by David Stockman, David Stockman’s Contra Corner:
I am in the throes of finishing a book on the upheaval represented by the Trump candidacy and movement. It is an exploration of how 30 years of Bubble Finance policies at the Fed, feckless interventions abroad and mushrooming Big government and debt at home have brought America to its current ruinous condition.
It also delves into the good and bad of the Trump campaign and platform and outlines a more consistent way forward based on free markets, fiscal rectitude, sound money, constitutional liberty, non-intervention abroad, minimalist government at home and decentralized political rule.
In order to complete the manuscript on a timely basis, I will not be doing daily posts for the next week or two. Instead, I will post excerpts from the book that crystalize its key themes and which also relate to the on-going gong show in the presidential campaigns and in the financial and economic arenas. Another of these is included below.
I am also working with my partners at Agora Financial on a new version of Contra Corner. More information on that will be coming later this month.
……In the improbable candidacy of Donald Trump, the Republican Party got what it deserved. After all, its job in the context of American political democracy is to function as the nation’s fiscal guardian. Yet that role hardly fits the GOP’s new presidential nominee and erstwhile constructor of hotels and casinos, who now promises to build the greatest ever walls, roads, bridges, military and other accoutrements of national greatness.
But then again, the GOP has been derelict on the fiscal front for most of the last for 35 years . Instead, it has become a gang of neocons, social cons, tax cons and just cons. Perhaps Trump is merely the ultimate expression of the latter.
The first two of these contemporary GOP factions—the neocons and the social cons— aggrandize the size and role of the state. This extends from the uninvited policing of the worlds’ neighborhoods and nations to the unjust intrusion into domestic family, religious and social life.
The “tax cons” correctly recognize that private enterprise, not the state, generates prosperity and wealth and that tax barriers and disincentives to production, investment and work should be lowered whenever possible. But they fail to heed the great Dwight D. Eisenhower’s fundamental rule for fiscal governance now that the cat of Big Government is out of the bag.
Namely, that tax cuts must be earned with off-setting retrenchment of the spending and entitlement accounts. That’s how Ike balanced the budget several times during his eight year tenure, even as he struggled to reduce the military budget by 33% in real terms and chisel away at the economically stifling edifice of the Roosevelt/Truman war taxes.
The GOP’s latter day supply siders, unfortunately, did the opposite——especially during the era of Republican rule under George Dubya Bush . The “tax cons” joined hands with the neocons to protect and enlarge the Reagan Warfare State budget, expanding its present day purchasing power to more than twice what General Eisenhower thought was adequate at the very peak of the Cold War. At the same time, they slashed the revenue base by nearly 4% of GDP with two giant unearned tax cuts.
So doing, they replicated the fiscal betrayal of the Reagan years with even less justification. Indeed, rather than pretending as did the Gipper that deficits would eventually go away owing to “growth”, the tax cons of the Dick Cheney schism militantly proclaimed they didn’t even matter.
In this context, the balance of rank and file Congressional Republicans morphed into “just cons”.
That is, they settled into the business of harvesting campaign loot from the K-Street lobbies and the endless racketeering enterprises of the Imperial City. And especially after the Citizens United decision opened the floodgates, the Congressional GOP became a pure fund-raising machine that happened to dispense talking points favored by the neocons, social cons and tax cons—when, as and if convenient.
Good Riddance To Johnny Lawnchair
And that gets us to the startling mid-term upheaval in the House GOP leadership last fall. Except that “leadership” is hardly the word for the Speakership of the feckless John Boehner or his replacement by the equally spineless Congressman Paul Ryan.
As we will document below, under the faithless leadership of Boehner and Ryan the large GOP House majority has been turned into a dysfunctional, squabbling gang. Notwithstanding the 2010 election’s tea party sweep, the House GOP has accomplished nothing in behalf of free enterprise, sound money and small government.
But worse still, it has utterly betrayed its core historical responsibility to defend the nation’s fiscal solvency. On that score, its record is so abysmal that it might as well embrace the budgetary follies that Trump has so far managed to enumerate—- for all the difference it would make.
As we showed in Chapter 9, the hoary excuse that a divided Senate and hostile Obama White House prevented the GOP House of Representatives from taking meaningful action on the fiscal front doesn’t wash. The House GOP had a huge lever called the “debt ceiling” that time and again it surrendered with hardly a fight.
The fact is, had the House GOP leadership held fast and refused to raise the debt ceiling at $14.3 trillion way back in August 2011, and especially on the heels of its tea party election sweep, it would have forced the unthinkable on the Imperial City. And that would have made all the difference.
To wit, the Obama White House would have been required to prioritize and allocate spending down to the level of incoming revenue. Such an unheard of exercise of Uncle Sam temporarily living within his means would have broken the deadly shibboleth that every dime of Uncle Sam’s bills must be paid once they are incurred.
Instead, payments to military vendors, local governments, student loan recipients, highway contractors and checks to Federal employees and beneficiaries would have been deferred or cutback. The resulting wailing and gnashing of teeth among the legions at the Federal trough would have been a wonder of political history.
In that fraught context, a determined Speaker postured in behalf of the taxpayers and producers of Flyover America could have written his own ticket in terms of the entitlement reforms and spending cutbacks that would be necessary for him to lift the fiscal siege. The back of the Federal doomsday machine—a budget in which upwards of 80% of outlays stem from entitlements, debt service and other automatic or contractual spending—-would have been broken.
Needless to say, Boehner and then Paul Ryan after him took the route of accommodation and surrender in the name of “bipartisan governance”. But the latter is no virtue of high-minded statesmanship; it’s a pernicious invention of the beltway’s permanent ruling class designed to keep the pork and entitlements flowing, the national debt growing and the Fed’s printing presses glowing red hot.
So here’s the truth. The existing GOP leadership is far worse than even the false caricatures that the elite commentariat and ruling class has thrown up against Donald Trump.
In fact, there are few political hacks in Washington more deserving of everlasting ignominy than the retiring House Speaker because he represented in one package all four gangs that have hijacked the Republican Party.
So we now offer a vehement good riddance to the man who has single-handedly destroyed whatever pathetic semblance of fiscal responsibility that remained in Washington prior to his baleful tenure.
The so-called bipartisan budget deal of 2015 that he confected as a parting gesture doesn’t even deserve to be called a farce. It’s actually just an extension of Washington’s pathological lying to the American public about the monumental fiscal calamity now brewing.
More importantly, it’s a case in point of why a confused and desperate Flyover America is turning to a strong man like Donald Trump to fix a system that it can plainly see is completely broken.
The chart below shows Washington’s patented “kick-the-can” formula—– employed for the second time since the phony sequester mechanism was put in place during the debt ceiling crisis of 2011.
The Boehner/Obama deal will increase spending by $85 billion in the here and now by busting the FY 2016 and 2017 caps. This new red ink will then, purportedly, be off-set way down the road with gimmicks, imaginary IRS audit revenues and hazy disability benefit reforms which will never materialize. Never.
Indeed, these people are beyond shame. The big bulge of $33 billion of savings shown for the Neverland of 2025 is due to a sharp increase in assumed discretionary spending cuts and Medicare benefit reductions. That is, the very same programs that are being pumped up during the next three years!
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