Reagan Republican: How GOP Destroyed the US Economy

Marketwatch’s Paul Farrel is at it again – speaking his mind. Paul has taken former Ronald Reagan Budget Director David Stockman’s article in the NYTimes and played it back again and has come up with the most popular posting on Dow Jones Marketwatch today. Paul minces no words, just like David Stockman:

Stockman is equally damning of the Democrats’ Keynesian policies. But what an indictment by a GOP  party insider — someone so close to the development of the Reaganomics ideology — says about America, helps all of us better understand how America’s toxic partisan-politics “holy war” is destroying not just the economy and capitalism, but the America dream. And unless this war stops soon, both parties will succeed in their collective death wish….
Stockman rushes into the ring swinging like a boxer: “If there were such a thing as Chapter 11 for politicians, the Republican push to extend the unaffordable Bush tax cuts would amount to a bankruptcy filing. The nation’s public debt … will soon reach $18 trillion.” It screams “out for austerity and sacrifice.” But instead, the GOP insists “that the nation’s wealthiest taxpayers be spared even a three-percentage-point rate increase.”

Paul Farrel examines all four points made by Republican Stockman and asks his readers not to just label Stockman just a traitor but to consider the underlying problems Stockman is citing:

there’s a depressing sense that Stockman will be dismissed as a traitor, his message lost in the 24/7 news cycle … until the final apocalyptic event, an unpredictable black swan triggers another, bigger global meltdown, followed by a long Great Depression II and a historic class war.

The article is timely because there is a huge debate going on about whether the US should do more to stimulate the economy, get rid of the unpaid for Bush tax cuts for the wealthy   or, like the British, embark on large scale and very painful austerity measures now [see one view here]. But the problem is the  austerity measures make the financial crisis even worse because they decrease wages and tax revenues while forcing cutbacks that often are unevenly applied.

And that is just what Stockman and Farrel point out. Tea Partiers and Republicans want their cake and to eat it too . Not just no tax increases but continuation of the “temporary” tax cuts for the wealthy while cutbacks in spending are targeted on the social safety net programs and not Defense or Medicare or their favorite federal aid programs or tax shelters. The problem is that the US has concentrated so much wealth in the top 20% of the population that the other 80% have only 7% of the remaining financial wealth – and so the ability of 80% of the population to endure a prolonged second recession or deflation/depression cycle is very slim indeed.
So in effect what Paul Farrel and David Stockman are saying if voters decide to kick the Congressional bums out of office they should do so in a bipartisan fashion and get rid of as many Republican incumbents as they do Democrats. With all of Congress having a 11% approval rating you would think that electors would throw the bums out of office en masses in a truly  bipartisan fashion. Yet the historical record of the past 100 years shows that there is less than a 10% turnover every election. This means the electorate hold their noses and  return, even in the worst of times, 90% of the existing Congressman and Senators every election. It seems “you get what you pay for” has a political corollary – “you get what you vote for… or don’t bother to vote for”.

Other comments on David Stockmans critique of his own GOP.
The original article by David Stockman in the NYTimes
The Big Picture – Blog that comments of financial markets agrees with Stockman
Outside the Beltway – agrees and  provides insights on the various players
BusinessWeek – backgrounds Stockman who  has had SEC charges in past 5 years
Seatlle PI – Stockman is last honest Republican
NPR – Stockman: Bush Tax Cuts Will Make U.S. Bankrupt
Barrons – sees HerbertHoover-like approach in  Stockman’s critique
SpiderLegs – best commentary on article
Aleksandreia – looks at two posts on the GOP’s stature
Bloomberg – columnist blames both political parties for  one fine mess

Curiously, there is nary a word from WSJ, Fortune, Forbes, The Financial Times, The Economist and a number of other sources one would expect to comment.