In 1981, at age 34, David Stockman was Ronald Reagan’s budget director. His complaint about the Republican administration for which he worked was that it was financially not conservative; that actual spending decisions were being made on political interests, not ideas. He spilled his thoughts to journalist William Greider who made a famous cover story of it in The Atlantic, embarrassing the president and earning Stockman a reputation as a truth-teller.
Stockman left government in 1985 and had a career in business at the Blackstone Group, which was something like what Mitt Romney did at Bain Capital. What brought him back into the political arena was the George W. Bush’s bailout of the banks in 2008. To Stockman, it was outrageous. It was not how capitalism was supposed to work. Profit and loss: if you fail, you sink. Once again, the practice was not following the ideas.
He has written a book about his thoughts, “The Great Deformation: The Corruption of Capitalism in America.” He speaks in Seattle Wednesday, April 17, at Town Hall. I talked to him Tuesday.
Stockman is 66 now, no longer the wunderkind, but still brimming with arguments and still supportive of capitalism. He is not a leftist of any sort, but sounds like the left when he asserts that the system we have now is crony capitalism, rigged to support “the one percent.”
Rigged in what way? Interest rates, for example. They are the lowest in half a century, and short-term rates are controlled entirely by the Federal Reserve Board. Who borrows at itty-bitty rates? Banks. Wall Street. “Low interest rates benefit speculators,” Stockman says.
Romney was pilloried during the 2012 campaign for having been a leveraged-buyout guy. Stockman, who was in the same trade, agrees with the criticism. “You didn’t learn anything about job creation,” he says of the Republican nominee. “You were a speculator.”
For a decade, the progressives argued against the Bush tax cuts — “tax cuts for the rich,” they called them. Then, when the cuts were about to expire, our progressive president changed his tune. Suddenly it was imperative that all the cuts be extended except for the top 2 percent of earners. Says Stockman, “I agree: tax the 2 percent. But don’t tell everyone else you can have this huge government and pay no more.”
Finally, the left argues that America vastly overspends on the military. Stockman agrees. “Terrorism is a police problem,” he says. “We could cut a quarter of a trillion from the defense budget.”
And where does he disagree with the left side of the house? Social Security. “They need to own up to the truth that there is no ‘trust fund,’ ” he says. Also, the left should recognize that the payroll tax is regressive, and that it taxes workers and the employers of workers, killing jobs, and pays much of the money to retired people enjoying the sun in Florida. “Means-test Social Security,” he says.