David Stockman wrote an intriguing article which appeared in the NY Times. That it appeared in the Times is noteworthy itself, for it contradicts so many liberal shibboleths the paper has supported (promoted) for many years. Its appearance is less likely to reflect the first steps to Damascus and may be a sign of financial desperation where the need for readership trumps political ideology. Or perhaps it is a return to “all the news that’s fit to print.”
Mr. Stockman has the background and experience to know of what he writes. He was the Budget Director under the Reagan Administration and is familiar with government spending and political excess.
His diagnosis of the problem is reasonable and welcomingly blunt:
… we are now state-wrecked. With only brief interruptions, we’ve had eight decades of increasingly frenetic fiscal and monetary policy activism intended to counter the cyclical bumps and grinds of the free market and its purported tendency to underproduce jobs and economic output. The toll has been heavy.
The United States is broke — fiscally, morally, intellectually — and the Fed has incited a global currency war (Japan just signed up, the Brazilians and Chinese are angry, and the German-dominated euro zone is crumbling) that will soon overwhelm it. When the latest bubble pops, there will be nothing to stop the collapse.
As the federal government and its central-bank sidekick, the Fed, have groped for one goal after another — smoothing out the business cycle, minimizing inflation and unemployment at the same time, rolling out a giant social insurance blanket, promoting homeownership, subsidizing medical care, propping up old industries (agriculture, automobiles) and fostering new ones (“clean” energy, biotechnology) and, above all, bailing out Wall Street — they have now succumbed to overload, overreach and outside capture by powerful interests. The modern Keynesian state is broke, paralyzed and mired in empty ritual incantations about stimulating “demand,” even as it fosters a mutant crony capitalism that periodically lavishes the top 1 percent with speculative windfalls.
I do disagree with this assessment:
There was never a remote threat of a Great Depression 2.0 or of a financial nuclear winter, contrary to the dire warnings of Ben S. Bernanke, the Fed chairman since 2006.
I believe there would have been a banking system collapse and another Great Depression. Regardless, there should have been no intervention, and that is the point Stockman was making. Instead, the politicians kicked the can further down a road that has an end. The banking system collapse may or may not have been avoided. A currency collapse now appears possible and an even Greater Depression has been baked into the future.
Stockman’s article is worth the read. It is pointed and highly opinionated. It raises anger from both sides of the political spectrum. From the left come criticisms from the likes of Paul Krugman, Jared Bernstein, Kevin Grier, Joe Weisenthal, John Feehery and Matt O-Brien.
From the right, Forbes has an article entitled David Stockman Brings New Meaning To ‘Flawed Economic Analysis’ which concludes with this advice:
It’s time to divorce ourselves from the myriad fallacies of the moment that are suffocating our present and future. But in doing so, we would be wise to not follow Stockman down a similar, fallacy-littered path.
I don’t know what it means when you anger both ends of the political spectrum. I suspect the left is upset with his interpretation of the effects of liberal policies, most notably The New Deal. The right appears to be displeased with his proposed remedies.