David Stockman has written a controversial Op Ed piece entitled Sundown in America that was published last Sunday in the New York Times.
I’ll quote the opening paragraphs to give a taste of the content:
The Dow Jones and Standard & Poor’s 500 indexes reached record highs on Thursday, having completely erased the losses since the stock market’s last peak, in 2007. But instead of cheering, we should be very afraid.
Over the last 13 years, the stock market has twice crashed and touched off a recession: American households lost $5 trillion in the 2000 dot-com bust and more than $7 trillion in the 2007 housing crash. Sooner or later — within a few years, I predict — this latest Wall Street bubble, inflated by an egregious flood of phony money from the Federal Reserve rather than real economic gains, will explode, too.
I’m not certain I agree with all of it — his political prescriptions towards the end seem especially suspect — but it is absolutely worth a read.
Update: Stockman addresses critics, including Paul Krugman (who in typical fashion fired off a torrent of mocking ad hominems instead of a response), in this interview with Marketwatch.
I don’t agree with all of his policy prescriptions near the end, but I do agree with some of them, as well as with his description of where we are, how we got here, and what the ultimate result is going to be. I was never a huge fan of Stockman (he was always too much into static revenue analysis and too dismissive of the stimulative and revenue-enhancing effects of tax cuts), but his heart is in the right place and his analysis seems spot on. Which means that it will be completely ignored, of course, since no one with any power to change things has any incentive to do so.
I thought DS was too harsh on Reagan and the supply-siders. Given the realities of where Reagan was in the 80s, cutting high marginal rates when he did was a good move. But as Laird says, much of the analysis is accurate. It is a frightening situation. One possible saviour for the US economy is the current move towards dirt-cheap gas, a revival of parts of the manufacturing base, etc. But the overhang of debt, unfunded obligations and so on, remains a massive problem, as it does for much of the West.
No wonder the price of gold, despite the odd correction, remains high.
I should have added that Krugman really is a wanker of the first order.
It’s coming. Wear a hat. (see Body Heat)
He is indeed J.P.
As for Reagan – what he did with taxes was correct (and got more revenue – not less revenue) the real failure was (as David Stockman knows) the failure to rollback the entitlement state.
But was that a personal failure – or what it a structural failure?
Can an entitlement state be rolled back.
Can such “entitlements” (once granted) be prevented from growing like cancers?
If the answer is “no” then the fate of the United States was sealed in November 1964 – when Barry Goldwater lost and (in the following few years) the entitlement state (although pensions already existed) was established.
The United States might have survived the burden of the general government pension (“Social Security”) system (after all a third of the country is owned by the government – and could be sold to give the elderly something in return for all those “contributions” they have paid – and their are various reform plans….) but all the “Great Society” stuff? Could the United States really survive all that?
Not likely – not in the long term.
So it may be that Barack Obama is not the destroyer of the United States – he is just bringing forward a death that was going to happen anyway.
It should also be noted that the flag at the top of the article is positioned incorrectly, with the stars to the viewers right.
Shameful.
Peter Schiff has a pretty good piece on “The Stockton Backlash.” It’s posted on several sites, including this one:
http://www.economicpolicyjournal.com/2013/04/peter-schiff-on-stockman-backlash.html
Excerpt from the article (which includes links to a video pastiche and also to an article, “Flying High,” by Mr. Schiff from 4/1/13):