David Stockman, who was Ronald Reagan’s director of the Office of Management and Budget (1981 to 1985), calls out both parties for being full of crap when it comes to the deficit in a NYT OpEd. It is today’s MSM must read.
As we discussed last week with Dylan, if we were serious about deficit reduction, we would be cutting spending EVERYWHERE and RAISING TAXES on not only the top 2%, but the upper and middle classes as well. (Shared sacrifice and all that).
The question is when, and I agree with the anti-Austerians it should be 2-3 years out if we want to avoid another 1938 like post-depression recession.
“It is obvious that the nation’s desperate fiscal condition requires higher taxes on the middle class, not just the richest 2 percent. Likewise, entitlement reform requires means-testing the giant Social Security and Medicare programs, not merely squeezing the far smaller safety net in areas like Medicaid and food stamps.
Unfortunately, in proposing tax increases only for the very rich, President Obama has denied the first of these fiscal truths, while Representative Paul D. Ryan, the chairman of the House Budget Committee, has contradicted the second by putting the entire burden of entitlement reform on the poor. The resulting squabble is not only deepening the fiscal stalemate, but also bringing us dangerously close to class war.”
How did we find ourselves in this mess? Stockman observes:
“The culprit here was the combination of ultralow rates of interest at the Federal Reserve and ultralow rates of taxation on capital gains. The former destroyed the nation’s capital markets, fueling huge growth in household and business debt, serial asset bubbles and endless leveraged speculation in equities, commodities, currencies and other assets.
At the same time, the nearly untaxed windfall gains accrued to pure financial speculators, not the backyard inventors envisioned by the Republican-inspired capital-gains tax revolution of 1978. And they happened in an environment of essentially zero inflation, the opposite of the double-digit inflation that justified a lower tax rate on capital gains back then — but which is now simply an obsolete tax subsidy to the rich.”
Note that this is part of two specific related issues: An supportable spending/taxing regime, and a massive shift in wealth in the nation. Our tax base insufficient for our spending, and our spending is excessive for a tax base. Add to that the concern that upper income earners have benefited at the expense of everyone else:
“This lamentable prospect is deeply grounded in the policy-driven transformation of the economy during recent decades that has shifted income and wealth to the top of the economic ladder. While not the stated objective of policy, this reverse Robin Hood outcome cannot be gainsaid: the share of wealth held by the top 1 percent of households has risen to 35 percent from 21 percent since 1979, while their share of income has more than doubled to around 20 percent.”
Stockman, like Bruce Barlett and even David Frum are yet more Republicans who are pointing out the current GOP leaders are no more serious about budget reform than the Democrats are. The main difference is the GOP has better slogans and marketing, and slides into full blow demagoguery more easily.
But in terms of actual strategies for intelligently addressing the issue? The most glaring truth is the lack of leadership on both sides of the aisle.
The Bipartisan March to Fiscal Madness
DAVID A. STOCKMAN
NYT April 23, 2011
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