Economics, "the dismal science," is notoriously uncertain and unpredictable -- yet every community, state and nation wants a healthy economy to support its populace. People need economics, even if it galls them.
We've always admired David Stockman, President Reagan's budget director, for his candor: When Republican Reagan wanted to shower giant tax giveaways on the rich, and added small tax cuts for the poor to his proposal, Stockman bluntly said the little boon for less-privileged families was a "Trojan horse" to trick America into accepting the big boon for the wealthy.
Now Stockman has written a book that is just as blunt. The Great Deformation: The Corruption of Capitalism in America denounces both Republicans and Democrats for leading America into colossal debt that could trigger another bitter slump.
In a New York Times treatise outlining his warning, he wrote:
"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."
If market speculation continues wildly, the next reversal could be worse, he says.
Stockman blames former President Nixon for ending the requirement that U.S. money be based on gold reserves -- which loosed "the era of bubble finance," with the Federal Reserve providing low-interest funds for speculators to plunge into exuberant stock-buying.
He denounces "the Reaganite shibboleth that deficits don't matter" and "the destruction of fiscal rectitude under Reagan -- one reason I resigned as his budget chief in 1985." He says the Reagan White House espoused easy Federal Reserve money that "incited the greatest equity boom in history, with the stock market rising fivefold between the 1987 crash and the 2000 dot-com bust."
Low-interest Federal Reserve money enabled manipulators to plunge into leveraged buyouts of corporations, which left the manipulators billionaires and the firms saddled with enormous debt. Stockman continued:
"The Republicans' utter abandonment of the balanced-budget policies of Calvin Coolidge ... allowed George W. Bush to dive into the deep end, bankrupting the nation through two misbegotten and unfinanced wars, a giant expansion of Medicare and a tax-cutting spree for the wealthy that turned K Street lobbyists into the de facto office of national tax policy."
As for today, Stockman attacks House Republicans and Budget Chairman Paul Ryan, saying: "His proposal for draconian 30 percent cuts over a decade on the $7 trillion safety net -- Medicaid, food stamps and the Earned Income Tax Credit -- is another front in the GOP's war against the 99 percent."Stockman concludes that America faces a grim future, thanks to policies that let rich speculators play "bubble" games. Is his analysis correct? We aren't sure. Economics is so dismal that answers never are clear.