Stockman Lost It

You remember David Stockman I assume. He was Ronald Reagan’s Budget Director and an advocate of the economics that permeated the early years of the exodus from California by the horde of radical right wingers seeking to throw out each and every strand of social safety net, social insurance, and anything remotely attached to the post-Depression social consensus.

Yes. That David Stockman.

Well, whilst he’s been fairly anonymous since he quit his post in protest at Reagan’s fiscal profligacy, he clearly hasn’t changed his mind. All those demons still pre-occupy him. They obviously agitate him. So much so that he has written a long ill-tempered rant that the New York times decided, for reasons clear only to itself, to publish and thus dignify.

The sky is, apparently, falling. Stockman ends his many pages of pain with this stern note:

“If this sounds like advice to get out of the markets and hide out in cash, it is.”

We are doomed!

But, sensible people would like to know, what is dooming us? Is it the Democrats and their fixation of providing government sponsored insurance? Is it the Republicans and their fixation of perpetual warfare and military spending? Is it big government? Is it the Federal Reserve Board and its efforts to save the economy by keeping interest rates too low? Is it the Federal government and it inability to balance its budget? Is it because Nixon kicked away the rigors of the gold standard? Is it because Reagan and George W. Bush ran up the deficit? Was it the bank bail-out engineered by George W. and his underling Hank Paulson? Is it because Alan Greenspan’s easy money pumped up the real estate bubble? Was it the banks? Was it Keynes? Was it Milton Friedman?

Yes it was.

It was all these things.

There is another bubble waiting to burst, and when it does … well let Stockman explain:

“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.”

The reason? In a nutshell:

“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.”

Heavy indeed.

So heavy that only prescient rebels and reformers like Stockman can bear the load.

Fear not! Stockman has the prescription:

“The way out would be so radical it can’t happen. It would necessitate a sweeping divorce of the state and the market economy. It would require a renunciation of crony capitalism and its first cousin: Keynesian economics in all its forms. The state would need to get out of the business of imperial hubris, economic uplift and social insurance and shift its focus to managing and financing an effective, affordable, means-tested safety net.”

There you have it.

The reason capitalism has wrought a mini-depression is because it was not allowed to work its magic. Something got in the way. The State did. Nasty government. Doing all those nasty things like ameliorating poverty for retirees, extending a helping hand to the elderly and the sick, protecting the unemployed, and defending the homeland at too great an expense. Yes it was rotten government.

I like the bit about “Keynesian economics in all its forms”. This is a rare attempt to run a common thread through both Reaganomics and Obamacare. I also like the bit where Stockman says we ought to throw the banks to the wolves. No. Really. It’s exhilarating stuff. Read it for yourself:

“There was never a remote threat of a Great Depression 2.0 or of a financial nuclear winter, contrary to the dire warnings of Ben S. Bernanke, the Fed chairman since 2006. The Great Fear — manifested by the stock market plunge when the House voted down the TARP bailout before caving and passing it — was purely another Wall Street concoction. Had President Bush and his Goldman Sachs adviser (a k a Treasury Secretary) Henry M. Paulson Jr. stood firm, the crisis would have burned out on its own and meted out to speculators the losses they so richly deserved. The Main Street banking system was never in serious jeopardy, ATMs were not going dark and the money market industry was not imploding.”

No, of course not. All that talk of panic was just us being silly. Stockman is made of sterner stuff. Much sterner.

But, alas, the damage is done. We are doomed. The change necessary is just too difficult for the government addled and softened American electorate to contemplate. Reagan was right: Medicare would turn America into a hotbed of socialism. Marxists would run the nation within a few years of its introduction. The middle class would chuck in their precious opportunity to go bankrupt because of illness and opt for big brother’s suffocating embrace. They would toss away every American’s right to live out their retirement in abject poverty and sickness to savor the deadly poison of Social Security instead.

If only we had the courage to allow capitalism to fly free. It would uplift us all.

“Man is born free and everywhere he is in chains.”

Or, to paraphrase somewhat:

“American voters have nothing to lose, but their chains, American voters unite.”

OK. I butchered that last one a bit, but it seems Stockman is following in the footsteps of Rousseau and Marx. He is calling for revolution. He has seen the enemy and it is us. Flabby, fat, and capitalist hating us.

So he ends:

“Revolutions are the locomotives of history.”

Well not really. That’s Marx again. But he sort of goes there.

The world is ending you see. Because we had the temerity to moderate the excesses of capitalism by leaning on the crutch of democratically elected government. We had the gall to look out for ourselves. To try to mitigate the wild swings that capitalism brings with it. To tame those animal spirits that lead us astray sometimes. And to constrain the greed that creates so much hardship for the less fortunate. It was democracy that protected us. “We the People”. Democracy.

And as Stockman would no doubt agree:

“Democracy is the road to socialism.”

Rats. That’s Marx again.

Anyway. You get the picture: put your money in cash. It’s only a matter of time before the Martians and the Federal Reserve Bankers land.

As I said, Stockman lost it. We can safely ignore him.