobbyists would be outlawed. No corporation, individual, or union could buy access to politicians.

    Political Campaigns would be publicly funded and last for only 6 weeks before an election.

    Regarding immigration, all illegal immigration would be stopped. The fence/wall that exists in California would be extended through Texas. Troops withdrawn from Iraq, Afghanistan, Germany, Korea, and Japan would be available to enforce our closed border. The children of illegal immigrants would no longer be given citizenship status for being born here. We should strongly encourage legal immigration, especially of professional well educated immigrants. John Mauldin has a great idea to encourage legal immigration and help the housing market:

    Any immigrant who buys a house in the US would be given a fast track to citizenship of two years, as long as they commit no crimes. This would attract wealthy immigrants. It might also keep the best and brightest graduate students here in this country.

    John Hussman had a creative solution to help the housing market. He came up with this idea in October 2008. Of course, the Bush and Obama idiots would never consider such a logical solution:

    Congress can efficiently mute the impact of the mortgage crisis on “Main Street” by allowing a small change in foreclosure law. Specifically, in foreclosure proceedings, judges should have the ability to reduce the amount of principal on a mortgage loan, provided that the original mortgage lender receives a “Property Appreciation Right” or “PAR” from the homeowner. The PAR would be an obligation to repay the mortgage lender out of future appreciation on the home (including property subsequently purchased, until the obligation was relieved). Payment would occur either when the home was sold, or through an equity-extraction refinancing at some later date. In that way, homeowners would surrender some amount of future appreciation in return for an equivalent reduction in the mortgage principal. This would result in an immediate lowering of mortgage payments, yet the original mortgage lender would still stand to be made whole. To account for time-value, the amount of the PAR obligation could be allowed to increase at a small rate of interest. The homeowner would be able to keep the house. Importantly, there would be no need to continue major write-downs on mortgage securities, since only the character of the payments, not the value of the mortgage obligation itself, would change.

    The Federal Reserve must be audited. It must be a complete audit with nothing off-limits done by the GAO. When the audit reveals that the Federal Reserve has committed crimes against the citizens of the United States, it should be disbanded. The country grew tremendously from 1789 until 1913 without a Federal Reserve. The Treasury can issue the money of the U.S. The money should be backed by hard assets. It would require a basket of hard assets including gold, silver, uranium, oil, natural gas, and agricultural products.

    We have reached Peak cheap oil. Ignoring it for a moment longer will ensure disaster for our suburban sprawl society. The government needs to get out of the way and let companies build nuclear reactors, oil refineries, and LNG facilities. The Pickens Plan which would utilize wind farms to free up natural gas to power our truck fleets should be given serious consideration. If geothermal, hydro, solar, and wind make sense from an ROI basis, it should be encouraged. Government needs to get out of the way of entrepreneurship. An expansion of electrified rail transportation is one area that government could actually provide leadership.

    The ideologues in the Republican Party and Democratic Party are not worried about a 3rd Party. They say that there is no way a 3rd Party could create an infrastructure to win in 2012. What they fail to realize is that people are sick and tired of their two party games. The names change, but the game remains the same. Both parties have failed the American people. The American people have failed. It is time to make a stand, before it is too late. 2012 is our last chance.

    I believe that Ron Paul and his Campaign For Liberty should break away from the Republican Party and either form a new 3rd Party or just take over the existing Constitution Party structure. The name is right. The ideas are consistent. I would vote for Ron Paul, but he is 72 years old and he may be too diplomatic. We need a bomb thrower. I think we need Chris Christie to take on Washington DC the way he has taken on the Unions and the Democrats in NJ. A Constitution Party ticket of Chris Christie for President and Paul Ryan as VP would be a winnable option. This would be revolutionary. It would require these two men to abandon the corrupt Republican Party and do what is best for the country. Party politics is dying rapidly due to incompetence and corruption. It is time to start over.

    If we keep these wise words of our founding fathers in our minds at all times, we could turn this country around before it is too late.

    “I love the man that can smile in trouble, that can gather strength from distress, and grow brave by reflection. ‘Tis the business of little minds to shrink, but he whose heart is firm, and whose conscience approves his conduct, will pursue his principles unto death.” — Thomas Paine

    “Peace, commerce and honest friendship with all nations–entangling alliances with none, I deem [one of] the essential principles of our government, and consequently [one of] those which ought to shape its administration.” –Thomas Jefferson: 1st Inaugural Address, 1801.

  64. Vilgrad:

    Fascinating, thought provoking comments — thank you

    And I found this to be quite intriguing:

    John Hussman has a fantastic idea regarding Social Security. This idea would benefit the working class and stick it to the rich. “Drop the rate substantially, but include all income – wage and non-wage. Three-quarters of Americans pay more in payroll taxes than in income taxes. By reducing the wedge between the hourly amount earned by employees and the hourly cost paid by employers, this strategy would create immediate incentives for employment. Moreover, it would raise more revenue because at present, even Warren Buffett only pays Social Security taxes on the first $106,800 of income.” This idea would be an immediate boost to the economy as the average worker would take home more pay. Revenue from Social Security would increase by $200 billion.

    I vote Yeah on the Hussman amendment

  65. b_thunder says:

    Mr. Ritholtz,
    I totally share your political views (both fiscal and social sides), but I do not see any national level politician to vote for!

    Please tell me which national-level politician i should consider mailing a check to, or, should we start a campaign to amend the Constitution and allow Bill Clinton run for the 3rd term? (this time on a condition NOT to appoint Summers, Rubin, Greenspan and their proteges’ to any government and federal reserve positions ????)


    BR: The John McCain of 2,000 qualifies. So does the Elito Spitzer (pre-hooker)

    Your last best hope is Bloomberg. . .

  66. BDW says:

    Krugman and Keynes have completely become throw away words for those who don’t have a fucking clue what they are or what they represent (see the socialist/fascist/communist regime now in the white house comments everywhere!!). Krugman was hugely critical of Obama over the last 18 months because none of this “stimulus” is actually Keynes. It does not create new infrastructure or put people to work and there is no real systemic long term investment. And what is really Keynes, a method for paying for it once the crisis has past, is no where to be seen if the wars continue, medicare part D remains, and the tax cuts aren’t allowed to expire. Taking a Krugman quote out of context during a recession is nothing more than the Breitbert mentality of the right.

    This to echo what RW said earlier. And Krugman has supported everything that Brennen mentioned in his post but will be demonized as “socialism and Keynesian ism run amok”.

  67. mrmike23 says:

    Well, Obama, for all his faults, has at least started to bring the office he occupies out of the dark ages of magical messages from god and back to science and reason. A start and maybe change toward the kind of service given by Javitz will eventually arrive.

  68. Petey Wheatstraw says:


    It’s me, Marcus A. I’m commenting under a new handle because the old one wouldn’t let any comments through (BR couldn’t troubleshoot, so now I’m Petey).

    Anyway, yes, people can look back and realize they were wrong. Once over the waterfall, however, it’s a little late for the revelation/admission to be anything but an annoyance.

  69. chartist says:

    I’m all for a fine libertarian like Ted Nugent as our next president….And after losing a nephew to the Iraq war, want to see Bush go quail hunting with Cheney.

  70. The present creates its own past. I realize it is really, really fun to look back and discover a villain in our past (Ronald Reagan, Milton Friedman) upon whom to blame all our present-day troubles, but really? There have been no intervening causes that might explain where we are now better than reaching back some thirty and forty years?

    Okay, if these are the villains, then tell you what let’s do–reverse everything they did, and it all ought be better. Instead of confronting the Soviet Union at every turn until it crumbles and falls and takes with it the only existential threat to the country, let’s kowtow to whomever is closest to posing such a threat now. But there really isn’t one right now, so we can’t reverse that strategy. I guess we could cozy up to Iran in lieu of finding any real existential threats. If abandoning the gold standard was such an anathema to our economic virtue, let’s reinstate it today. That will surely substantively change the economic fortunes of the country.

    This sort of historical revisionism is utter silliness, and points, paradoxically, to how successful we have been through the last forty or so years, and how minimal are our problems even today. Serious problems would require serious solutions that are concerned with the here and now, not with with trying to reach back through several decades to find a bogeyman.

    I mean, why stop at forty years? Let’s go back sixty or eighty or even to the founding. Ah–the real source of our problems today is that of the four main founding groups–the Puritans, the Quakers, the Virginians and the Scots/Irish, the Puritans and Quakers abandoned their animating value (religious freedom) in order to get rich like the Virginians. (The Scots/Irish just went along for the ride, or perhaps, the booze). There. Now discuss how much better and different things might have been had the Puritans and Quakers not turned into such materialists.

  71. Curmudgeon:

    You may be missing Stockman’s main point, and his philophical thesis:

    The main point is that the party of Fiscal responsibility morphed into the party of profligacy and deficit spending.

    And the philosophical issue is that ideas (and ideology) matter. As soon as much of the adult population starts believing in Santa Clause, the country is in trouble. . .

  72. Transor Z says:

    The thing is, there is “science” behind all of this — the polling that proves that political messages are like Doritos: push the right taste buttons and a wholly manufactured “food product” will be consumed as if it has value. Part of the scientific method is to find what is repeatable, right? This shit’s as old as the hills.

    GOP moderates have been SPANKED for 30 years by a better organized, cohesive, disciplined core of complete tools. I’m a DEM but I know there’s no “vision thing” or integrity there either. Sadly, historically speaking change only happens in response to intolerable conditions and it tends to lack nuance.

  73. byomtov says:

    It’s Javits, I think.


    BR: DOh! I’ll fix above

    I have a nasty habit of adding a “z” to the end of people’s last name . . .

  74. willid3 says:

    The Paul family is not better than any of the others.
    their proposals would not help any but the top 1%, just like the rest. its just cloaked differently

  75. alnval says:

    Stockman writes with the simplicity and clarity of someone who understands what he’s talking about. This isn’t ideology talking it’s facts. When you recognize that sub-text what he says becomes even more frightening. Moreover, he’s not resorting to arguments that were derived artificially from gigo computer models.

    Stockman tells a simple story that has a beginning, a middle and now an end that we all can see and agree on. You can argue that he hasn’t picked the right facts but that’s beside the point. Even Occam would likely approve.

    The history highlights are bad enough. But Stockman’s calling out the “vast, unproductive expansion of our financial sector” and “the hollowing out of the larger American economy” is truly apocalyptic particularly as there continues to be no fact-based, legislative solutions in sight. Our legislators deny us access to solutions, even ones that might work, by placing more value on protecting their jobs and the ideologies that inspire the “welfare state” and the “warfare state” than the country itself.

    Although Stockman’s op-ed is basically a call to Republicans to get their act together one cannot escape the possibility that in order for this to happen, things in this country will have to get a lot worse before they even have a chance of getting better. Maybe not as bad as pitchforks and torches, but given the current political climate, who knows?

  76. ToNYC says:

    You might have better said the Federal Reserve destroyed the economy. The real money behind what is of par value today is involved with the Member Banks. Quite naturally in the lawful exercise of their 1913 charter, the FRS survives by withdrawing credit and as it turns out those in the loop are remarkably efficient in cherry -picking the pennies-on the-dollar assets with the benefit of timing. Play and replay.
    The political parties are simply the harbormasters of the money ports and ready to arrange themselves as necessary to fake peace with the least visible injustice.


    BR: Stockman blames the Fed, but also blames the massive deficits on tax cut & spend GOP.

    The Democrats have historically been the party of tax and spend, but they had JFK as a tax cutter, and Clinton (with a GOP Congress) produced a balanced budget.

  77. Petey Wheatstraw says:


    I don’t think it’s political revisionism. Actions have reactions. Decisions have consequences. It takes a while for seeds to bear fruit.

    Nixon defaulted on our debt, causing massive inflation and unemployment (since that moment, the middle class hasn’t had a raise).

    Carter had to deal with the aftermath, so, he hired Volker.

    Reagan invented borrow and spend in response to his own complaints about tax and spend — resulting in massive deficits that we haven’t even contemplated paying. In addition, he foisted Stockman’s utterly foolish and naive concept of “trickle down” and regressive taxation onto the adoring middle class. Reagan sowed the seeds of corporatism and began the great transfer of wealth to the top 2%, or so. He also began the push for deregulation of industry that is arguably at the heart of our current crime spree. He appointed Greenspan.We are living the results of those actions.

    In addition, and OT: Reagan was the Great Divider, using disdain for liberal philosophy (as diffuse a term as there could be) and faux wedge issues like abortion, religion, class (race) warfare and welfare queens — coupled with an absolutist stance on those issues — to create a rift in the middle class that has yet to heal (if you think the USSR folded primarily due to RR’s policies, that would be tunnel vision in the extreme). At best, “Morning in America” was a really good acid trip.

    Bush ’41 was helpless to do anything with what Saint Ronnie left him.

    Clinton ran a tighter ship than most, in terms of economics, but the gulf between the Reagan right and anything else (now exclusively deemed “liberal,” regardless of merit or basis in conservative principles), guaranteed a state of perpetual gridlock. Clinton’s negative contributions (with which we are still dealing) were NAFTA and the bipartisan self-fuckery that was Gramm, Leach, Bliley.

    Then comes Bushco and the Great Crime Spree. The Treasury was looted by insiders. Crony-capitalism and criminality were conducted in the open without a law enforcement agent in sight. The Constitution was consigned to the trash heap of history. The Supreme Court was stacked with Corporatists. Money was borrowed in the name of the middle class US taxpayer and distributed to the uber wealthy.

    Obama? Well, exactly what’s a brother to do? When you’re the mayor of a company town where everybody in management is a crook, it’s not a stupid thing to go with the flow.

    Now, he’s just another Corporatist.

  78. [...] Barry Ritholz summarizes the basic charges of Stockman’s indictment, although the entire article is definitely worth reading in full regardless of which side of the argument you’re on: • The total US debt, including states and municipalities, will soon reach $18 trillion dollars. That is a Greece-like 120% of GDP. [...]

  79. S Brennan says:


    Outlines four problems and gives much ink [very specific right wing talking points] to solve the lessor three and ignores his number one, the one with the biggest cost.

    FYI, SSI couldn’t be more fiscally sound, anybody who claims otherwise should be laughed out of town.

    If you want payroll taxes to pay for tax cuts to the rich, be an honest broker, admit the rich are robbing the treasury to pay for their golden bathtubs…IKE was a Republican, Bush [the 1st & 2nd] & now Obama [Bush the 3rd] pretend to be Republicans, but they are just low end accomplices for the biggest theft in history.

  80. wileycoyote says:

    Thanks BR for the list- I’ll get reading.


    BR: That’s just a start.

    The ongoing bailouts, started by the Bush Admin and adopted whole by the Obama admin, were a huge mistake (at least he forced GM into bankruptcy — should have done the same with Citi and B of A) I’ve written about that a ton.

    I find the O economic team to be a huge disappointment (written tot hat also)

  81. Rescission says:

    Fiscal conservatism is a political term used to describe a fiscal policy that advocates avoiding deficit spending. Fiscal conservatives often consider reduction of overall government spending and national debt as well as ensuring balanced budget of paramount importance. Free trade, deregulation of the economy, lower taxes, and other classical liberal policies are also often affiliated with fiscal conservatism.

    Fiscal Conservatism was rhetorically promoted during the presidency of Ronald Reagan. During Reagan’s tenure, income tax rates of the top personal tax bracket dropped from 70% to 28% in 7 years, while payroll taxes increased as well as the effective tax rates on the lower two income quintiles. Real GDP growth recovered strongly after the 1982 recession and grew during Reagan’s remaining years in office at an annual rate of 3.4% per year, slightly lower than the post-World War II average of 3.6%. Unemployment peaked at over 10.7% percent in 1982 then dropped during the rest of Reagan’s terms, and inflation significantly decreased. Federal tax receipts nearly doubled from $517 billion in 1980 to $1,032 billion in 1990. A net job increase of about 16 million also occurred.

    According to a United States Department of the Treasury non-partisan economic study, the major tax bills enacted under Reagan, as a whole, significantly reduced (~-1% of GDP) government tax receipts. The Economic Recovery Tax Act of 1981 was a massive (~-3% of GDP) decrease in revenues (the largest tax cuts ever enacted) By the end of Reagan’s second term the national debt held by the public ballooned from 26 percent of the GDP in 1980 to 41 percent in 1989. By 1988, the debt totaled $2.6 trillion, due in part to both increased military spending at the end of the Cold War and according to some, the tax cuts. The country owed more to foreigners than it was owed, and the United States moved from being the world’s largest international creditor to the world’s largest debtor nation.

    While the mantle of fiscal conservatism is most commonly claimed by Republicans and Libertarians, it is also claimed by many centrist or moderate Democrats who often refer to themselves as “New Democrats”. Former President Bill Clinton, who was a New Democrat and part of the fiscally conservative Third Way advocating Democratic Leadership Council, is a prime example of this as his administration along with the Democratic-majority congress of 1993 passed on a party-line vote the Omnibus Budget Reconciliation Act of 1993 which cut government spending, created a 36% individual income tax bracket, raised the top tax bracket, which encompassed the top 1.2% earning taxpayers, from 31% to 39.6%, and created a 35% income tax rate for corporations. The 1993 Budget Act also cut taxes for fifteen million low-income families and 90% of small businesses. Additionally, during the Clinton years, the PAYGO (pay-as-you-go) system originally introduced with the passing of the Budget Enforcement Act of 1990 (which required that all increases in direct spending or revenue decreases be offset by other spending decreases or revenue increases and was very popular with deficit hawks) had gone into effect, and was used regularly until the system’s expiration in 2002.

    In the 1994 midterm elections, Republicans ran on a platform that included fiscal responsibility drafted by then-Congressman Newt Gingrich called the Contract with America, which advocated such things as balancing the budget, providing the president with a line-item veto, and welfare reform. After the elections gave the Republicans a majority in the House of Representatives, Gingrich pushed aggressively for reduced government spending, which created a confrontation with the White House that climaxed in the 1995 government shutdown. After Clinton’s re-election in 1996, they were able to cooperate and pass the Taxpayer Relief Act of 1997, which lowered the top capital gains tax rate from 28% to 20% and the 15% rate to 10%.
    After this combination of tax hikes and spending reductions, the United States was able to reduce the $3.8 trillion public debt by $360 billion and create the largest federal budget surplus ($236 billion in fiscal year 2000) as well as the longest period of sustained economic growth in United States history.

    So from my lens, it looks like this thing can work if we bring back Clinton and Newt as a tag team. Like them or hate them, they both understood fiscal conservatism and economics. “It’s the economy stupid”.

  82. Vilgrad says:

    S Brennan

    It’s funny, but the Trustees for Social Security report that the unfunded SS liability is $17.5 trillion. Please enlighten us about how sound it is. Or maybe you will just laugh me out of town.

    You liberal ideologues are so enamored of your failed economic policies, you wail “Right Wing” at anyone who doesn’t borrow and spend the country into oblivion. Liberals are like attack dogs who bark and piss on any idea that isn’t blessed by Paul weasel face Krugman.

    Let’s hear your brilliant plans to save the country. We breathlessly await your wisdom.

  83. liqal says:

    [irrelevant partisanship edited out]

    The political left and right is a mirage. It is a diversion, much like a flash of flames from a magicians hands while the circus elephant is led away from behind the curtain to a safe room. Except in Americas case, the magician is the political ‘it’ man of the moment, the flash is a nonsensical social issue ( many social issues are conscripts of the state or the supreme court, not impacted by federally elected representatives ).

    And the elephant being led away from behind the curtain ? The Amercian way of life. Wake up America.
    - J. Edward

    Another version from George Carlin…. a few years ago…. should have listened


  84. contrabandista13 says:

    “….I can sum it up thusly: Whereas the Democrats have no economic policy, the Republicans have a very bad one….”

    The Republican economic policy was to bash the “piñata”, whereas the Democratic economic policy was to enable the Republicans, and then rush in and grab as much as they could…. Nothing has changed, the blame falls squarely on the entire ruling class in this country. The difference between a one party system and a two party system is one party…

    From Jesse’s Cafe

    “…..Obama does actually resemble a moderate Republican of the old school in most of what he does. That could be attributable to his desire to fit in and please the powers that be, and a further indication of the general shift to the right that the US has taken over the last 30 years. It in no way detracts from his incompetence and ineffectiveness. He reminds me of a classic modern American CEO, a well credentialed and highly articulate empty suit, a nicely appointed lump who serves his ‘backers’ from beginning to end and deals primarily in connections and privilege, rather than effectiveness and results. He is the new and improved version of politicians compared to the dreadful political machine troll like a Richard Shelby, or the smarmier car salesmen types like a Bob Corker, Barney Frank, or a Chris Dodd…..”

    Best regards,


  85. alfred e says:

    @econolicious: Correct. Well said. Empty suit.

  86. Joe Friday says:

    BR: “For the record, the NBER addressed the economic impact of the terror attack, although i disagree with them”

    As do I.

    The CBO stated that the cost of the of tax cuts primarily for the Rich & Corporate was almost THREE TIMES AS GREAT as the cost of the Iraq war (including the costs of the military operations and subsequent reconstruction), all homeland security expenditures, the costs of rebuilding after September 11, all military action in Afghanistan, and all other costs of the so-called ‘Global War On Terrorism’, COMBINED.

    To paraphrase the OP, it was the Bush economic policies that hijacked the national economy.

  87. Dow says:

    Like it or not, term limits benefit lobbyists who are still there long after the politician has returned home. I’m starting to think we should add a third branch to Congress that’s simply picked by lottery just to introduce some variety.

  88. willid3 says:

    Vilgrad Says:
    August 1st, 2010 at 4:12 pm

    I see we have heard from willid3 making a post which adds absolutely nothing to the dialogue. You might as well just play with yourself as make such a worthless post.

    Do you have anything to add to the debate willid3? If not, go fuck off.

    well, if you were worth bothering with i might be inclined to debate. but it hard to do that with some one who is limited to just talking points.

    as to whether Stockton is correct? i think we tried a grand experiment with conservative (or at least thats what they are called anyway) economics (seem to really be talking points)

    and the experiment returned just grand results.
    we had the greatest expansion in the economy ever.
    oh. no. not even an expansion.

    we had the largest explosion in jobs in all time.
    um. no. weakest job growth ever for a time not in recession or depression. total jobs at the end of the great experiment were just barely 1 million more than before it started. and never really grew much. even though population was up, and requires 125k-150k every month just to stay even

    incomes are up right? um. no.
    and we had lots of so called conservative proposal to create lots of jobs and they worked right?
    um no. incomes fell back to before 2000.
    deregulation helped create new jobs right?

    it did lead to this dandy recession, the worst on record, just barely better than what happened in the great depression

  89. d4winds says:

    re: the comments
    much heat, no light.

  90. vriley says:

    I’d like to pick up on Stockman’s point that Paul Volker set the stage for the Reagan recovery. It seems to me that most economic writing is primarily inwardly focused, looking for correlations between economic/fiscal/monetary policies and economic trends. But I wonder if sometimes the force behind a recovery is not policy at all but rather some process outside of policy. For example, I wonder if the economic recovery in the ’80s was due, not to policy, but rather to the personal computing revolution, an infrastructure-level shift that was responsible for massive levels of capital investment, jobs, operational efficiency gains, and subsequent profits. Similarly, although the Clinton administration’s focus on deficit reduction may have set the stage for the ’90s rebound, I wonder if most of that rebound might have been due instead to the similar infrastructure-level shift to the Internet. In both recessions of the early ’80s and the early ’90s, infrastructure-level technologies were waiting in the wings to create whole new classes of jobs and economic activity. What worries me about the current recession is that I don’t see a similar large-scale technology maturing today and getting ready to play a similar role tomorrow.

  91. Vilgrad says:


    If you expect me to defend Republican economic policies, you’ve come to the wrong guy. Bush, Paulson, Greenspan and Geithner should be in prison for what they did to the country. But, we are where we are.

    The Federal government spends $3.8 trillion per year and brings in $2.4 trillion per year. That is the starting point. Slogans and accusations won’t fix this. Tremendous amounts of pain will be inflicted upon many to fix it.

    Not fixing it will lead to the collapse of the country. Those in power today, on both sides of the aisle, have no intentions of fixing it. Therefore, the country will collapse within the next ten years.

  92. Vilgrad says:


    John Hussman is truly a non-partisan economist who tries to bring common sense to the discussion. I really like his housing idea, which he put forth in October 2008. His idea would have saved the country billions while putting the housing market back on a path to recovery. Instead we are about to experience round two of the great home price plunge.

  93. willid3 says:

    i am not convinced that your prescription isn’t just as bad.and that the collapse you seem to be worried about won’t be triggered by what you are proposing. i suspect that the great depression can still give us some guidance in this. we tried a lot of things that mirror what you suggest to address it. they all failed. the only reason radical (and lets face it, they are much more conservative than we are, and much or the libertarian point of view than any body is today) solutions were tried was the collapse was bringing on the collapse of any support for capitalism and democracy. FDR actually campaigned on cutting the budget, until he was forced to actually do some thing to keep a revolution at bay, as the common folks couldn’t see any benefit to capitalism, and not much in democracy. they were more concerned with staying alive. and i would suggest they were a much more patient population than todays is. the deficit every one is worried about is more driven by the collapse in the economy as opposed to a lot of real spending. there has been a relative uptick, but there always is in an economic crises as the private sector shrinks. and this time it was really close to a collapse that would have made the GD look like a cake walk. driven by wall street ‘misdeeds’ supported by their lap dogs in government. this is what happens when you allow regulators to ‘help’ those they are suppose to police.

  94. BDW says:

    “blah blah blah….John Hussman has a fantastic idea regarding Social Security. This idea would benefit the working class and stick it to the rich. ….blah blah blah”

    He does have a good idea. What’s interesting is that Al Franken proposed something similar……six years ago on his radio show.

  95. wileycoyote says:

    Bravo Vilgrad. I heard more creative ideas from you here in two minutes than I’ve heard from anybody in Washington in 10 years.

  96. Vilgrad says:


    I’m open to hearing your proposals, rather than your reasons why everything I propose will make things worse. Are you in favor of reducing military spending by $400 billion?

  97. RC says:

    Anyone suggestions of “improvement” of tax code by throwing away the whole thing and starting with “rules that fit on a postcard” is basically not serious and just making a blind partisan talking point.

    Each line of the tax code has a constituency and suggesting that we remove them all at once is politically impossible (except in partisan utopia).