David Stockman is what’s known as a “spectacular failure”: A high flyer who climbs to great heights and then spins out of control and augers into the earth with afterburners roaring. An aspiring Olympic diver who somersaults off the 10-meter platform into an empty pool. You get the idea.
Whether he likes it or not, Stockman is intimately associated with one of 20th century America’s most influential Economic Theories That Don’t Work (ETTDW), variously known as Reaganomics, supply-side, and trickle-down. Its Four Pillars of Stupidity (a play on T. E. Lawrence’s* “Seven Pillars of Wisdom”) are (1) government austerity, (2) tax cuts, (3) deregulation, and (4) shrinking the money supply. (*A vastly smarter man than Stockman.)
He invented neither the concept nor its popular names. He wasn’t even the person who labeled it “voodoo economics”; that was done by George H. W. Bush while campaigning against Reagan for the 1980 GOP nomination. Rather, Stockman’s notoriety derives from implementing it as Reagan’s OMB director, even though he didn’t believe in it, which he made clear in his infamous Atlantic culpa mea, “The Education of David Stockman.”
Now, Stockman has published a massive tome criticizing the way we conduct government, business, and economic policy in this country. It’s roughly the size and weight of an unabridged dictionary, but much less authoritative. Titled, “The Great Deformation, The Corruption of Capitalism In America,” it’s 768 pages long (including a skeletal index; there is no bibliography, and no footnotes either), weighs 2.4 lbs. (shipping weight per Amazon.com), and consists of 100% angry rant and 0% serious scholarship.
I haven’t read it, and you shouldn’t either.
I’ve written book reviews before, but I’ve never before reviewed a book I hadn’t read. That’s considered bad form in intellectual circles, but I’m making an exception this time. I can’t possibly tolerate 700+ pages of Stockman’s adjective-laden pulpit-thumping, and I’d go crazy if I tried, and I’ll wager serious money — which is my case is 5 bucks — that you would, too.
I did check it out of the public library, after walking past it several times, and then picking it up and flipping through it and putting it back on the rack several more times. Finally, curiosity got the best of me, in the way that a rat finally goes for the cheese on the trigger of a spring trap, and after parsing a few pages and reading a number of other people’s reviews, I came to realize this book is even worse than I initially thought.
There’s something in this book to piss off nearly everyone. He doesn’t like Republicans or Democrats. He’s against corporatism and crony capitalism, but he’s also against the New Deal, Social Security and Medicare, minimum wage laws, and food stamps — he’s pretty much against everything conservatives and liberals are for, which doesn’t leave much to be for. He’s basically an economic anarchist, which these days also goes by the name “libertarian.” Fortuitously for readers, he does conveniently summarize his policy prescriptions in a numbered list at the end of the book, which allows you to see where he’s going without having to read the damn book, and I’ll tell you what those are in due course below, but bear with me for three more paragraphs of Stockman’s lack of qualifications to write books about economics or anything else.
Stockman has zero qualifications to write an encyclopedic history of U.S. economics, although that didn’t stop him from trying. We already know he doesn’t have a sensibility of finesse, so this shouldn’t surprise us. Born as an Army brat, and raised in Michigan, he graduated from a small-town high school and earned a B.A. in history from Michigan State University, which is to Michigan what Washington State University is to Washington, i.e., the state’s land-grant agricultural school. Kids who want to be farmers go there. In other words, Stockman isn’t an economist. For that matter, he isn’t a historian, either; and proper historical method is utterly lacking in this book — there’s no research, no bibliography, no footnotes, no citations to source, and — not to put too fine on a point on it — no sources. This book is merely a guy talking to himself. And the guy is nothing more than what conservatives mockingly call a “liberal arts graduate.” (I was going to write “nothing more or less” here, but stopped myself, because that phrase doesn’t feel apropos in this context.)
So how did Stockman get such a prominent role in the Reagan administration? Especially considering Reagan was so popular with conservatives that he could have hired any conservative budget director he wanted, maybe even Milton Friedman or at least one of his graduate students? And Stockman wasn’t even a Reagan supporter within the GOP; he supported John Connally in the 1980 primaries. He wormed his way into the GOP establishment by getting elected to Congress, that’s how, after climbing the bottom rungs of the career-politician ladder by working several gigs as a staff assistant, initially for Reps. Jack Kemp and John Anderson, then for the House GOP caucus. And then he attracted Reagan’s attention by sending the president-elect a memo titled, “Avoiding a GOP Economic Dunkirk.” Stockman did have a flair for showmanship. But not much talent for anything else. It can’t be said that he was a wildly successful in politics, or at OMB either. He served only 3 terms in the House before resigning to take the OMB job; and Reagan’s economic policies, under Stockman’s guidance, caused federal spending and deficits to explode.
After leaving government, Stockman tried his hand in business, and failed at that, too. First, he joined Salomon Brothers, a Wall Street investment firm, then left Salomon Brothers for Blackstone Group, then left Blackstone Group to start his own private equity firm, which under his stewardship lost hundreds of millions of its investors’ dollars. He also had a 21-month stint as CEO of a mid-sized auto components supplier that ended with the company filing bankruptcy and going out of business. Stockman settled SEC fraud charges against him by paying a $7 million fine, and also was criminally indicted for fraud, but wasn’t prosecuted. Meanwhile, he stayed in the public eye and made money by writing books, starting with one bashing his former boss Reagan that became a bestseller.
Now for Stockman’s opinions of what we need to do to prevent economic and political Armageddon (quoted here under the Fair Use Doctrine, without permission from the author or publisher):
1. “Restore banker’s bank and sound money.” This means abolish most Federal Reserve functions and reinstate the gold standard. J. P. Morgan and other bankers proposed, and Congress adopted, the Federal Reserve system after a series of financial panics, culminating in the Panic of 1907, repeatedly crushed America’s economy. Liaquat Ahamed’s Pultizer Prize-winning book, “Lords of Finance,” argues the gold standard was the primary cause of the Great Depression. (Ahamed is a Cambridge and Harvard-educated banker and author.) But don’t let historical experience stop you from promoting failed 19th century policies, David.
2. “Abolish deposit insurance and limit the Fed discount window to narrow depositories.” To make his feelings about deposit insurance crystal clear, he calls it “an abomination.” But he’s willing to replace it with a postal banking system for “blue-haired ladies and timid savers … unwilling to risk putting their savings into uninsured charter banks,” although they’ll get “a penalty interest rate … to compensate the federal government for use of its balance sheet and credit rating.” The U.S. had a postal savings system from 1911 – 1966; it appears he likes the system that existed in the U.S. before World War I, when people frequently lost their savings in banking collapses.
3. “Adopt Super Glass-Steagall II.” This might actually be popular because it would kick the Wall Street investment banks, which everyone hates, off their pedestal and make them compete like real businesses.
4. “Abolish incumbency through an omnibus amendment.” This is a radical revision of the Constitution that abolishes the electoral college, establishes a standard 6-year federal term of office applicable to the president and vice-president and both houses of Congress, and revives the idea of term limits by allowing no one to run for re-election. It also calls for public funding of campaigns, a prohibition on private campaign sepdning, and a two-month limit on campaigning. “Additionally, no former federal office holder would be allowed to lobby.” This might be popular, too, and even more so if a provision were added to enforce term limits by hanging elected office holders when their terms end. This would also prevent people like Stockman from profiting from their public service by writing books after leaving office.
5. “Require each two-year Congress to balance the budget.” Ah yes, conservatives’ old friend, the Balanced Budget Amendment. I’m not sure whether he believes in it, or threw it in to get conservative votes for the rest of his program, some of which conservatives won’t like.
6. “End macroeconomic management and separate the state and the free market.” This is the heart of Stockman’s economic philosophy, and he leaves no doubt of where he stands: “The Keynesian predicate would be abolished,” and “outcomes in terms of wealth, living standards, GDP, jobs, [etc.] … would be determined [by] the free market … if there weren’t enough jobs, wage rates would tend to fall until there were enough jobs …” — I’m sure you get the idea.
7. “Abolish social insurance, bailouts, and economic subsidies.” He repeats his demand for “the end of the Keynesian fiscal state,” which he condemns as “fiscal suicide,” then labels social insurance as “intergenerational thievery.” Skip ahead to #9 if you can’t wait to see what he proposes for capitalism’s losers.
8. “Eliminate ten major federal agencies and departments.” In his own words, abolish “much of the federal government.” The specific agencies he slates for elimination are Energy, Education, Commerce, Labor, Agriculture, HUD, Homeland Security, SBA, DOT, and Ex-Im Bank. Then he also throws in Fannie and Freddie, FHA, and “homeowner’s tax preferences and the rest of the housing goody bag,” and Amtrak subsidies and fare subsidies for public transit riders. I wonder if he knows the Department of Energy’s responsibilities include America’s nuclear weapons stockpile, and without DOE, the civilian control of these weapons would shift to the military? I’m guessing he’s not aware of this, hasn’t thought about it, and wouldn’t understand its ramifications. Maybe someone should mail him a copy of Eric Schollser’s book, “Command and Control,” which describes the military’s shocking mismanagement of nuclear weapons.
9. “Erect a sturdy cash-based means-tested safety net and abolish the minimum wage.” Stockman believes, “Outside of national defense and foreign affairs, the primary function of the federal government [should] be to maintain a means-tested safety net ….” At first blush, this sounds like support of public welfare for those capitalism can’t provide jobs for, but then he adds this is to “fulfill the humanitarian sentiments held by the electorates in modern urban-industrial societies where extended family support networks no longer exist …” suggesting he thinks not letting the unemployed starve is sentimental pap that he goes along with only to prevent revolution, and qualifies it with this: “… while strictly containing the risks of abuse and freeloading by the able-bodied and non-needy … [which] means … any citizen wanting aid from the state would be subject to a strict and intrusive means test, including … a work requirement … coupled with the abolition of the minimum wage and the scaling out of transfer payments to the working poor …” although rather than completely kill off entitlements he would convert “housing, food stamps, and Medicare and Medicaid … to cash equivalents.” I get a feeling he’s nostalgic for the time when most people lived on farms and grew their own food, and therefore didn’t need to be bailed out whenever capitalism suffered one of its periodic collapses, which of course refers to the society that existed in the U.S. until about 1900 or a little earlier. He seems to share political conservatives’ strong affection for the 19th century. I wonder if it has dawned on him that “strict and intrusive” means-testing would require a huge government bureaucracy to carry out?
10. “Abolish health ‘insurance’ in all its forms.” By this he doesn’t mean eliminating private health insurance; he means replacing Medicare and Medicaid with cash transfer payments, repealing Obamacare, and eliminating the tax break for employer-provided health insurance. But he would make “one necessary concession to socialism” — “a system of federally licensed catastrophic insurance funds [to] cover the means-tested safety-net population … in return for mandatory premiums … withheld from” their cash transfer payments. Look, something either works or doesn’t work, and if he really believes free markets work for health care, then why is a concession to “socialism” necessary? The answer, of course, is to plug a hole caused by market failure.
11. “Replace the warfare state with genuine national defense.” This is followed by some double-talk that sounds like he thinks having a stripped-down military like we did in the 1930s before Pearl Harbor was a good idea and we should do that again. This becomes explicit when he says, “In other words, the nation’s conventional forces would be reduced by perhaps two-thirds and be used solely to shield the continent from conventional military attack,” coupled with “massive nuclear retaliation” against any nuclear attacker. This is classic isolationism with a vengeance, a policy that failed miserably in the interval between the world wars. It’s also an extremely dangerous defense strategy; in the nuclear age, we built large conventional forces precisely so we don’t have to use nukes to defend ourselves. That was pretty much our strategic situation in the early years of the Cold War, and it scared the hell out of everyone who studied it. Stockman doesn’t know how to be afraid, our when to be afraid. Another reason to mail a copy of Schlosser’s book to him, although I fear he wouldn’t read it.
12. “Impose a 30 percent wealth tax; pay down the national debt to 30 percent of GDP.” He refers again to “Keynesian foolishness;” I get that he really hates Keynesianism. He also refers to “honest debt markets,” which seems to imply there’s something dishonest about public debt, even though the government has never defaulted and lots of corporate and individual borrowers have. This turns the definition of dishonesty upside down. But, in a burst of populism, he would make the rich pay off the national debt by confiscating a hefty portion of their wealth. I suspect this is going to look like socialism to a lot of conservations.
13. “Repeal the Sixteenth Amendment; feed the beast with universal taxes on consumption.” Replacing the income tax with a sales tax, value added tax, or the euphemistically labelled Fair Tax is, like abolishing the Federal Reserve and reinstating the gold standard, another conservative wet dream. Those of us living in Washington State have personal experience of a tax regime consisting of no income tax and heavy reliance on sales taxes: In percentage terms, the poor are taxed six times as much as the rich, while revenues fall short of what’s needed to fund schools and other public services. It’s the worst tax system among the 50 states, and going nationwide with it is incomprehensible.
Perhaps it’s just a coincidence that Stockman’s numbered proposals add up to Unlucky 13, but I wonder if that isn’t a sign (or a jinx, take your pick). Or maybe the book is a giant put-on and this is his way of telling us he’s pulling our leg. But I doubt it, I don’t think he’s into subtlety, or is skilled at literary subtlety. I think he means what he says. And that makes him a crank. I have a policy against reading books written by cranks. It’s a waste of time because I won’t learn anything, and I don’t like indulging people who deserve to be ignored.
Now let’s look at what other reviewers say about this book. For this purpose, I’ll use Amazon.com (quoted under Fair Use). This book has accumulated 312 Amazon reviews to date, and I obviously can’t quote from them all, so I’m exercising my editorial prerogative to paste in selective quotes that reflect my own opinion of the book. Needless to say, I’m grateful to these people for reading it so I won’t have to. If you want to peruse other reviews, you’re free to go to Amazon.com’s website and do so.
“He describes complex decisions and complex historical events in extremely simplistic terms.”
“It was simply painful to read.”
“I struggled through sixty pages before I asked myself, ‘is it me, or does this suck?'”
“Advice on how to save dollars, from the man who lost four billion of them.”
“The deficit doubled under his management, but now he is an expert on how to solve our financial problems.”
“Conveniently omitted are all facts which don’t support Stockman’s political agenda.”
“I found the remarks and conclusions of the author meaningless.”
“What’s scary is that many silly people take this book seriously.”
“Remind me where and when Stockman has been right and why I should listen to anything he has to say.”
“The book is so wildly incoherent that it’s hard to know where to start.”
“It seems the greatest deformation of the economy was that Stockman’s publisher fired all the editors.”
“Badly written, badly organized, unreadable, and I am returning it for a refund.”
“I would not recommend it to anyone.”
“I’m not sure I’ll ever finish it. Not sure I’ll even try.”
“It goes on and on and on and on, never making a concise point.”
“Comes across as an arrogant, narcissistic twit who believes no one but he has a real grasp of proper monetary policy.”
“Not intellectually honest.”
“Unfortunately, I waited to use this product until well past the 30 day refund period.”
“The book is disorganized like it was written by a madman.”
“I did not feel I was giving up anything when I quit reading this book.”
“No theme or organization.”
“A compilation of complaints from a failed politician, failed Federal employee, failed businessman, and now failed author.”
“I got it for a gift and the person I got it for did not want to read it. Now I need to return it.”
If you ask me, the people have spoken.