David Stockman, a former budget official in Ronald Reagan's administration and author of The Great Deformation: the Corruption of Capitalism in America, is one deeply pissed-off dude. The scope of his disdain is wide -- it would take a lot of fence to corral those he deems responsible for a century of wildly wrong-headed developments that, in his view, are destined to sink America.
What's more, his perps would have to be held in separate cells, because they're of remarkably different stripes. Milton Friedman is implicated (his sin: advocating managing the money supply), but so is Paul Krugman (and of course his spiritual mentor John Maynard Keynes). Franklin Roosevelt is on the list of "policy villains," but so is Richard Nixon, who dealt the final blow to the gold standard. Former Reagan economic advisor Art Laffer (Mr. Supply Side) is there, a few names away from Larry Summers (these days, Mr. Demand Side), who served, most recently, as Barack Obama's top economic advisor.
If you can figure out what these folks have in common, you'll be on the way to understanding the connective tissue that (barely) holds together this tirade, which Stockman mercifully summarized in the New York Times. (The book is over 700 pages ... like I said, the man is really mad.) So what's the connection? I'll give you a hint: They all advocated economic interventions. They thought they could help boost growth, lower unemployment, raise revenues, stimulate investment, smooth out volatility, and so on. And, as Stockman sees it, the problem is not simply that they all failed miserably. It's that their failure has doomed America.
That's not hyperbole. In a way that would almost be refreshing if it didn't surpass the Hunger Games on the dystopia scale, Stockman's is not one of those arguments that tells you how screwed up things are but then leaves you with hope that all can be solved if we take the author's advice. Instead, America, according to Stockman, is in "end-stage metastasis." The nation "is broke -- fiscally, morally, intellectually."
It's easy to poke fun at a rant like this, and most of it is just plain wrong (more on that in a moment). But what's more interesting is to figure out where Stockman is on target. There are, unquestionably, aspects of American capitalism that have been corrupted -- in no small part through money in politics, something Stockman vividly rails against. He's also right that the U.S. economy is seriously underperforming and bad policy is implicated. One of his hobbyhorses, crony capitalism -- a frequent target of the very progressive economist Dean Baker -- is surely holding back growth, skewing the distribution of income and wealth, and steering investment not toward its most productive uses, but to those most favored by the tax code.
Unfortunately, those points are not central to his argument. What Stockman is most worked up about is that for almost a century, economic policymakers have ... um ... made policy, and that's led to cheap money, high indebtedness, and econo-moral turpitude. Sovereign debt is the biggest villain of all here, and there are lots of big numbers -- in the trillions! (When folks like Stockman use trillions as opposed to shares of GDP, they're trying to scare you.) Fiscal and monetary stimulus, which contribute to the debt, are key accomplices. Stockman insists that the market should work out its failures without all these meddlers trying to fix them (there must be "a sweeping divorce of the state and the market economy"); no government investments in industry; central banks shouldn't mess with the money supply, and so on.