Former Reaganite Calls Republican Economics “Vulgar Keynesianism”

I first wrote about David Stockman after the release of his tell-all book, The Triumph of Politics: Why The Reagan Revolution Failed, in 1986.  As a conservative back then, I took issue with Ronald Reagan’s youthful OMB director for his “betrayal” of Reagan and the conservative movement by exposing some of the Republican family secrets.

Stockman, responsible for Reagan’s budgets, had earlier revealed to William Greider in the famous 1981 Atlantic article, “The Education of David Stockman,” that,

None of us really understands what’s going on with all these numbers.

Disturbing stuff back in 1981, when the so-called Reagan Revolution was taking root.

Stockman entered Congress in 1977 as an enthusiastic small-government Republican. In the words of Greider,

Stockman had made himself a leading conservative gadfly, attacking Democratic budgets and proposing leaner alternatives.

Later embracing supply-side economics, Stockman saw that philosophy as the answer to the question that plagued Reagan during the 1980 campaign: How can Reagan cut taxes, dramatically increase defense spending, and keep the budget in balance all at the same time?

Well, as Stockman found out by the time he left the administration in 1985, Reagan couldn’t do all those things and didn’t really have the stomach for the fight.  And for some Republicans, two out of three wasn’t bad anyway. Deficits smeficits.

But for Stockman, the mounting deficits resulting from the fiscal policies of both Reagan and the Congressional Republicans were intolerable.  He advocated raising taxes to keep deficits down. Republicans, Stockman said back then, simply weren’t willing to make the kind of cuts that would counter the loss in government revenues and keep the budget in balance.  They simply didn’t have the courage of their convictions in those days.

Or these days.

On Saturday, the New York Times ran an Op-Ed by none other than David Stockman, “Four Deformations of the Apocalypse.”

It began in a fury:

IF there were such a thing as Chapter 11 for politicians, the Republican push to extend the unaffordable Bush tax cuts would amount to a bankruptcy filing. The nation’s public debt — if honestly reckoned to include municipal bonds and the $7 trillion of new deficits baked into the cake through 2015 — will soon reach $18 trillion. That’s a Greece-scale 120 percent of gross domestic product, and fairly screams out for austerity and sacrifice. It is therefore unseemly for the Senate minority leader, Mitch McConnell, to insist that the nation’s wealthiest taxpayers be spared even a three-percentage-point rate increase.

More fundamentally, Mr. McConnell’s stand puts the lie to the Republican pretense that its new monetarist and supply-side doctrines are rooted in its traditional financial philosophy. Republicans used to believe that prosperity depended upon the regular balancing of accounts — in government, in international trade, on the ledgers of central banks and in the financial affairs of private households and businesses, too. But the new catechism, as practiced by Republican policymakers for decades now, has amounted to little more than money printing and deficit finance — vulgar Keynesianism robed in the ideological vestments of the prosperous classes.

You have to like that “vulgar Keynesianism” charge, coming not from a blogger for the Joplin Globe but from a Republican who was down in the trenches when the first shots were fired in the mythical Reagan Revolution.

But there’s more.  When discussing the exponential increase in the national debt, he said:

This debt explosion has resulted not from big spending by the Democrats, but instead the Republican Party’s embrace, about three decades ago, of the insidious doctrine that deficits don’t matter if they result from tax cuts.

Stockman says that the “primordial forces” that drive the “federal spending machine” are “the welfare state and the warfare state“:

…the neocons were pushing the military budget skyward. And the Republicans on Capitol Hill who were supposed to cut spending exempted from the knife most of the domestic budget — entitlements, farm subsidies, education, water projects. But in the end it was a new cadre of ideological tax-cutters who killed the Republicans’ fiscal religion.

Claiming that it was not “supply-side strategy” but Fed chairman Paul Volcker’s crushing of inflation in the 1980s that enabled the famous economic recovery conservatives endlessly champion up to this day, Stockman said Republicans became,

hooked…on the delusion that the economy will outgrow the deficit if plied with enough tax cuts.

And listen to this:

By fiscal year 2009, the tax-cutters had reduced federal revenues to 15 percent of gross domestic product, lower than they had been since the 1940s.

Now, given that fact, if supply-side economics really worked, we would be awash in jobs and prosperity, the Bush years instead bringing us high unemployment and near-depression.

There is much more to Stockman’s piece in the Times, and anyone interested in the traditional Republican view of how we got to where we are today would do well to read it all.

But here is the last paragraph:

The day of national reckoning has arrived. We will not have a conventional business recovery now, but rather a long hangover of debt liquidation and downsizing — as suggested by last week’s news that the national economy grew at an anemic annual rate of 2.4 percent in the second quarter. Under these circumstances, it’s a pity that the modern Republican Party offers the American people an irrelevant platform of recycled Keynesianism when the old approach — balanced budgets, sound money and financial discipline — is needed more than ever.

Vulgar Keynesianism,” indeed.

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