David Stockman served as a US Representative (R-MI) from 1977 until resigning on January 27, 1981, to accept appointment as the Director of the Office of Management and Budget under President Ronald Reagan. Stockman is considered one of the most powerful OMB directors ever, "an economic superstar on a par with former Fed Chairman Alan Greenspan."
Always willing to speak his mind, Stockman recently told the Daily Beast that Ben Bernanke, Timothy Geithner, and Larry Summers should be fired immediately, offered advice on the federal budget, and said Rep. Ron Paul (R-TX) is the "only guy who really understands monetary policy, economic policy, the proper role of the state ..."
While I personally disagree with him on tax cuts (it's the spending), David Stockman is a man whose advice deserves your attention, especially in light of the dangers of ignoring the deficit. He's absolutely right about Ron Paul too. Anyone who's actually serious about shrinking the budget and limiting government, supports Ron Paul. Everyone else is either playing pretend, or has their head stuck in the sand.
Reagan White House budget guru David Stockman talks to Lloyd Grove about the dangers of ignoring the deficit, why Bernanke, Geithner and Summers must be fired ASAP—and his support for Ron Paul.
Federal Reserve Chairman Ben Bernanke “is a math teacher, he’s not a central banker,” former White House Budget Director David Stockman scoffs. “He is so caught up in his equations that I think he’s extremely dangerous—the worst Fed chairman we’ve ever had.”
“How can he believe that stimulating more credit creation and more borrowing can possibly solve the problem of a housing sector that’s drowning in debt and a federal government that’s on the edge of insolvency?…
“He is the greatest enabler of Wall Street speculation and of the disasters that brewed both before the financial crisis of 2008 and are brewing again, and I would blame the Bush White House. I would lay this right at the doorstep of Karl Rove. How did they vet the appointment of a new Fed chairman and not even read the black-and-white writings of this Bernanke fellow who said, ‘If push comes to shove, I’ll print money until the cows come home. I’ll drop it out of helicopters!’ This is Republican doctrine? This is sound money?” Stockman concludes: “The Wall Street casino is simply a consequence of what Bernanke is doing, and for that alone, he should be removed from office.”
Summers,” Stockman continues, dispatching his next victim, “has had in his whole life only one idea—and it’s wrong. The idea is: No matter what state we are in the cycle—you’re entering a recession, coming out of the recession or facing one down the road—stimulate the economy, add to the federal debt, basically borrow from the future in order to create false gains today.”
As for Geithner, “he has basically been a bag carrier for Wall Street—in fact, his shoulders are a little stooped,” Stockman says. “I don’t think he’s really fit to occupy the office he’s in. He has no real philosophy. I don’t see any evidence that he’s understood financial history or public policy going back decades and decades. It’s all seat-of-the-pants, make judgments on the fly: Try something, and if it doesn’t work, try something else…He might make a third-rate investment banker, but he certainly shouldn’t be Secretary of the Treasury.”
“I think it’s monetary policy going back to Milton Friedman,” Stockman says, invoking the famed University of Chicago economist. “I think Milton Friedman is the evil genius here. He’s the one who basically told Nixon, ‘Close the gold window, throw out the old disciplines, eliminate the old rules, just let the Fed manage the money supply, let the exchange rate float, and everything will work out perfectly.’ Friedman was utterly naïve politically, and he didn’t recognize that once you threw the restraints away—of fixed exchanged rates, of a dollar tied to some metallic reserve—the Fed would be under enormous pressure politically and intellectually to make excuses to flood the market with easy money…Today we’re reaping the harvest.”
Stockman, a nominal tax-cutting supply-sider when he worked for Reagan, has been crusading in recent weeks for President Obama to let George W. Bush’s tax cuts expire—something that will happen automatically absent congressional intervention.
Stockman is especially severe on his former House colleague Dick Cheney, who as vice president insisted: “Reagan proved deficits don’t matter.”
“There are big questions about how good Dick’s view of foreign policy was,” Stockman tells me, “but his possible errors there are nothing compared to how far off base he was in economic policy. That is a clueless statement, and symptomatic of why I hold the Republican Party so responsible for the mess we’re in. The Republican Party is supposed to be the conservative party. The Democratic Party is supposed to be the irresponsible party. But somehow we lost that.”
Yet Stockman hopes the Republicans gain the majority in the House and Senate next November ...
“I’m totally in agreement with Ron Paul,” Stockman says. “I don’t think he can be elected president, but I think he’s the only guy who really understands monetary policy, economic policy, the proper role of the state, the proper role of the U.S. in the world. On the other hand, the world is changing pretty dramatically before our eyes. I wouldn’t rule out anything right now. But if you asked me who is speaking truth to power, it’s Ron Paul.”
Stockman is absolutely correct about Milton Friedman too. Despite the volumes of great work Friedman did, he was wrong on monetary policy. The Chicago School accepted the central bank, and we've been paying the price ever since.
Though I haven't read it personally, I understand that David Stockman's now out of print book, "Triumph of Politics: Why the Reagan Revolution Failed," is a superb read (minus the excessive axe-grinding). The "Triumph of Politics" is an "inside-baseball" view of the federal budget process, and cautionary tale about how the political process necessarily corrupts even the most coherent and popular conservative programs.