Andrew Sullivan, writing in Atlantic Magazine, picked up on a recent David Stockman opinion piece in the New York Times. WC suspects that the reverberations of these posts are echoing around the blogosphere. Some background:
Former US House member David Stockman was Ronald Reagan’s first Director of the Office of Management and Budget (1981-1985). He was a key member of the team that developed the voodoo “supply side economics,” formerly known as “trickle down” economics. The idea of the supply-siders was that if you cut taxes on the rich, they’d all spend more and the economy would prosper. And if the economy prospered, why Republican voters would prosper, too. The supply-siders had no proof that the economy would prosper; the only thing that was certain about the idea was that the rich would pay lower taxes. Supply-side economics has always had the enthusiastic support of the wealthy.
If Stockman ever believed in supply-side economics, he abandoned those beliefs early on. He famously gave a series of interviews to Atlantic Magazine in 1981, resulting in a killer article in December of that year, by William Greider, “The Education of David Stockman.” For the crime of being honest and, worse, candid, Stockman was banished to Republican purgatory, where he has remained pretty much ever since, although he stayed on as OMB Director another four years. He also abandoned the “wishful thinking of supply-side economics.”
Not so his party. By combining steep tax cuts, especially tax cuts for the wealthy, with increases in defense spending and impressive increases in non-defense spending, the Republicans have managed to grossly inflate the National Debt. Consider the following graph:
The top half shows the debt in trillions of dollars, not adjusted for inflation; the bottom chart shows the same data as a percentage of the then-current Gross Domestic Product (“GDP”).
The steepest and greatest increase in debt by any measure was during Reagan’s two terms. As Stockman notes in his article, that was because Reagan greatly decreased taxes and, despite what you may have thought, also increased spending, particularly in defense. You have to ask why Republicans cling to this model.
The second greatest increase came during George W. Bush’s administration, when two unfunded wars, an unwillingness to veto spending increases and yet more tax cuts created another spike in debt.
The premise of the Republicans’ claim now that ending the tax breaks for the wealthy will hurt the economy has been proven false two times now. Each demonstration of falsity has cost the United States a few more trillion in national debt. Supply-side economics is voodoo. The premise is a lie. Stockman, who helped champion it in the first Reagan administration, has had the courage to admit it. Why can’t the noisy Republicans in Congress?
How dare the Republicans scream about the size of the current deficit – a deficit created by the Republicans absurd economic policy, two unfunded wars and fat cat tax cuts – and yet be unwilling to agree to a modest tax increase on the wealthiest 1% of Americans? Stockman notes,
It is not surprising, then, that during the last bubble (from 2002 to 2006) the top 1 percent of Americans — paid mainly from the Wall Street casino — received two-thirds of the gain in national income, while the bottom 90 percent — mainly dependent on Main Street’s shrinking economy — got only 12 percent. This growing wealth gap is not the market’s fault. It’s the decaying fruit of bad economic policy.
The political bankruptcy of Republican fiscal policy is indisputable. The only question is whether the voters will fall for the Republican Big Lie.
UPDATE: Paul Krugman had a nice essay on this issue on August 7. “Flim-flam Man,” indeed.