Reagan insider: 'GOP destroyed U.S. economy'

Discussion in 'Economics' started by owusu, Aug 10, 2010.

  1. owusu


    Aug. 10, 2010, 12:45 a.m. EDT · Recommend (29) · Post:
    Reagan insider: 'GOP destroyed U.S. economy'
    Commentary: How: Gold. Tax cuts. Debts. Wars. Fat Cats. Class gap. No fiscal discipline

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    By Paul B. Farrell, MarketWatch

    ARROYO GRANDE, Calif. (MarketWatch) -- "How my G.O.P. destroyed the U.S. economy." Yes, that is exactly what David Stockman, President Ronald Reagan's director of the Office of Management and Budget, wrote in a recent New York Times op-ed piece, "Four Deformations of the Apocalypse."

    Get it? Not "destroying." The GOP has already "destroyed" the U.S. economy, setting up an "American Apocalypse."
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    Yes, Stockman is equally damning of the Democrats' Keynesian policies. But what this indictment by a party insider -- someone so close to the development of the Reaganomics ideology -- says about America, helps all of us better understand how America's toxic partisan-politics "holy war" is destroying not just the economy and capitalism, but the America dream. And unless this war stops soon, both parties will succeed in their collective death wish.

    But why focus on Stockman's message? It's already lost in the 24/7 news cycle. Why? We need some introspection. Ask yourself: How did the great nation of America lose its moral compass and drift so far off course, to where our very survival is threatened?

    We've arrived at a historic turning point as a nation that no longer needs outside enemies to destroy us, we are committing suicide. Democracy. Capitalism. The American dream. All dying. Why? Because of the economic decisions of the GOP the past 40 years, says this leading Reagan Republican.

    Please listen with an open mind, no matter your party affiliation: This makes for a powerful history lesson, because it exposes how both parties are responsible for destroying the U.S. economy. Listen closely:
    Reagan Republican: the GOP should file for bankruptcy

    Stockman rushes into the ring swinging like a boxer: "If there were such a thing as Chapter 11 for politicians, the Republican push to extend the unaffordable Bush tax cuts would amount to a bankruptcy filing. The nation's public debt ... will soon reach $18 trillion." It screams "out for austerity and sacrifice." But instead, the GOP insists "that the nation's wealthiest taxpayers be spared even a three-percentage-point rate increase."

    In the past 40 years Republican ideology has gone from solid principles to hype and slogans. Stockman says: "Republicans used to believe that prosperity depended upon the regular balancing of accounts -- in government, in international trade, on the ledgers of central banks and in the financial affairs of private households and businesses too."

    No more. Today there's a "new catechism" that's "little more than money printing and deficit finance, vulgar Keynesianism robed in the ideological vestments of the prosperous classes" making a mockery of GOP ideals. Worse, it has resulted in "serial financial bubbles and Wall Street depredations that have crippled our economy." Yes, GOP ideals backfired, crippling our economy.

    Stockman's indictment warns that the Republican party's "new policy doctrines have caused four great deformations of the national economy, and modern Republicans have turned a blind eye to each one:"
    Stage 1. Nixon irresponsible, dumps gold, U.S starts spending binge

    Richard Nixon's gold policies get Stockman's first assault, for defaulting "on American obligations under the 1944 Bretton Woods agreement to balance our accounts with the world." So for the past 40 years, America's been living "beyond our means as a nation" on "borrowed prosperity on an epic scale ... an outcome that Milton Friedman said could never happen when, in 1971, he persuaded President Nixon to unleash on the world paper dollars no longer redeemable in gold or other fixed monetary reserves."

    Remember Friedman: "Just let the free market set currency exchange rates, he said, and trade deficits will self-correct." Friedman was wrong by trillions. And unfortunately "once relieved of the discipline of defending a fixed value for their currencies, politicians the world over were free to cheapen their money and disregard their neighbors."

    And without discipline America was also encouraging "global monetary chaos as foreign central banks run their own printing presses at ever faster speeds to sop up the tidal wave of dollars coming from the Federal Reserve." Yes, the road to the coming apocalypse began with a Republican president listening to a misguided Nobel economist's advice.

    Stage 2. Crushing debts from domestic excesses, war mongering

    Stockman says "the second unhappy change in the American economy has been the extraordinary growth of our public debt. In 1970 it was just 40% of gross domestic product, or about $425 billion. When it reaches $18 trillion, it will be 40 times greater than in 1970." Who's to blame? Not big-spending Dems, says Stockman, but "from the Republican Party's embrace, about three decades ago, of the insidious doctrine that deficits don't matter if they result from tax cuts."

    Back "in 1981, traditional Republicans supported tax cuts," but Stockman makes clear, they had to be "matched by spending cuts, to offset the way inflation was pushing many taxpayers into higher brackets and to spur investment. The Reagan administration's hastily prepared fiscal blueprint, however, was no match for the primordial forces -- the welfare state and the warfare state -- that drive the federal spending machine."

    OK, stop a minute. As you absorb Stockman's indictment of how his Republican party has "destroyed the U.S. economy," you're probably asking yourself why anyone should believe a traitor to the Reagan legacy. I believe party affiliation is irrelevant here. This is a crucial subject that must be explored because it further exposes a dangerous historical trend where politics is so partisan it's having huge negative consequences.

    Yes, the GOP does have a welfare-warfare state: Stockman says "the neocons were pushing the military budget skyward. And the Republicans on Capitol Hill who were supposed to cut spending, exempted from the knife most of the domestic budget -- entitlements, farm subsidies, education, water projects. But in the end it was a new cadre of ideological tax-cutters who killed the Republicans' fiscal religion."

    When Fed chief Paul Volcker "crushed inflation" in the '80s we got a "solid economic rebound." But then "the new tax-cutters not only claimed victory for their supply-side strategy but hooked Republicans for good on the delusion that the economy will outgrow the deficit if plied with enough tax cuts." By 2009, they "reduced federal revenues to 15% of gross domestic product," lowest since the 1940s. Still today they're irrationally demanding an extension of those "unaffordable Bush tax cuts [that] would amount to a bankruptcy filing."

    Recently Bush made matters far worse by "rarely vetoing a budget bill and engaging in two unfinanced foreign military adventures." Bush also gave in "on domestic spending cuts, signing into law $420 billion in nondefense appropriations, a 65% percent gain from the $260 billion he had inherited eight years earlier. Republicans thus joined the Democrats in a shameless embrace of a free-lunch fiscal policy." Takes two to tango.
    Stage 3. Wall Street's deadly 'vast, unproductive expansion'

    Stockman continues pounding away: "The third ominous change in the American economy has been the vast, unproductive expansion of our financial sector." He warns that "Republicans have been oblivious to the grave danger of flooding financial markets with freely printed money and, at the same time, removing traditional restrictions on leverage and speculation." Wrong, not oblivious. Self-interested Republican loyalists like Paulson, Bernanke and Geithner knew exactly what they were doing.

    They wanted the economy, markets and the government to be under the absolute control of Wall Street's too-greedy-to-fail banks. They conned Congress and the Fed into bailing out an estimated $23.7 trillion debt. Worse, they have since destroyed meaningful financial reforms. So Wall Street is now back to business as usual blowing another bigger bubble/bust cycle that will culminate in the coming "American Apocalypse."

    Stockman refers to Wall Street's surviving banks as "wards of the state." Wrong, the opposite is true. Wall Street now controls Washington, and its "unproductive" trading is "extracting billions from the economy with a lot of pointless speculation in stocks, bonds, commodities and derivatives." Wall Street banks like Goldman were virtually bankrupt, would have never survived without government-guaranteed deposits and "virtually free money from the Fed's discount window to cover their bad bets."
    Stage 4. New American Revolution class-warfare coming soon

    Finally, thanks to Republican policies that let us "live beyond our means for decades by borrowing heavily from abroad, we have steadily sent jobs and production offshore," while at home "high-value jobs in goods production ... trade, transportation, information technology and the professions shrunk by 12% to 68 million from 77 million."
  2. Tsing Tao

    Tsing Tao

    you people who post/write these articles simply do not get it.

    we, the public, are subject to the idiocies of BOTH parties.

    right/left/conservative/liberal/republican/democrat = all suck. every last one.
  3. olias


    I just think it's a waste of time and so much nonsense that so many people want to point to Republicans or Democrats, liberals or conservatives as the blame for everything. Both parties are really pretty damn similar. They are both to blame for the current mess. There can be no doubt about that. The enemy is simply bad policies which they are both guilty of. I don't think the constant blaming of one side or the other is really going to improve anything. Both sides have valid points and faults. I think we'd all be better of to stop thinking of ourselves as democrats ourselves of that predisposition, and then we can honestly analyze our situation and find solutions. I wonder if how many people really care about solutions and how many just want to be on a winning team. Is it the same mentality that makes people go nuts for a sports team? They want to feel part of that?

    It a constant buzzkill on this website that in every thread somebody's got get on and start blasting 'republican this' and 'liberal that'. Once the discussion goes there then I know that the discussion is dead. No real ideas get exchanged. It just becomes a pointless/fruitless argument.
  4. Stockman has seen the light of the force and turned from dark side.
  5. +1000
  6. bone

    bone ET Sponsor

    Any logical person could not possibly conclude that one political party has the best economic policies, and that the other party is primarily responsible for the country's economic situation.

    Companies should not be getting bailed out, investment banks should not be getting bailed out, States with ridiculous civil employee pension and benefits schemes should not be getting bailed out, labor unions should not be getting bailed out, and individuals who had no damn business buying real estate should not be getting bailed out.

    Both political parties are perfectly adept at spending money that they don't have, with the ultimate delusion being social justice by executive fiat and wealth redistribution as a means of buying votes.
  7. What makes any statist, leftist think that they're any better than politicians?

    Why should YOU or ME pay higher taxes so that a government worker can retire early on a nice, big pension?

    Honestly, who GIVES A FUCK about deficits or if the Government survives? I hope the U.S. Federal Government goes broke, bye-bye and I won't give up another dollar in additional taxes to "save it."

  8. LOL, I've been saying the exact same thing repeatedly on ET. It is hard to believe a diehard Republican agrees. Ending the gold standard was the catalyst, the Reagan/BushI/BushII debt runup fueled the fire.
  9. Hopefully the mods can move this thread to P&R as it is obviously going to turn into a political flame war and have nothing to do with actual economics...
  10. jem


    the point

    govt has to cut spending by 30% balance the budget and switch to a flat tax.

    govt spending the problem behind every budget message.
    #10     Aug 10, 2010