From "Morning in America" To Doom and Gloom

Reagan official David Stockman raised issues that desperately need to be discussed, but misses the mark on solutions.

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David Stockman, former budget director during President Reagan's tenure exits Manhattan federal court, Monday, March 26, 2007, in New York. Stockman was charged in an indictment unsealed Monday with overseeing a sweeping fraud at a troubled auto parts supplier that he led before the company collapsed into bankruptcy.

Reagan-era budget director David Stockman may be forever associated with a comical and controversial idea: That ketchup can pass as a vegetable to satisfy regulations for school lunches. The idea was quickly dropped, and Stockman himself said at the time that the administration had "not only egg on its face, but ketchup, too."

Stockman has evolved since then, in particular by aiming some of his criticisms at the Republican party whose hero once employed him. And far from Reagan's famed "Morning in America," Stockman foresees a chilling economic and moral future for the country.

With a new book, "The Great Deformation: the Corruption of Capitalism in America," Stockman issues a dire warning, as he explains in a lengthy piece in the New York Times:

So the Main Street economy is failing while Washington is piling a soaring debt burden on our descendants, unable to rein in either the warfare state or the welfare state or raise the taxes needed to pay the nation's bills. By default, the Fed has resorted to a radical, uncharted spree of money printing. But the flood of liquidity, instead of spurring banks to lend and corporations to spend, has stayed trapped in the canyons of Wall Street, where it is inflating yet another unsustainable bubble.

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.

[See a collection of political cartoons on the budget and deficit.]

Will any of us be able to get up in the morning, after reading that? Stockman's prose may be a bit alarmist, although he is correct in assessing the runaway entitlement spending (done by Republicans as well as Democrats) and the debt.

Of course, not every administration merely deepened the problem—Bill Clinton balanced the budget and ended his administration with a surplus. But what's notable is the absolutism of Stockman's economic medicine. The abandonment of the gold standard is blamed for fiscal decline. (Is tying currency value to a precious metal by definition better? Or is there a role for the actual living, breathing human being at the Fed to adjust things when necessary?) And he rails against the Wall Street and auto industry bailouts, saying the financial institutions should have been allowed to succeed or fail on their own, and that the automobile company assistance merely moved jobs around without saving any.

That's not true—or not entirely true. As distasteful and entitled as some Wall Street executives are, and as much as many of us would like to have seen them in the unemployment line or cleaning homes for the people who used to mow their many lawns, such vindication would have come at a huge price for the rest of us. Like it or not, our jobs and futures are tied to the health of the banking and investment community.

The collateral damage from Stockman's approach would have been far-ranging and severe. And the automobile companies, which are not only big employers but an important symbol of American industrialism (literally and figuratively) are now profitable. What is Stockman's problem with that intervention, given that the US government is on track to make money from the bailout?

[See a collection of political cartoons on the economy.]

Stockman has some radical ideas for reform, including keeping the president and members of Congress to single, six-year terms (which would merely exacerbate the problem on the Hill of shallow working relationships and a loss of institutional knowledge), limiting campaigns to eight weeks (a nice idea, but virtually impossible to enforce, especially post-Citizens United), providing 100 percent public financing for campaigns (another great idea many have tried and failed to implement) and mandating a balanced budget and the threat of sequestration (that's not working out well even now).

Stockman has offered some provocative ideas and warnings, and has raised some issues that desperately need to be discussed. But sometimes, government needs to step in to help. Allowing entire industries to fail (even when the demise was self-inflicted) is a bit callous to the victims who had nothing to do with the poor decision-making at the top. It's kind of like telling kids the ketchup on their hot dogs qualifies as a vegetable.

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