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We've been hearing a lot about David Stockman's recent essay on the American economy and the imminent demise he predicts for it.
Stockman, you may recall, was budget director under President Ronald Reagan in the 1980s -- a position from which he resigned, he now tells us, in protest against Reagan's economic policies.
The value of Stockman's essay, which appeared in The New York Times a week ago, lies in its blunt summary of the weaknesses and danger signs in our economic condition. Along the way he lambastes almost every public figure imaginable, living or dead, including the strange geniuses among his fellow Republicans, such as Paul Ryan, who he says "are terrified of telling the truth" about how deep the deficit is and what it will take to work it down. The only hero in the article is another Paul, Paul Volcker, who as chair of the Federal Reserve during Reagan's presidency imposed anti-inflation austerity measures that successfully put the economy back on an even keel -- for a while.
The challenge of Stockman's essay is that he mixes useful insights and warnings with doses of excessive or misplaced vituperation. Even Paul Krugman, a liberal Keynesian, has said that Stockman had some good points. It's important for us to consider seriously Stockman's central tenets, and ignore the vivid and sarcastic asides, if we are to escape his prediction that the United States will suffer another economic crash and tumble into irreversible decline because the political system is too weak and divided to prevent it.
The weaknesses to which Stockman points: Over the past 12 years, economic output has grown about 1.7 percent per year and business investment less than 1 percent per year; payroll job count has been essentially flat at +0.1 percent per year; during this same period, real median family income dropped 8 percent, and the less wealthy 90 percent of Americans were clobbered with a jaw-dropping loss of a quarter of their net worth. Here's how Stockman sums it up: "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."
What does this mean we have to do? Sit back, this is not going to be pleasant.
The American economy is not growing or creating jobs. The flood of debt the government has unleashed has helped make some bumps in the road a little easier -- particularly for banks and financial acrobats -- but it has done little to spur real economic activity (jobs and investment) and has sapped the strength the government would need to help bail us out of another crash. The federal government is divided politically; no large-scale growth engine has been proposed, let alone agreed upon; other world economies are slowing down and some may implode, so there is no locomotive in sight for the global economic train.
Like Stockman, I don't see a road forward for us that does not involve considerable pain and a long period -- perhaps a decade -- of real belt-tightening while we work down the deficit and our national debt, reform the health care system so cost increases are tempered, crank up powerful growth programs like investment in capital infrastructure to generate jobs and make us more competitive, and raise taxes modestly across the board to help bring down the deficit.
Unlike Stockman, I believe we might be able do this. But it's discouraging that no national leader is presently proposing such an approach or laying out, frankly and compellingly, the adverse circumstances that require it. That's what's needed so we the people can understand it, debate it and then reach a decision together as to whether we'll back leadership that wants to get it done.

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Comment Preferences

  •  Uh (14+ / 0-)
    Even Paul Krugman, a liberal Keynesian, has said that Stockman had some good points.
    Per Krugman
    I guess I’m going to have to write more about David Stockman’s unfortunate rant, since a lot of people who should know better seem to think he made serious points.
    Well, it turns out that I’ve actually been polite to David Stockman; Neil Irwin describes his recent writings as “spittle-filled”, and gets at the essentially destructive nature of Stockman’s critique.
    Not exactly saying Stockman has some good points.

    "Empty vessels make the loudest sound, they have the least wit and are the greatest blabbers" Plato

    by Empty Vessel on Sat Apr 06, 2013 at 06:52:47 PM PDT

  •  Other Economies are Winding Down Because They (14+ / 0-)

    are doing

    real belt-tightening while [they] work down the deficit and [their] national debt,
    The political system is no longer strong enough to govern the economy thanks precisely to Stockman and his Administration and his side.

    We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

    by Gooserock on Sat Apr 06, 2013 at 06:53:40 PM PDT

    •  Not to mention (7+ / 0-)
      Like Stockman, I don't see a road forward for us that does not involve considerable pain and a long period -- perhaps a decade -- of real belt-tightening while we work down the deficit and our national debt, reform the health care system so cost increases are tempered, crank up powerful growth programs like investment in capital infrastructure to generate jobs and make us more competitive, and raise taxes modestly across the board to help bring down the deficit.

      Unlike Stockman, I believe we might be able do this. But it's discouraging that no national leader is presently proposing such an approach or laying out, frankly and compellingly, the adverse circumstances that require it.

      That this is pretty much exactly what Obama has proposed (and I oppose the chained CPI, but that's another thang).  This diarist seems to falling into the standard moderate trap...namely that Obama couldn't be proposing all the things he is demanding...because balance.

      "Empty vessels make the loudest sound, they have the least wit and are the greatest blabbers" Plato

      by Empty Vessel on Sat Apr 06, 2013 at 06:57:23 PM PDT

      [ Parent ]

    •  Well, there's a basic inconsistency between (0+ / 0-)

      arguing for a "free market" that regulates itself and agents of government wanting to govern the economy.

      I am, personally, quite happy to conclude that "free market" is a euphemism to disguise the long standing commercial desire to take "free goods" from the environment to market for a monetary profit. And, if that's the case, then I'm also happy to conclude that this system sucks and has to be changed because to profit is to exploit and collect rewards for essentially doing nothing. Also, the process of taking stuff to market to see who wants it is extraordinarily wasteful. Before we take anything, we should consider the import of the taking on what's left remaining.

      That said, since budgeting is a pie in the sky endeavor, it's bound to be discouraging. Planning accomplishes nothing. Planning for what someone else is supposed to do is bound to be frustrating since productive humans are basically disinclined to do what they're told, unless they are coerced. So, if there's to be a planned economy, force has to be used. In which case, "free market" is no longer a euphemism for theft, but a perversion of reality.
      Many people in the U.S. were persuaded that their representative agents opposed the command economy of the U.S.S.R. as propounded by the "godless communists." The reality, it turns out in retrospect, is that the opposition was to the "godless" component, based on the conviction that coercion in the name of a deity is preferable to a secular tyranny. And that's a belief that persists in the totalitarian states of the U.S. where the minutest aspects of individual lives and relationships are being subject to the rule of law in the name of God. That the state is prohibited from restricting established religions does not preclude religious doctrine from being relied on to promote tyranical law.

      We organize governments to deliver services and prevent abuse.

      by hannah on Sun Apr 07, 2013 at 04:02:41 AM PDT

      [ Parent ]

  •  There are many roads forward but all reliant on... (3+ / 0-)
    Recommended by:
    Stude Dude, Gooserock, greengemini

    ...reasonable and decisive governance. That, sir, is the gating resource. The problem is not debt. Not industry. Not the lack of investment. The lack of virtuous, ready, willing, and able governance, a necessary asset too unreasonable to expect today.

    Also, none of the many roads forward seem to include the poorly skilled, poorly educated and no one has a plan for that many "left behind."

    Force public funding of elections, only public funding, and maybe our future will include the kind of governance deserved by such a powerful and abundant nation.

    •  The question is whether what is to be governed (1+ / 0-)
      Recommended by:
      kck

      is the allocation of our natural and man-made resources and assets or the human population.
      Of course, that question is superfluous when humans are categorized as just another resource to be exploited and disposed of as the elect determine to be right.
      Are property rights to continue to dominate human rights? If so, then we will all continue as potential slaves. If not, then the place to start is by recognizing that children have rights and ratifying the Convention on the Rights of the Child. Until we start recognizing that humans have rights (by insuring that their survival is provided for), the echoes of our history as a slave nation will continue to reverberate, if only in the desire to wrest obedience from our own kind for nothing.

      Germans have a saying (which is not to say they always follow it) "erst kommt dass Fressen, dann kommt die Kultur."
      Roughly translated, it says that first people have to be fed, then they'll become civilized.
      "No free lunch," gets it backwards. It says that eating is conditioned on obedience (paying subservience). If you think not, just remember that within the month children in Massachusetts were denied lunch because their account hadn't been paid up front.
      People in prison get lunch, but not our children in school. Indeed, one of the major sources of antagonism towards Barack Obama is connected to the distribution of free food to indigent families via stamps or debit cards. It conflict with one of the major tenets of the culture of obedience that compliance has to be coerced by restricting access to sustenance to those who have earned their property rights.

      The ownership society is right to be concerned about debt. Those who own have reason to worry about the tables being turned.

      We organize governments to deliver services and prevent abuse.

      by hannah on Sun Apr 07, 2013 at 04:26:13 AM PDT

      [ Parent ]

      •  Very interesting.... (0+ / 0-)
        Germans have a saying...Roughly translated, it says that first people have to be fed, then they'll become civilized.
        Then there's the old English proverb:
        'You can lead a horse to water, but you can't make it drink'
        Americanized by Dorothy Parker:
        'you can lead a horticulture, but you can't make her think'
        Our culture, our low bar for what is "civilized" and our country's vast abundance seem to collide with the proverbs I don't know if Americans believe one can actually physically need to be fed here given our "safety net" mentality and the reality that resources themselves are not scarce.
        •  Resources have been made artificially scarce (1+ / 0-)
          Recommended by:
          kck

          through the magic of private property rights. Indeed, even our public properties are increasingly restricted from public use by the imposition of "hours of operation" and the levying of fees.
          If currency were as readily available as the inch or the ounce, there would be no difficulty. However, as it stands now, certificates of debt are only issued upon the completion of some service or evidence of incompetence.
          The culture of obedience demands evidence of compliance before it issues sustenance. Potable water used to be readily available from public fountains. Now it has to be paid for, in part because fresh water resources have been permitted to be polluted by industrial wastes and effluent. It used to be that such "externalities" were simply ignored. Now they are expected to be paid for by individual households. Monetization does not necessarily improve the individual or general welfare; it does make it easier to calculate the extent of the deprivation.
          It has been fairly well established that increases in average longevity and improved health in the twentieth century were largely the result of improved sanitation and investments in public infrastructure. Those trends have now been reversed. The data tell us that average longevity is trending down and many people are unhealthy. To a certain extent, we are paying now for careless industrial practices which degraded the environment and human beings along with it.

          We organize governments to deliver services and prevent abuse.

          by hannah on Sun Apr 07, 2013 at 09:36:36 AM PDT

          [ Parent ]

  •  Being an old guy myself and having been paying (12+ / 0-)

    attention during those long-ago days of the 80's, I can't think of a reason in the world why any aspect of David Stockman's professional life and actions would lead me to care about, much less be concerned by, his apocalyptic concern about our failure - in his long-held view - to kill the so-called "welfare state" and use supply-side economics to fix what ails us...

    "In a nation ruled by swine, all pigs are upward mobile..." - Dr. Hunter S. Thompson

    by Jack K on Sat Apr 06, 2013 at 07:35:19 PM PDT

    •  I wish I could rec this comment x1000. (1+ / 0-)
      Recommended by:
      gramofsam1

      The article in question was all about killing the "welfare state" and implementing supply side economics, as well as bashing Keynes, though he did praise Volcker (who was appointed by Carter and is a Keynesian and used Keynesian economics to get us out of Nixon-incurred stagflation.)

      Why Stockton's article seemed to be newsworthy is beyond me.

      You can't scare me, I'm sticking to the Union - Woody Guthrie

      by sewaneepat on Sun Apr 07, 2013 at 05:02:20 AM PDT

      [ Parent ]

  •  I see Stockman on financial shows. He's a grifter. (8+ / 0-)

    And he's hawking his latest book.
    Remember under his boss Reagan the deficit tripled.

  •  I do not agree (8+ / 0-)

    With the main thesis. Less than half the national debt is owed by foreigners; a significant part (roughly one third) is held by intergovernmental agencies, like the social security trust fund. Explain to me, please how exactly we go broke owing money to ourselves?
       Besides, what of Japan? They have had a much higher debt to GDP ratio than us for the past 20 years, and show no signs of going broke. The real problem is economic inequality which leads to the bigger problem of slack demand and consequent un and underemployment which worsens the demand.
       What really bothers me about this argument that the diarist seems to genuflect to is that these are not idle intellectual sophistries we are debating. A decade of stagnant growth inflicts real pain on real people and can blight a generation. Frankly I find the economic 'morality tales' about as valid as I find arguments that 3,000 innocent people deserved to be cruelly murdered on 9/11 because 'America deserved it/had it coming'. Explain that to a widow with three young children after you tell her her husband  perished in a 100 story burning building.
       And by the way, Stockman is a washed up irrelevant political hack, desperately trying to be relevant once more, just like this whole 'supply-side' economic bullshit theory. Oh please, we can actually think over here

    An empty head is not really empty; it is stuffed with rubbish. Hence the difficulty of forcing anything into an empty head. -- Eric Hoffer

    by MichiganChet on Sat Apr 06, 2013 at 07:58:04 PM PDT

    •  Stockman and the company he keeps are not (1+ / 0-)
      Recommended by:
      mollyd

      very capable at what they do or very honest about it. I saw him on some chat show and he was as cocksure as he was when he tripled the debt with St Ronnie. I thought he had a 'come to Jeesus' moment, but he's as crazy as ever.

      Hopefully we won't have to listen to his next apology for tanking the economy.

    •  How did everyone forgot Clinton? (0+ / 0-)

      The most fiscally successful president ever.  He raised taxes, mostly on the rich.  Problem solved.  Any fiscal hawk who opposes tax increases is not a fiscal hawk

      Hay hombres que luchan un dia, y son buenos Hay otros que luchan un año, y son mejores Hay quienes luchan muchos años, y son muy buenos. Pero hay los que luchan toda la vida. Esos son los imprescindibles.

      by Mindful Nature on Sun Apr 07, 2013 at 01:09:44 AM PDT

      [ Parent ]

    •  The quantity of what people owe and own that's (0+ / 0-)

      denominated in terms of certified IOUs is still minuscule, compared to the whole.
      Take, for example, the nearly $2.7 trillion that individuals owe to various financial institutions and the federal Treasury

      http://www.federalreserve.gov/...

      Those are not dollars included in the so-called "deficit" or "national debt." Indeed, in the accounts of the Federal Reserve Bank accountants, those dollars aren't even called debt. If you click the link, you'll see that these dollars are referred to as "Consumer Credit Outstanding."

      Whether a certified IOU is considered a debit or a credit depends on who's looking at it. The person to whom it is owed considers it a credit to the owner and assigns it as a debit to the ower. It's all a matter of perspective.
      What I suspect is that myopic individuals who only see things from their side can't understand that.

      Accountants invented double-entry book keeping based on the hypothesis that, if things were counted twice, the sums were more likely to be right. Then economists came along and assumed that balancing two sides provides useful information beyond equal sums and set about developing models of multitudinous interactions that are supposed to produce balance. In a sense, they substituted form for function and tried to conform the function to the form -- like constricting a woman's waist into an hour-glass figure, thereby ruining her digestive system.

      We organize governments to deliver services and prevent abuse.

      by hannah on Sun Apr 07, 2013 at 04:47:34 AM PDT

      [ Parent ]

      •  Nice link (0+ / 0-)

        And I would remind you that too much consumer debt actually is a threat to the economy, because individuals, unlike the government don't get to run their own currency. Instead when they get over-indebted they spend less, again contributing to the problem of slack demand. We of course all know that consumer spending is two thirds of the economy.
           Indeed it has been shown that a substantial increase in private and business, not government debt, is the forerunner to every major financial crisis that this country has had.
             Dishonest hacks like Stockman - and I can link you to a hair-raising article in which this expert gives out his 'solutions' (naturally praised by some very serious nudnik) - are part of the problem, not the solution

        An empty head is not really empty; it is stuffed with rubbish. Hence the difficulty of forcing anything into an empty head. -- Eric Hoffer

        by MichiganChet on Mon Apr 08, 2013 at 07:39:16 AM PDT

        [ Parent ]

  •  There is no debt problem (3+ / 0-)
    Recommended by:
    Gooserock, Mr Robert, greengemini

    .....and the only reason we would have a long period of pain and suffering is if there is a continued preference in our political system for more pain and suffering.  

  •  Stockman Schmockman. (1+ / 0-)
    Recommended by:
    PrahaPartizan

    We need about ten trillion printed and mailed out to all the citizens for a reasonable jumpstart.

    Boehner Just Wants Wife To Listen, Not Come Up With Alternative Debt-Reduction Ideas

    by dov12348 on Sat Apr 06, 2013 at 09:38:17 PM PDT

  •  Krugman's response to Stockman was covered (0+ / 0-)

    here, much better and more accurately than in the current diary.

  •  Wake up call or walk down memory lane .. (1+ / 0-)
    Recommended by:
    Grabber by the Heel

    let's take a brief walk thru the 80's with David Stockman ...where to start?
    1984 ... Reagan tells the American people ... "America is back .. standing tall, looking to the 80's with courage, confidence and hope"
    1984 ... Reagan goes to China to promote trade
    1984 ... Fed bails out bank with $4.5 billion
    1984 ... Most bank failures since 1938
    1985 ... growing homeless
    1985 ... First time since 1914 that US owes foreigners more than they owe to the US
    1986 ... National debt passes the $2 Trillion mark
    1986 ... Stockman quits the Reagan government, goes to work on Wall Street and writes a book on how the Reagan Revolution failed.
    1987 ... Stock market drops 508 points
    1988 ... Incomes for the top 5% rose while incomes for the poor decreased
    Yeah .... we need to do this again?

    The figures looked more or less human. And they were engaged in religion. You could tell by the knives (it's not murder if you do it for a god).” ― Terry Pratchett, Small Gods

    by Bozmo2 on Sun Apr 07, 2013 at 09:25:05 AM PDT

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