Former Reagan budget director David Stockman's apocalyptic op-ed in the New York Times caused quite a stir over the weekend. In short, Stockman argues that the Fed's loose monetary policies, an expanding social safety net, bank bailouts, misguided Keynesianism, and the large budget deficit "have brought America to an end-stage metastasis."
"The state-wreck originated in 1933, when Franklin D. Roosevelt opted for fiat money (currency not fundamentally backed by gold), economic nationalism, and capitalist cartels in agriculture and industry," Stockman says. The only solution, it seems, is to dismantle the whole system piece by piece and start over.
Stockman takes aim at both Democrats and Republicans — including his former boss, Reagan — ensuring that columnists across the ideological spectrum would be eager to tear it apart. A quick rundown of why experts just aren't buying Stockman's doomsday assessment:
1. Paul Krugman
The New York Times columnist characterizes the column as "cranky old man stuff, the kind of thing you get from people who read Investors Business Daily, listen to Rush Limbaugh, and…get investment advice from Zero Hedge." He essentially accuses Stockman of numerical demagoguery:
It’s full of big numbers that are scary because they’re big numbers — we’ve run a current account deficit of $8 trillion. So? We have a $16 trillion a year economy; America’s net international investment position is a debt of about 30 percent of GDP, which isn’t that big; our balance of investment income is still positive. But it’s EIGHT TRILLION DOLLARS! [New York Times]
2. Jared Bernstein
The former economic adviser to Vice President Joe Biden finds a few things to like in Stockman's piece — mainly the attacks on "crony capitalism" and Wall Street banks. Otherwise, he accuses Stockman of making angry, blanket statements while throwing nuance out the window:
But by mushing this all together under the rubric of evil debt and interventionism instead of analyzing the details — differentiating smart borrowing from wasteful borrowing, giving fiscal and monetary stimulus their due (he’s welcome to point out where they go wrong, but his blanket condemnation is nonsensical) — I suspect most readers will react the way I did: It’s like hearing a crazy person on a street corner ranting against whatever: They invariably stumble on some profound and piercing insights, but it’s mostly nonsense, and instinctually, we keep our heads down and move on. [On the Economy]
3. Kevin Grier
Libertarian-leaning economics professor Kevin Grier says Stockman "confuses cause and effect, goes all gold-buggy, slanders Milton Friedman, and just generally comes unhinged in a massive hissy fit. " The title of his post says it all: "David Stockman wants to pee in your cornflakes." [Kids Prefer Cheese]
4. Joe Weisenthal
The executive editor at Business Insider notes that the years before the New Deal weren't exactly a golden age:
It's hard to know where to begin poking holes in the whole thing, but probably the most telling and self-contradicting aspect, is the fact that he traces the original sin of the economy back to FDR taking the U.S. off of the gold standard…
The problem is that the last 80 years, since then have represented a marvelous time for economic progress in America (and elsewhere). Standards of living have soared, and the tools of modern economic management have meant that we've never had another economic crash anywhere near the level we saw during The Great Depression. [Business Insider]
5. John Feehery
The Hill columnist and president of QGA Communications argues that Stockman, as director of the White House Office of Management and Budget from 1981 to 1985, isn't exactly blameless:
Mr. Stockman, the budget director who lied about the budget during the Reagan years, now promotes himself as the only man who is telling us the truth about our economy today. He believes the economic lives we are all living is a gigantic fraud, perpetrated by the high and mighty at the expense of the low and humble.
For the life of me, I don’t know how a tight monetary policy would help the poor get out of poverty. Usually, when central banks constrict the money supply, it is the poor that get hit the hardest. But that is what Stockman wants. To him, our current economic system is a fraud. And when it comes to fraud, he is an expert. [The Feehery Theory]
6. Matt O'Brien
Finally, Matt O'Brien, associate editor at The Atlantic, cites the cinematic masterpiece Billy Madison on Twitter:
The best response to that David Stockman op-ed bit.ly/Pm2nqg
— Matt O'Brien (@ObsoleteDogma) April 1, 2013