(New America Foundation/Flickr)

In his new book, “The Great Deformation,” former Reagan budget director David Stockman says the federal budget has turned into a fiscal “doomsday machine.” If the government doesn’t stop “cooking the books” and get its debt under control, Stockman predicts a collapse of the U.S. economy. We’ll talk to Stockman about his book and get his take on President Obama’s proposed 2014 budget, introduced on Wednesday.

Guests:
David Stockman, director of the Office of Management and Budget in the Reagan Administration, former U.S. congressman and author of "The Great Deformation: The Corruption of Capitalism in America"

  • Livegreen

    I agree with Stockman about Wall Street vs Main St.

    However on deficitis it is tiring to hear another conservative argue that deficits during a recession are bad. (NPR ENOUGH ALREADY).

    Does Mr. Stockman distinguish between printing money during a boom and a recession? Or is it all the same for him?

    If its all the same then he is saying Keynes, FDR, Bernake, Clinton & Paul Krugman are wrong while Hoover, Dick Cheney and Alan Greenspan were right?

    • Chris OConnell

      There was a caller who talked about Stockman on NPR and I just want to take this opportunity to say: This is not NPR!

      KQED carries NPR but it also has other programming unrelated to NPR. Like this program. Not all public radio is NPR, and thank goodness because they are getting lamer and lamer over there.

    • menloman

      You haven’t considered that they’re all wrong. Hoover raised tariffs during the recession, Cheney’s war was a disaster for the economy, Greenspan was a supporter of the gold standard…then assumed he was smarter than the market.

  • Guest

    I have been waiting a long, long time to hear the words you have said on this program today: “If a bank is too big to fail it *is* too big exist, and there is no political will to break them up.” Thank you, David Stockman, for writing and saying what needs to be said. I particularly appreciate how you balance the discourse of welfare with that of warfare. Question: is your book premised on the notion that Capitalism has been corrupted, or that Capitalism is itself corrupting? This is an important distinction. (It seems to me that the “deformation” is the logical result of Capitalism.)

  • mckemper

    One reason the war machine is so massive and seemingly invulnerable to budget cuts is that without the military and its attendant industries, the unemployment situation would be much worse. We’re stuck!

    • menloman

      Damn lucky to have the war machine eh?

      • mckemper

        I wouldn’t say lucky. Maybe damned though.

  • Storm

    So what will the Day of Reckoning look like? And when does Mr. Stockman think it will arrive?

    I think most listeners have no idea what a collaps of the U.S. economy might look like, and what it will mean in their personal lives.

    It would help the public to take Mr. Stockman’s concerns more seriously if he might give a timeline with symptoms of coming collapse that they might recognize as fulfilling his concerns.

    • Guest

      Look out the window.

    • Chemist150

      165% total debt to GDP (that includes the money borrowed from Social Security and not simply the federal debt which many politicians use and say it’s at a fine level).

    • menloman

      Defaulting on debt is not an option. The Fed intends to pay off today’s dollars with tomorrow’s weaker dollars by flooding the market with more paper money. As a result your savings will be worth less. The only party that is able to pay American’s debt is Americans.

  • Mark

    Mr Stockman is absolutely correct. He needs to focus more on the nexus of central bank, finance and political symbiosis that is destroying this country. The MIC is definitely part of this but only vis-a-vis protecting the oil interests that back our petro-dollar status that takes us back full circle to the central bank.

    Neo-Keynesians fail to understand the destruction of the ballooning debt and the destruction that it does to the economy. We are too deep in the hole to keep digging and the risk is that the hole collapses on us should our debtors call back their funds or the currency fails due to unmitigated money printing.

  • Gary Kay

    No real surprise here. It was known over 2000 years ago that ” the love of money is the root of all evil.” Money determines what does or does not get done in this world. Money is power and power is money. And the lust for power is the universal value. We were raised to believe that liberty was the universal value, but the record of history does not prove that belief.

  • Chemist150

    Great guest.

  • Animalia

    Does Mr. Stockman have any suggestions as to how to get politicians to respond to the people’s needs instead of Wall Street and Corporations? How to we change funding in politics when the fox is watching the hen house?

    • Chemist150

      When you go against the status quo, you get pushed out and end up with a reputation like Jimmy Carter.

  • He is right about the problems of the free market. This is also a big
    reason for the federal debit and deficit. Lobbying and money in politics
    skews the federal government from getting free market pricing. Big bank
    bailout, defense, medical insurance, medical market (example: free
    market pricing among hospitals?) and extended copyright and patent
    abuse. It is a big spiral.

  • Sam

    We have no choice in our 401Ks but to be invested in stock maekets. What does Mr. Stockman sugest we do?

    • menloman

      Mr. Stockman advises putting your money in hard goods–gold, art works, real estate, civil war memorabilia, newspapers (kidding about that one).

  • erictremont

    Mr. Stockman behaved very honorably when he spoke out against deficit spending in 1985 while the economy was in pretty good shape, unlike other Republicans who only started worrying about the deficit until after Reagan left office.

  • trite

    Please, Michael Krasny, let Mr. Stockman finish his sentences. You continually cut him off. He was unable to finish his answer to the very interesting question posed by a caller about what to do with our many national assets in the world today. Keep your questions until the man has finished his point.

  • please ask per public bank like North Dakota has.

  • Gary Kay

    I didn’t know I was an affluent retiree! Can Stockman tell me where my money is? I can’t find it!

  • runner_8064@yahoo.com

    Mr Stockman torpedoes his credibility when he says the $2.7 T accumulated in US Treasury Bonds in the Social Security Trust fund isn’t real money, doesn’t exist. It’s a undeniable fact that the trust fund has $2.7T more in revenue (mostly from payroll taxes) than it has paid out in benefits. That’s simple arithmetic and cannot be denied. So where exactly would Mr Stockman have put the money if he were the trustee? If not in ultra-secure US Treasury Bonds, then would he have stacked $100 bills in a warehouse somewhere?

    • erictremont

      The Social Security trust fund is essentially a bunch of IOUs, i.e., the fund loans money to the rest of the Federal Government, which is then obligated to pay the fund back with interest. Since the Federal government is running a deficit, at some point it will have to raise taxes and/or cut spending in other programs in order to generate the funds to pay back the Social Security trust fund.

      • runner_8065@yahoo.com

        Maybe you don’t have a grasp on the meaning of the term “money”. “Money” is an IOU. Have you ever taken Economics 101? Do you think happens when you deposit $100 into your bank account, then withdraw it a year later, that it is the same $100? What do you think the bank has been doing with it for the year, holding it in their vault waiting for you to come get it? They spent it. They loaned it out.

        The SS Trust fund is indeed held in $2.7 T of IOUs. That’s what US Treasury Bonds — or any of the other investment bonds — are defined as: IOUs. It’s the the same Treasury Bonds that China, Europe, and many private citizens hold, and all are nothing but interest paying IOUs.

        The trust fund invested in the treasury bonds with the excess FICA it received over the past 40 years, and expects — the same as anybody who deposits money to their bank — to be paid pack, since the Bonds are backed by the full faith and credit of the US of America. If the USA doesn’t pay on the Bonds when they come due, the USA would be in default, and China, Europe, and private citizens holding US Treasury Bonds wouldn’t be paid back either. That’s a bigger problem than SS.

        BTW, Treasury Bonds are– excepting a few details — are exactly the same thing as Federal Reserve Notes, the cash in your pocket, all backed by the faith and credit of the USA, and all Federal Reserve notes — the $5 bill in your wallet, etc — are all IOUs.

        • erictremont

          I agree with you 100%, the IOUs must be paid back. I never suggested they would not be paid back. Nothing you’ve said refutes my basic point, that the Federal Government must eventually raise additional revenues and/or cut other programs in order to pay back those IOUs.

    • And virtually all of that 2.7T in excess FICA taxes have already been spent by the Congress. There is NO Trust Fund. That went bye-bye decades ago when the Congress decided to tap into it on a regular basis. Whatever was there is almost all gone (last I heard your most recent FICA tax payment goes into a benefit check in about 6 weeks).

      The only “trust” is whether you trust the Congress to pay back what it took.

  • Chris OConnell

    Good show. I like David Stockman in the same way I like Ron Paul. I don’t agree with them on some very large issues but I LIKE them. They have a real honesty and integrity and bring a fresh analysis. And I respect them unlike most Republicans who these days can hardly speak one complete sentence that jibes with my understanding of reality. Yes, it’s that bad.

    I object to Stockman’s take on the Social Security issue. Beyond the trust funds – and it is extremely unfair to insist it is a fiction even if it has become an accounting gimmick – the social security system is far from insolvent. Even without the trust fund, SS can pay 75% for the next 50 years. And a few little reforms can go a long way to do much better than that.

    One simple and obvious reform (thus impossible due to Republicans) is to have the social security tax apply to all payroll income, not just the first 107K or whatever it is now. That goes almost all the way to solving any problems with Social Security. Also, it is annoying that Mitt Romney doesn’t pay Social Security taxes on his $21 million income when it hits me for about 15% (including Medicare and employer contribution).

    It is quite galling to have the big Bush tax cuts, a Wall Street driven economic crisis, our foreign entanglements and ridiculous military spending lead us into fiscal disaster and the solution becomes to cut Social Security. That’s the problem. Social Security needs some tweaks. But that is on its own. For it to be tied into all of our other economic problems like the debt ceiling, passing a budget, etc. is wrong.

    • averros_ibn_rushd

      Social Security funds are all in Treasury bills – i.e. the IOUs from the bankrupt government. When more money were coming into SS than flowed out this was no problem. Now, Treasury or Fed have to return money to S.S. by buying back T-bills. If US govt defaults, the T-bills will lose value completely, and so will the whole S.S. fund. And, no, tweaks won’t save it: the piggy bank is full of promises which are impossible to keep.

      • No, the SS Trust Fund is not held in T-Bills, it’s held on the Federal equivalent of Post-It notes. They’re financially worthless scraps of paper amounting to nothing more than a promise by the Congress to borrow the money.

      • Chris OConnell

        You missed my whole point, Sherlock! But that’s OK, I am missing your point, too.

  • skywalker

    Both stock market and housing are rising high like tsunami in tandem. During 2007 crisis, only housing market was flying high.

    Stay away from shoreline or stay in the ocean. You don’t want feel the impact of double tsunami.

    Stay away = move to Canada, Australia, new Zealand
    Stay in the ocean = cash under mattress

  • cooper29

    If your are surprised by Mr Stockman’s truth telling, then check out Paul Craig Roberts (PaulCraigRoberts.org) who served in Treasury under Reagan and is considered one of the co-founders of Reaganomics. He regularly takes our government to the proverbial woodshed. He’s unabashed and much more interesting than Mr Stockman. Are you listening Krasny???

  • Al Gamow

    Stockman is tilting at windmills. Any “K Street” lobbyist who happened to read or listen to Stockman’s views must have shrugged it off and continued with their business and politics as usual. Our political system is structured to prevent almost all of Stockman’s changes from happening.

  • kristie dunham

    We are experiencing tyranny of the minority, I really like what he has to say.

  • menloman

    John Maynard Keynes got us back on the gold standard at Bretton Woods, Richard Milhous Nixon got us off the gold standard. When the US couldn’t come up with enough gold for England when they asked to have their holdings in greenbacks paid off Nixon defaulted on the promise. He said it was temporary. Now is the time to make good on that promise. Humans will always act irrationally. Only a limited asset such as gold restrains runaway spending. Obama is right, we need to raise taxes and cut spending. However, he doesn’t mean raise taxes on everyone and he isn’t really interested in cutting anything.

Sponsored by

Become a KQED sponsor