Wednesday, December 01, 2010

David Stockman: The Voice of Reason

60 Minutes recently aired a story about the GOP's knee jerk opposition to taxes. What made the story particularly compelling was that David Stockman, President Reagan's budget director, called out his own party for their extreme orthodoxy against taxes.

Stockman has gravitas because he is the Republican who once helped engineer the largest tax cut in history during Reagan's presidency.

But these are different times.

The Bush tax cuts were never rescinded, even while the US was engaged in two lengthy, costly, wars. Both of those unfunded wars were put on the federal government's credit card to be paid in the future.

However, this borrowed war money will be much more expensive to pay back in future years, due to the interest on the exorbitant debt that's been created.

Stockman says all the Bush tax cuts should be eliminated - even those on the middle class.

"It's become, in a sense, an absolute. Something that can't be questioned. Something that's gospel. Something that's sort of embedded into the catechism. And so scratch the average Republican today and he'll say 'Tax cuts, tax cuts, tax cuts,'" Stockman explained.

"It's rank demagoguery," he added. "We should call it for what it is. If these people were all put into a room on penalty of death to come up with how much they could cut, they couldn't come up with $50 billion, when the problem is $1.3 trillion. So, to stand before the public and rub raw this anti-tax sentiment. The Republican Party, as much as it pains me to say this, should be ashamed of themselves."

Stockman is also quite critical of President Obama for saying things like, "I believe we ought to make the tax cuts for the middle class permanent."

"We have now got both parties essentially telling a big lie, with a capital 'B' and a capital 'L' to the public," he told Leslie Stahl. "And that is that we can have all this government, 24 percent of GDP, this huge entitlement program, all of the bailouts. And yet, we don't have to tax ourselves and pay our bills. That is delusional."

The national debt is now growing by $100 billion a month. So, the massive hole continues to grow ever deeper.

"We're going to be in a period of austerity. We've had a 30-year spree of really phony prosperity in this country," said Stockman.

Yet, Stockman says neither party is truly committed cutting spending.

"Even Republicans have said there's nothing significant we want to cut. They don't want to cut Social Security entitlements; they don't want to cut Medicare reimbursements to doctors; farm subsidies; education loans for middle class students. Certainly not defense!" he said.

Stockman says there should be a one-time 15 percent surtax on the wealthy that he estimates would cut the national debt in half. But he knows it is highly unlikely in such a strong anti-tax environment in America today.

"We've demonized taxes. All right. We've created almost the idea they're a metaphysical evil," he said.

"In 1985, the top five percent of the households, wealthiest five percent, had net worth of $8 trillion, which is a lot. Today, after serial bubble after serial bubble, the top five percent have net worth of $40 trillion," he explained. "The top five percent have gained more wealth than the whole human race had created prior to 1980."

The antipathy to raising any taxes or making any real spending cuts is so intense in Washington, Stockman despairs that when the new Congress returns after the holidays, they'll do what they often do: nothing.

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