You see where it's published, the New York Times, and your inclination is to write it off as garbage. You see who wrote it, former Reagan budget director David Stockman, and you remember that he was the apostate who turned tail over '80s-era deficits and became a hero to dopey green-eyeshade types like the Concord Coalition.
And you think, well, this is going to be a a bunch of nonsense - perhaps an establishment-type call to raise taxes or cut some sort of "grand bargain."
Nope. It's awesome. Take the time to read the whole thing, but here is an excerpt:
So the Main Street economy is failing while Washington is piling a soaring debt burden on our descendants, unable to rein in either the warfare state or the welfare state or raise the taxes needed to pay the nation’s bills. By default, the Fed has resorted to a radical, uncharted spree of money printing. But the flood of liquidity, instead of spurring banks to lend and corporations to spend, has stayed trapped in the canyons of Wall Street, where it is inflating yet another unsustainable bubble.
When it bursts, there will be no new round of bailouts like the ones the banks got in 2008. Instead, America will descend into an era of zero-sum austerity and virulent political conflict, extinguishing even today’s feeble remnants of economic growth.
THIS dyspeptic prospect results from the fact that we are now state-wrecked. With only brief interruptions, we’ve had eight decades of increasingly frenetic fiscal and monetary policy activism intended to counter the cyclical bumps and grinds of the free market and its purported tendency to underproduce jobs and economic output. The toll has been heavy.
As the federal government and its central-bank sidekick, the Fed, have groped for one goal after another — smoothing out the business cycle, minimizing inflation and unemployment at the same time, rolling out a giant social insurance blanket, promoting homeownership, subsidizing medical care, propping up old industries (agriculture, automobiles) and fostering new ones (“clean” energy, biotechnology) and, above all, bailing out Wall Street — they have now succumbed to overload, overreach and outside capture by powerful interests. The modern Keynesian state is broke, paralyzed and mired in empty ritual incantations about stimulating “demand,” even as it fosters a mutant crony capitalism that periodically lavishes the top 1 percent with speculative windfalls.
I have two quibbles with Stockman.
The first is that I think he gives the Reaganites a bad rap when it comes to deficits. He cites the often-mentioned supposed quote that "deficits don't matter," and uses this to support the notion that Reagan didn't care at all about mounting debt. That's not true. What they believed was that long-term economic growth was more important than short-term deficit reduction, and that pro-growth policies were the best way to keep deficits and debt under control. The Reagan team did not think it was just fine to keep running up massive deficits in perpetuity. They would have been appalled what what is happening today.
Stockman had far less tolerance for any deficits at all than his colleagues, which is why he resigned and became a fairly vocal critic of Reaganonmics in subsequent years. Fair enough, but I believe the vision of the Reagan economic team was to allow growth policies to overtake deficits over time and to maintain balanced budgets and/or surpluses over the long term. To say they believed "deficits don't matter" at all is unfair.
The second quibble is with his comment about the Bush wars and "not paying for them." First, I believe Bush had no choice about either war. They were both vital to national security. Whether the ultimate prosecution of those wars has actually enhanced our national security is an argument for another day - I think Iraq has and Afghanistan largely has not - but as a budgetary matter, what Bush's critics usually mean is that he went to war and did not raise taxes to pay for it. Bush believed higher tax rates were antithetical to growth, just as Reagan did, and if you look at the trend of GDP growth and deficits during the Bush presidency, he was right.
That said, this piece on the whole is exceptional. Stockman demonstrates with stunning clarity how the government's constant insistence on fine-tuning the economy - trying to somehow "manage" our way through every little dip and dive - has created a contorted mess of high debt and devalued currency. If you really want to convince your liberal friends how counterproductive economic central planning is, memorize every word of it.
