The Reckoning

David Stockman

David Stockman (Image by The Aspen Institute via Flickr)

David Stockman appeared on The Colbert Report last night. You may recall Stockman is the former budget director from the Reagan cabinet (also mentioned in Max’s recent article). Stockman is one of many Republicans who are coming out of the closet to protest the current political strategy of the Republican Party. Several former Republican Secretaries of State are going on record objecting to using the START treaty as a bargaining tool. Even some current Republican members of Congress are voicing objections.

Stockman stated on Colbert that we are “burying our children and grandchildren in debt”, in an apparent reversal on trickle down economics. Colbert said it seemed like he was ‘slapping himself in the face’, to which Stockman replied, “I’m trying to sober up” (audience applause).

Stockman went on to proclaim that we’ve had a giant frat party for the last thirty years and the day of reckoning is at hand. Colbert asked him how he would fix it and he replied that one of the ways would be to ‘cut the defense budget’. Colbert responded by saying, “Why not hand the keys to al Queda, put lady liberty in a burka, and ban bacon?”

Stockman countered that we have an annual $800 billion defense budget of which only a small percent goes towards finding Osama bin Laden. This is true. We spend a great deal of taxpayer dollars on weapons systems that are becoming ineffective. We currently have twelve aircraft carriers (Not sure if this includes the newly christened George H. W. Bush). Each of these requires 5,000 people; mostly teenagers, to operate. We have contracts for super cool F-35 fighters and Osprey helicopters; most of which are inefective in modern warfare. How much of this is necessary? The military industrial complex that Dwight Eisenhower warned us about is in full swing.

Stockman went on to say that Simpson-Bowles is a well intentioned pin-prick in solving the problem.

It’s telling when even the Republicans of days gone by are admonishing the current regime for their misbehaviour. Perhaps they should take notice that they are putting the country in danger by playing partisan politics.


About Mr. Universe

Mr. Universe is a musician/songwriter and an ex-patriot of the south. He currently lives and teaches at a University in the Pacific Northwest. He is a long distance hiker who has hiked the Appalachian Trail and the Pacific Crest Trail. He is also an author and woodworker. An outspoken political voice, he takes a decidedly liberal stance in politics.
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23 Responses to The Reckoning

  1. Max aka Birdpilot says:

    Stockman is reiterating “The Law of Diminishing Returns”.

    While the tax cuts of the 80’s may have been of some help, possibly of reversing the recession of ’82, they also were offset by several Reagan tax INCREASES. Overall, though, the tax burden shifted AWAY from the progressive tax code model this country had had for over 60 years. But the song remained the same.

    GHW Bush (remember, HE called Reagan’s plan “voodoo economics”) set the stage for the advances of the 90’s by breaking his “Read my lips . . .” pledge. The GOPers crucified him for doing so. The country saw it’s greatest economic expansion in over 30 years with the Bush/Clinton pragmatic economic policies. And the song remained the same.

    W comes on the scene singing the same old song, cut taxes even more, enters two wars without paying for the for the first time in this country’s HISTORY, and turns a $200Billion annual surplus into, eventually a Trillion + deficit in eight short years. And the song remains the same.

    Stockman is saying that it’s time to turn the page in the hymnbook! Diminishing returns no longer help even marginally. I DO like his call on “trickle-down”.

    What has trickled down to the middle classes, and our children and grandchildren is NOT prosperity.

    It’s urine.

  2. Mr. Universe says:

    @Max

    Ouch. Truth hurts.

  3. Bart DePalma says:

    Mr. U:

    There is no current regime of GOP government for Stockman to admonish. Based on your favorable impression of Stockman, however, I presume you will be supporting the new GOP House’s efforts in 2011 to end the giant frat party.

    Color me skeptical on that account.

  4. Mr. Universe says:

    @Bart

    I’m not a fan of Stockman. It’s just an indicator that the ship is way off course and that sharper minds are acknoweldging it (why is there no spell check?!? crap,this is my blog).

    I really don’t have to colour you skeptical. I’ve always known that about you.

  5. Max aka Birdpilot says:

    Hell, y’all, even Arthur Laffer, inventor of that famous curve(ball), admits he hasn’t a CLUE where ON HIS OWN curve(ball) federal taxes lay!

  6. Max aka Birdpilot says:

    Hmmm. Something we seem to be NOT getting, even though it’s been pointed out on several occasions, is that government revenues have NOT, more than marginally, DECREASED as a result of so-called “tax cuts”. Decreases have a MUCH larger correlation with a down economy.

    Tax revenues thus remain a (relative) constant percent of the GDP.

    What IS CHANGING are the SOURCES of that revenue. What has actually been happening is a REDISTRIBUTION of the source of revenue DOWNWARD from upper incomes and corporation to the middle class in violation of the historical progressive tax system we’ve had since the passage of the 16th amendment. Thus: “trickle down”.

    Any takers on this?

  7. Max aka Birdpilot says:

    Bart said: “There is no current regime of GOP government for Stockman to admonish

    Actually it’s called the 112th Congress, House of Representatives, it’s Speaker, and the Minority Leadership of the Senate.

    Wrong again, Bart.

    Ideological ass.

  8. mclever says:

    It always fascinates me how two people can read the exact same statements from someone and come to completely contradictory understandings.

    Case in point: The different understanding of what Mr. Stockman means about ending the giant frat party as expressed by Bart and Mr. U.

    Based on Mr. U’s interpretation, Mr. Stockman apparently doesn’t think the currently proposed Republican actions will help put an end to the “giant frat party.” His interpretation has Mr. Stockman admonishing the Republicans regarding their alleged plans for tax cuts and other irresponsible actions.

    Based on Mr. DePalma’s interpretation, he appears to think that Mr. Stockman must be supportive of the Republican plans.

    Obviously, both cannot be true.

  9. Max aka Birdpilot says:

    mclever said: “Based on Mr. U’s interpretation, Mr. Stockman apparently doesn’t think the currently proposed Republican actions will help put an end to the “giant frat party.” His interpretation has Mr. Stockman admonishing the Republicans regarding their alleged plans for tax cuts and other irresponsible actions.

    Based on Mr. DePalma’s interpretation, he appears to think that Mr. Stockman must be supportive of the Republican plans.

    Obviously, both cannot be true.

    I would NOT bet on the ideological ass, Mr. DePalma, as burros are good for hauling but not so well known for their being insightful!

  10. mclever says:

    @ Max aka Birdpilot

    What IS CHANGING are the SOURCES of that revenue. What has actually been happening is a REDISTRIBUTION of the source of revenue DOWNWARD from upper incomes and corporation to the middle class in violation of the historical progressive tax system we’ve had since the passage of the 16th amendment. Thus: “trickle down”.

    Any takers on this?

    Astute observation. You’ve just put into words something I’ve unsuccessfully tried to express on several occasions.

    As you note, because the tax revenues as a percentage of GDP appear to remain relatively constant, the effect of changing marginal rates primarily serves to divvy up where the government’s money will come from. The counter-argument will be that everyone should pay an equal share, and that it’s unfair to “burden” the wealthy disproportionately.

    Historically, taxes were primarily paid by the wealthy, because they are arguably gaining the most from the economic and social system. (If they weren’t, then they wouldn’t be wealthy…) They also make the most use of the system, so they pay the most for the privilege. Furthermore, based on Michael’s recent analysis comparing tax rates to unemployment, there seem to be sound reasons for maintaining a progressive tax structure if one wants to maintain a thriving middle-class.

  11. Max,

    What IS CHANGING are the SOURCES of that revenue. What has actually been happening is a REDISTRIBUTION of the source of revenue DOWNWARD from upper incomes and corporation to the middle class in violation of the historical progressive tax system we’ve had since the passage of the 16th amendment. Thus: “trickle down”.

    Any takers on this?

    I already started on this as an analysis for a future article. I won’t say too much yet, because I’m still in the early phases, but I will say that the results I’ve seen thus far are fascinating.

  12. shiloh says:

    Even though Bart is not religious in any way, shape or form ~ he staunchly adheres to the gospel of st. ronnie. But unlike Reagan, Bart was born a conservative and sticks to his limbaugh daily talkin’ pts. w/out exception!

    So it shall be written, so it shall be done!

    Again death, taxes, Bartles microscopic world view ~ a certain symmetry, eh.

    Praise the Lord! and pass the collection basket …

  13. filistro says:

    @shiloh… But unlike Reagan, Bart was born a conservative and sticks to his limbaugh daily talkin’ pts. w/out exception!

    Interesting observation. I do believe there are people who are “born conservative.” I’m not entirely sure Bart is one of them, but am open to argument.

    Look at the “quote of the week” up there at the top. What category do you think YOU fall into… and which one is Bart? Do we think Bart would “change his principles for the sake of his party”… or vice-versa?

  14. Max aka Birdpilot says:

    Michael, it’ll be interesting to see the results of your research.

    Historically, the 16th was passed hard on the heals of the REPUBLICAN progressive movement; the time of the trustbusting, regulation of the food industry and the drug industry. A period when it was determined that the upper class and the industrial captains COULD NOT be trusted to do what was best for the country, only for themselves. That it WAS in the BEST INTERESTS of the COUNTRY AS A WHOLE to regulate and tax corporations and to tax incomes at a higher rate as income levels increased because those elements of American society had the greatest leverage on the country as well as taking the greatest advantage.

    The Congresses, 60th, 61st (which passed the 16th Amendment), were BOTH REPUBLICAN dominated, the 62nd had a Democratic House and GOP Senate, all with a GOP President.

    Guess they were ALL RINO’s

  15. Max,

    Guess they were ALL RINO’s

    Sure, but by today’s standards most of the Democrats were DINOs, too. The Democrats were still the party of Jim Crow back then.

  16. mclever says:

    You make a great point, Max, that the progressive tax structure and early business regulations were initially instituted by Republican progressives. 🙂

    However, I think it’s worth noting that political “progressive” back then meant something different than “progressive” means today. While the tax policies those old Republicans introduced were undoubtedly progressive by definition, those “RINOs” wouldn’t recognize the socially liberal positions of today’s progressives.

    Today, “Progressive” is used synonymously with “Liberal” or even “Very Liberal” on both social and fiscal issues. But back then, the “Progressives” were considered fiscal *moderates*. They sought a third way that was neither libertarian capitalism nor communist socialism and mostly ignored social issues. I think Nixon’s pragmatic policies were the closest we’ve seen to a resurgence of the old-school progressives, though the DLC’s semi-pro-business approach isn’t too far off, either, and they are often derided by today’s self-proclaimed progressives.

    (Whenever talking about political history with my spouse’s colleagues, one must be clear whether using “progressive” in today’s terms or in historical context, so please forgive me if this comes across as nitpicking. I’ve been harangued by pedantic professors discoursing the need for precision in language on several occasions…)

  17. dcpetterson says:

    On the idea of the SOURCE of revenue changing where as tax receipts as a % of GDP remains fairly constant —

    If you shift the tax burden onto consumers, they have less money with which to consume, and this would tend to drive down demand, and thus to harm the economy.

    Investments, of course, are not taxed until the become profits. By shifting the tax burden toward the “investor class”, you encourage them to re-invest rather than to take profits. This increases economic activity.

    A combination of lowering taxes paid by consumers, and raising taxes on after-investment profits, would be a powerful boost to the economy. (Of course, this also assumes low sales taxes and low “user fees” of various kinds as paid by consumers.)

    Thus: strongly progressive taxes are good. Strongly regressive taxes (or even flat taxes) are bad.

  18. Max aka Birdpilot says:

    mclever, thanks for your clarification. While I understand well the difference in the terminology of a hundred years ago vs. today, many may not.

    “Progressive” of yesteryear had it’s roots in “progress” from the old “bad” system to a new better one.

  19. mclever says:

    @dcpetterson,

    You make excellent observations regarding the shifting of the tax burden and its likely result on the economy.

    A combination of lowering taxes paid by consumers, and raising taxes on after-investment profits, would be a powerful boost to the economy. (Of course, this also assumes low sales taxes and low “user fees” of various kinds as paid by consumers.)

    I think part of the reason the “lower taxes on rich = good” concept gets such traction with voters is because most voters fall in the consumer class, where shifting their tax rates has a tangible impact on their personal budget. A relatively small increase in taxes means that Jenny doesn’t get dance lessons or the premium cable gets canceled. Because their income is dependent upon what the boss is willing to pay, they can’t readily adjust their income to compensate for higher taxes, other than possibly taking on a new job or doing free-lance work.

    However, for those in the wealthier business-ownership class and/or investor class, the decision to take income is often in their own control. The amount of salary a business owner chooses to pay herself is a balance between her business’s profits, the resulting business tax burden, her personal income needs, and compensating for the tax burden there, too. If taxes get raised, then the business owner will probably adjust her salary accordingly, possibly even declining a salary increase to funnel more money back into growing the business, because that might be seen as a better investment to defer the taxes. I’m not trying to say this always happens, the point is just that she has options that aren’t available to the typical middle-class consumer, and that her exercise of those choices may in fact have a positive economic impact in the face of higher taxes.

    Similarly, someone in the investor class may draw a salary from a corporation or two, but the majority of their income often comes from investment income, which as you note doesn’t get taxed until that income is realized, i.e. sold. Those sales are often happening as money gets moved around, regardless of whether the investor actually withdraws any cash in the transaction, so there’s always a certain amount of “activity tax” being paid. Dividends are part of the income equation, too, but they are taxed separately and may get reinvested, depending on what seems to be the best economic option for the investor. Someone at this level of wealth and income often has great flexibility in both the amount and nature of the income they choose to take out of their investments each year. As you astutely note, if the marginal taxes go up, then that provides some incentive to defer the income, thus keeping more cash in the investment economy. The idea that raising taxes on wealthy investors means that they keep the money invested longer may seem counter-intuitive to those in the consumer class where a few dollars on each paycheck matters.

  20. mclever says:

    Max, I figured you knew the difference. 🙂

  21. shiloh says:

    Ideology aside, Bart would turn into Michael Steele if it meant his beloved teabaggers would win every election, the bottom line.

    solo estoy diciendo

    Winning is the only acceptable outcome for wingers like Bartles and when a Dem like say, Barack Hussein Obama is elected the 44th President of the United States of America! 🙂 the conservative whining is non-stop …

    Interesting as Dem politicians become Rep and vice-versa so easily, mostly for political expediency ~ which is why I determined in the early ’70s ain’t much difference between Dems/Reps once they get elected as most are only interested in getting re-elected and making a lot of $$$.

    palin being the exception as she quit to make a lot of $$$. America, what a country!

    Liberal Reps, conservative Dems ~ it’s all so much nonsense as Rome burns …

    >

    hmm, back to the future and damn you Nate for deleting your comment section(s).

    >

    Reasons for the Fall of the Roman Empire:

    There are adherents to single factors, but more people think a combination of such factors as Christianity, decadence, lead, monetary trouble, and military problems caused the Fall of Rome. Imperial incompetence and chance could be added to the list. Even the rise of Islam is proposed as the reason for Rome’s fall, by some who think the Fall of Rome happened at Constantinople in A.D. 1453.

    1. Christianity

    Over time, Church leaders became influential and took away power from the emperor. Christian beliefs conflicted with the working of empire.

    2. Barbarians and Vandals

    Rome embraced the barbarians but also lost territory and revenue to them, especially in Carthaginian Africa, which they lost to the Vandals.

    3. Decay

    ie lack of military discipline.

    4. Inflation

    By the time of Claudius II Gothicus (268-270 A.D.) the amount of silver in a supposedly 100% silver denarius was only .02%. This led to or was severe inflation, depending on how you define inflation.

    5. Lead

    The presence of lead in the drinking water leached in from the water pipes, from glazes, and food preparation could have contributed to heavy metal poisoning. Lead was associated with contraception and recognized as a deadly poison.

    6. Economic

    * Poor management,
    * The dole (bread and circuses), and
    * Hoarding.

    Also: Environmental change and decaying infrastructure.

    7. Division of the Empire

    The Roman Empire was split not just geographically, but culturally, with a Latin Empire and a Greek one, the latter of which may have survived because it had most of the population, a better military, more money, and better rule.

    8. Hoarding and Deficit

    Causes of the fall of Rome include economic decay through hoarding of bullion, barbarian looting of the treasury, and trade deficit.
    ~~~~~~~~~~

    hmm, sounds vaguely similar to another country I’m familiar with …

    Another tidbit: the average CEO earned about eight times the salary of his average employee a century ago, but earns more than 300 times his average employee’s wages now

    Greed is good ~ Gordon Gekko

  22. Bartbuster says:

    Do we think Bart would “change his principles for the sake of his party”… or vice-versa?

    Blankshot Bart will say just about anything to defend GOP actions and control.

  23. dcpetterson says:

    @mclever

    Your thoughts on invest vs. income, and moving it around, and deferring income, and all that compared to the situation of everyone who doesn’t live in that tax bracket — exactly what I wanted to get at. You provided excellent details. Yes, for exactly the reasons you describe, and in the ways to which you allude, increasing income taxes on the wealthy can lead to increased investment, and more private business activity, because some level of income is deferred.

    Thank you for that very clear description!

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