David Stockman to America: This is your new normal

Reagan’s former budget chief and the original supply side economist has been taking his whacks at the Republican Party since 1985. But the warning this time is not just for Republicans … it’s Americans. Welcome to the new normal.

Stockman was a guest on This Week on ABC along with Mike Pence, ringing the alarm on the American fiscal crisis once again. Only this time, every American should be alarmed, change your view of Government or face fiscal armageddon. Unless government begins to tackle the massive size of our 14 trillion dollar debt, and cut entitlement spending … this will be our new normal, 9% unemployment and a sun setting Republic.

Two bites. The first, the warning to the American people. This is our new normal.

http:v//www.youtube.com/watch?v=CyWNU2PbCuU

I do not doubt that he’s right. My biggest concerned is that the people at the top don’t care, because the new normal will not touch them. The second clip has a warning to America in general. Banana Republic!

httpv://www.youtube.com/watch?v=ibDkt5Igzj8

Stockman is beyond smart but so much of what he has said is typical of an economist. Push a plan and then later, or a theory, and then either walk away from it later, or explain why it wasn’t followed to perfection.

Lately, he’s been going after the Bush Tax Cuts, and explaining why the Bush rates can’t be extended … for anyone:

Mr. STOCKMAN: We’ve had a rolling referendum on what we want in government and what we don’t, ever since the first Reagan spending cut program – which I was part of in 1981. And it seems pretty clear to me that by 2010, we’ve decided a lot of things that cost a lot of money, the American people want. I might not agree with that but apparently, they do.

So we’re spending $3.8 trillion in defense, non-defense, entitlements, everything else, and we’re taking in only 2.2 trillion. So we got a massive gap. You have to pay your bills; you can’t keep borrowing from the rest of the world at that magnitude, year after year after year. So in light of all of those facts, I say we can’t afford the Bush tax cuts.

RAZ: Now, I think many people would be surprised to hear Ronald Reagan’s former budget director make this argument. I mean, what happened to the idea you once pushed, that tax cuts ultimately stimulate the economy?

Mr. STOCKMAN: I think that’s true. But we’re in a much different world today than we were in the early 1980s. We have had a spree of debt building for the last 30 years, both in the public and in the private sector. So in that environment, the highest priority is solvency now, not incentives for growth.

RAZ: You seem to suggest that many of our economic troubles are the result of Republican economic policies over the past few decades. You are a Republican. You are a conservative. Why do you think Republicans are largely to blame?

Mr. STOCKMAN: Because the Republicans abandoned their old-time fiscal religion in favor of two theories, which I think are now proving to be both wrong and highly counterproductive and damaging.

One was monetarism, which said let the dollar float on the international markets. Let 12 men and women at the Fed decide whether to raise or lower interest rates, and use the Fed to try to run this massive economy. What they’ve done instead is run the printing press; they’ve flooded the world with dollars. The whole monetarist policy has been a mistake.

The second thing was the perversion of supply side. Yes, there was a good idea that in certain circumstances, lower tax rates will encourage economic activity and savings. But when you make it a religion, when you make it a catechism and you say you cut taxes no matter what the circumstance, what the season, what the condition, then I think the whole idea has been perverted.

By getting off track over the last 30 years, the Republican Party has basically given up its historic view that the key thing was financial discipline, financial responsibility, and that we had to live within our means. Today, we have two free lunch parties and as a result, we’re borrowing ourselves into grave danger with each passing month and year.

Now that all sounds good to me, but as a layman, and a citizen, I want my government to cut spending before I would consider a single tax increase. Stockman can explain how both need to be done but Americans have come to know Congress for what it is. Taxes will go up … but spending will not stop. I do wish Dr Stockman spent a little more time on that side of the equation.