Thirty-one years and six-odd months. That’s the new record. That’s how long former Reagan budget director David Stockman has dined out on his outcast/iconoclast—outconoclast?—reputation for fiscal straight talk. Reporters would have a tough time shaming parties or presidents if the occasional Isaiah didn’t break away and do the shaming for them. Stockman’s been shaming Republicans since his breakfasts with William Greider turned into a novella-length Atlantic blockbuster about his political “education.”
Stockman hung up his green eyeshade and spent two decades in the private sector. But for media purposes, he is forever a “former Reagan budget director” who “warns of new housing bubble” or “wouldn’t touch the stock market with a 100-foot pole” or “blasts Paul Ryan’s proposal.” The bio sells the story and confirms whatever economic theory is being plied. That’s a shame: Stockman’s current theory is one part sense and five parts Hunger Games nightmare. In his view the gold standard should be restored, entitlements should be abolished, and a brief crash would be followed by a somewhat prosperous dawn.
This was former Rep. Ron Paul’s plan for years, but the media takes it more seriously when it comes from someone like Stockman. Ever since that Atlantic piece and especially since his own 1986 memoir The Triumph of Politics, Stockman’s been a living monument to truth in politics—a terra-cotta warrior of centrism who was “taken to the woodshed” and survived. It’s easy to forget, but he spent three more years in the White House after the Atlantic profile allegedly ruined him. And he got $2.4 million for the memoir, but that remains a strong read. Stockman.
The point of Greider’s profile was that supply-side economics didn’t really work. Stockman arrived at the Office of Management and Budget and, in Greider’s words, “discarded orthodox premises of how the economy would behave.” Cut taxes and cut spending and investors would feel new confidence. “Instead of the continuing pattern of slow economic growth, the new model was based on a dramatic surge in the nation's productivity.” But it didn’t happen, and the economy lurched deeper into recession, and the Laffer curve—the theory that more tax cuts always pumped more revenue—was disproven.
That’s how we remember Stockman’s education. In his memoir, he had more time to explain the problem: There hadn’t been enough cuts. “That the politics of American democracy made a shambles of my anti-welfare state theory,” he wrote, “I can now understand.” Inflation was whipped, over a few long, painful years by a “tight money” (less printing of it, basically) policy from the Federal Reserve. That was fine by Stockman only because it was “the nearest proxy for gold on the horizon.” And even the gold standard “was not a magic cure for our problems, and was certainly no substitute for political discipline and fiscal solvency.” You needed to combine that with the partial abolition of the state.
Stockman wrote this and then—as far as Washington was concerned—disappeared. He took his own advice, avoided the rent-seeking harems of K Street, and re-entered the private sector. That did not end well. Stockman started a private equity firm and became CEO of Collins & Aikman Corporation, an auto parts manufacturer in his native Michigan. He cut 750 management jobs from the manufacturer, betting that the manufacturing industry was about to take off. It didn’t take off. In 2005, the company collapsed, and in 2007 the Securities and Exchange Commission accused Stockman of defrauding investors with schemes like phony letters “that purported to justify the immediate recognition of rebates in income.” The case was settled in April 2010, when Stockman paid $7.2 million in fines.
In the meantime, Stockman had published the first of a series of New York Times op-ed columns. He’d identified the real villains in our current crisis. “The baleful reality,” he wrote, “is that the big banks, the freakish offspring of the Fed’s easy money, are dangerous institutions, deeply embedded in a bull market culture of entitlement and greed.” A few months later, he was smartly repacking this message as a call for Republican sanity. “It’s a pity,” he wrote, “that the modern Republican Party offers the American people an irrelevant platform of recycled Keynesianism when the old approach —balanced budgets, sound money and financial discipline—is needed more than ever.” Liberals started to cite him, without seeming to realize that his problem with Paul Ryan was that he wasn’t right-wing enough.
A few columns later, truth-speaker reputation restored like a vintage Thunderbird, we have The Great Deformation. It’s 748 pages long, at least 40 percent bigger than anything Washingtonians pretend to read, so most people will end up encountering it through Stockman’s columns or public speeches. He still gives a good quote. At a Reuters-sponsored forum with his Obama-era counterpart Peter Orszag, Stockman claimed that the people who didn’t see the failures of the economic system were afflicted by a “recency bias,” and that “both parties function as concierges to introduce the politicians to K Street.”
He would put a stop to that. Sort of like Bob Kerrey, who ran a buzzy but totally unsuccessful 2012 bid for Senate, Stockman wants an “omnibus amendment” that would abolish the Electoral College (OK); set single terms for all federal officeholders, including the president, at six years (hang on); run campaigns on public funds; and limit campaign time to two months. Like Charles Murray, he wants social welfare reverse-engineered so that “all existing programs including housing, food stamps, and Medicare and Medicaid would be converted to cash equivalents.” And then there are the bold ideas: A 30 percent tax on wealth, eliminating most of the Federal Reserve in order to return to the “gold-backed dollar,” and the abolition of health insurance. “The one necessary concession to socialism,” he writes, “would be a system of federally licensed catastrophic insurance funds.”
I’d read this book 10 times before I read another possible presidential candidate’s memoir of how his Real American Story schooled him in the Audacity of Hope. Like the Washington Post’s Federal Reserve reporter Neil Irwin puts it, Stockman’s ideal would mean “forcing millions of Americans to endure grinding poverty because gold is good.” But it’s a coherent vision of a World Without the Fed. In the 1980s, Stockman sardonically referred to a gap in the budget as the “magical asterisk,” something skeptics could figure out later. And now, against evidence, he says we’ve run out of later.