David Stockman, Working-Class Hero
William Greider reclassifies Reaganomics' onetime poster child.
In 1981 the journalist William Greider laid out the economic self-deceptions of the Reagan administration, which would unbalance the federal government's books for the next two decades, in a classic AtlanticMonthly article titled, "The Education of David Stockman." David Stockman was President Reagan's budget director, a true believer in supply-side economics and the last powerful conservative to make a serious attempt at radically shrinking the size of government. His ambition to cut federal spending made him a poster child for Reaganomics and much-reviled by the left. (Click here for a representative Stockman caricature from that era.) Stockman told Greider he wanted to attack "weak claims," not "weak clients," but in the end, he couldn't prevent his budget cuts from falling disproportionately on the poor; the rich clients with weak claims proved too powerful to defeat. Ultimately, Stockman failed to achieve budget cuts of any kind sufficient to reverse a trend toward growing deficits fed by the Reagan administration's tax cuts. Greider's piece depicted Stockman as a brilliant young conservative idealist who gradually became disillusioned with the conservative movement's grand theories about how the world worked. In a memoir published five years later, Stockman expressed some disgust with the political process itself.
Greider's piece still makes for compelling reading today, not least because another White House in thrall to supply-side economics (or, more likely, cynical tax-cut politics) has once again created a huge federal budget deficit, today estimated by the Congressional Budget Office at $401 billion. Once again—remarkably, in this case, given President Bush's unwillingness to fund his much-vaunted compassion agenda—the size of government is growing. According to a new study by the Brookings Institution's Paul C. Light, the federal government employs, directly or through government contracts and grants, 12 million people, or a million more than it did under President Clinton. Surprisingly, these additional million people aren't working solely, or even largely, to fight the war on terrorism; they're divided roughly between employees working in defense- and non-defense-related areas, with slightly more in the latter category. The few conservatives who still want to shrink big government are up in arms about the fact that under Bush there's been an increase in "domestic discretionary spending" as a percentage of the nation's gross domestic product. Even Stockman managed to shrink that. To paraphrase Stockman (as quoted by Greider), the hogs are really feeding.
These parallels are evident to many political commentators, and Stockman's name has been popping up here and there. But what's doing with Stockman himself? Greider tells us in his new book, The Soul of Capitalism: He's become a working-class hero of sorts, albeit in pinstripes.
Greider's new book is an examination of the ways in which trends in the flow of capital have created opportunities to promote social justice. (Greider, who was a Washington Post editor when he wrote the Stockman piece, has moved leftward since then, or at least come out of the closet. He now writes for TheNation.) In some instances, Greider notes, these trends have promoted social justice themselves. Stockman, who now specializes in corporate buyouts, is apparently an example of the latter. You won't find any rhetoric on the Web site of Heartland Industrial Partners, the private equity firm Stockman founded, that sounds even vaguely socialist. But according to Greider, Heartland is one of "a handful of specialized investment firms committed to a 'worker-friendly' mode." Even its name, Greider posits, is borrowed from an investment fund started by Leo Gerard, now president of the United Steelworkers of America, called the Heartland Labor Capital Network. Gerard's fund invests labor pension funds in companies that agree to allow union organizing. So does Stockman's.
Here's how Greider tells it:
Stockman's venture may startle those who remember his combative style in Washington politics, but he impressed labor people with some of the deals he did for the Blackstone Group of Wall Street. Stockman managed large and successful industrial turnarounds by working with the employees and unions, instead of rolling over them. Since he launched his own firm in 1999, his "buy and build" strategies have focused entirely on restoring midsized manufacturing companies to good health and profitability. …
"David is buying controlling ownership of these companies, and he's actually turning them around, and he's not doing it by beating the shit out of workers," Gerard says. "David came to me very early on with his idea, and we decided to support it. David made his presentation to the trustees of the [Steelworkers] pension fund, labor and management, and asked for $10 million. When he left the room, the board voted to give him $25 million. We signed an agreement with him, and he recognizes there's a role for unions in the workplace, and there'll be no antiunion activities. We've organized some of the facilities that he's purchased."
Heartland Industrial Partners' commitment to labor is sufficiently robust to have provoked a lawsuit from the anti-union National Right To Work Legal Defense Foundation objecting to what it calls "an illegal sweetheart arrangement that requires all companies acquired by the Heartland firm to help impose unionization on their employees." The lawsuit concerns Heartland's acquisition of Collins and Aikman Corp., which was nonunion when Heartland acquired it but is now being organized by the Steelworkers.
Stockman last month became CEO of Collins and Aikman. He promptly went into Reagan budget director mode, slashing payroll. But this time, there was a difference: The 750 jobs Stockman eliminated were management jobs. Chatterbox doesn't know whether these jobs represented weak claims, but they surely didn't represent weak clients. What Stockman couldn't do to the government, he appears to be achieving on Wall Street. This time, the left is applauding.
Timothy Noah is a former Slate staffer. His book about income inequality is The Great Divergence.