Over the years, I have described myself politically as a “Jacob Javits" Republican.” For those of you unfamiliar with the Senator from NY, Javits was a social progressive, a fiscal conservative, “a political descendant of Theodore Roosevelt’s Progressive Republicanism.”
After he “retired” in 1980, the GOP took a very different turn: The emphasis on Fiscal conservatism was lost. Balanced budgets were no longer a priority. In terms of electoral politics, the embrace with the Religious Right was a deal with the devil. It married the party to a backwards combination of social regressiveness and magical thinking. Ideology trumped facts, and conflicting data and science was ignored.
In short, the party became more focused on Politics than Policy.
I bring this up as an intro to David Stockman’s brutal critique of Republican fiscal policy. Stockman was the director of the Office of Management and Budget under President Ronald Reagan. His NYT OpEd — subhed: How the GOP Destroyed the US economy — perfectly summarizes the most legitimate critiques of decades of GOP economic policy.
I can sum it up thusly: Whereas the Democrats have no economic policy, the Republicans have a very bad one.
The details are what makes Stockman’s take so astonishing. Here are his most important observations, of which I find little to disagree with:
• The total US debt, including states and municipalities, will soon reach $18 trillion dollars. That is a Greece-like 120% of GDP.
• Supply Side tax cuts for the wealthy are based on “money printing and deficit finance — vulgar Keynesiansism robed in the ideological vestments of the prosperous classes.”
• Republicans abandoned the belief that prosperity depended upon the regular balancing of accounts — government, trade, central banks private households and businesses.
• Once fiscal conservatism was abandoned, it led to the serial financial bubbles and Wall Street depredations that have crippled our economy.
• The Nixon administration defaulted on American obligations under the 1944 Bretton Woods agreement.
• Who is to blame? Milton Friedman. In 1971, he persuaded President Nixon to unleash on the world paper dollars no longer redeemable in gold.
• According to Friedman, “The free market set currency exchange rates, he said, and trade deficits will self-correct.” What actually occurred was “impossible.” Stockman calls it “Friedman’s $8 trillion error.”
• Ideological tax-cutters are what killed the Republicans’ fiscal religion.
• America’s debt explosion has resulted from the Republican Party’s embrace, three decades ago, of the insidious Supply Side doctrine that deficits don’t matter if they result from tax cuts.
• The GOP controlled Congress from 1994 to 2006: Combine neocon warfare spending with entitlements, farm subsidies, education, water projects and you end up with a GOP welfare/warfare state driving the federal spending machine.
• It was Paul Volcker who crushed inflation and enabled a solid economic rebound — not the Reagan Supply Side Tax cuts.• Republicans believed the “delusion that the economy will outgrow the deficit if plied with enough tax cuts.”
• Over George W. Bush 8 years in office, non-defense appropriations gained 65%.• Fiscal year 2009 (GWB last budget): Tax-cutters reduced federal revenues to 15% of GDP — lower than they had been since the 1940s.
• The expansion of our financial sector has been vast and unproductive. Stockman blames (tho but not by name): 1) Greenspan, for flooding financial markets with freely printed money; and 2) Phil Gramm, for removing traditional restrictions on leverage and speculation.
• The shadow banking system grew from a mere $500 billion in 1970 to $30 trillion by September 2008 (see Gramm, above).
• Trillion-dollar financial conglomerates are not free enterprises — they are wards of the state, living on virtually free money from the Fed’s discount window to cover their bad bets.
• From 2002 to 2006, the top 1% of Americans received two-thirds of the gain in national income.I find it fascinating that the most incisive criticism of the irresponsible GOP policies has comes from two of its former stars: Bruce Barlett and now David Stockman. Sure, Krugman, Stiglitz, DeLong and others have railed against Bush policies for years. But it seems to take an insider’s critique to really give the debate some punch.
Its funny, but when I criticize Bush, I get accused of being a liberal Democrat (I am not). I am simply giving my honest perspective of an utterly ruinous set of irresponsible policies that did lasting damage to America. The critiques of Obama does not generate the same sort of reaction. I suspect brain damaged partisans of the left suffer from somewhat different cognitive deficits than brain damaged partisans of the right.
Here’s to hoping that reality-based economic policies are somewhere in our future.