David Stockman on Why Trump Can’t Fix the Debt: ‘This Guy Is Part of the Swamp’
As Ronald Reagan’s first budget director, former Michigan congressman David Stockman led the charge to cut the size, scope, and spending of the federal government in the early 1980s. He made enemies among Democrats by pushing hard for cuts to welfare programs—and he ultimately made enemies among his fellow Republicans by pushing equally hard to slash defense spending. His memoir of the era, The Triumph of Politics: Why the Reagan Revolution Failed, is a legendary account of how libertarian principles got sacrificed on the altar of political expediency.
Stockman’s new book is Trump’s War on Capitalism, and it takes a blowtorch to the former president’s time in office. “When it comes to what the GOP’s core mission should be…standing up for the free markets, fiscal rectitude, sound money, personal liberty, and small government at home and non-intervention abroad,” he writes, “Donald Trump has overwhelmingly come down on the wrong side of the issues.”
At a Reason Speakeasy event in New York City, Reason‘s Nick Gillespie talked with Stockman about his political journey from being a member of Students for a Democratic Society who protested the Vietnam War to being one of Reagan’s main advisers to his denunciation of Donald Trump and his hope that Robert F. Kennedy Jr.’s candidacy helps throw the 2024 election into the House of Representatives.
Stockman also explains how Trump led the charge on COVID lockdowns, got rolled by Wall Street and the Federal Reserve, and why his nativist views on immigration are inimical both to freedom and economic growth.
Watch the full video here and find a condensed transcript below.
Nick Gillespie: This is The Reason Interview with Nick Gillespie. Thanks so much for coming out. Our guest tonight is David Stockman. He is a former congressman, a two-termer from Michigan, south of Grand Rapids. Probably best known in the public eye for being Ronald Reagan’s first budget director who made the naive, idealistic, and absolutely wonderful mistake of believing that Ronald Reagan wanted to cut the size, scope, and spending of government across the board. He wanted to cut the welfare-warfare state, right?
David Stockman: Well, the welfare part.
Gillespie: And this is before we get into his fantastic book, a real stinging critique of Donald Trump, Trump’s War on Capitalism. In preparing for this, you as budget director, you came in and you had to cut $40 billion from a $700 billion budget in 1981. To give you a sense of how quaint that is, the defense budget now is about $700 billion. I think we may be approaching that just in interest on the debt. But you were scrounging around to find $40 billion to cut. What happened?
Stockman: Well, I think the problem was Ronald Reagan believed in small government profoundly, except for the Pentagon side of the Potomac River. And he was really a hawk, a real, unreformed, unrequited Cold War hawk. The defense budget was about $140 billion when we got there. By the time he left, it was $350 billion, a massive increase on the theory that the Soviet Union was developing first-strike capability. None of that was true. That was the origination of the whole neocon view of the world. That’s where all these characters originally got their start in the process. And so, by the time we got to 1988, the defense budget had eaten up and then some of all the domestic cuts, and the Republicans who were willing to stand up for domestic spending cuts and title reforms and so forth were so demoralized by seeing these massive increases year after year for the Pentagon that they basically threw in the towel, and the whole thing was kind of a wipeout.
If you want to get the numbers on it, just to kind of cap off the point, when Jimmy Carter left the White House after all those years of big spending by the Democrats, first Carter and then before him, of course, [Lyndon B. Johnson (LBJ)], and guns and butter and all the rest, the domestic non-defense budget was 15.4 percent of [gross domestic product (GDP)]. So way up, historically. When Reagan left, it was 15.3 percent. So he made a 0.1 percent difference. And that’s about all we got.
Gillespie: I would recommend everybody read, The Triumph of Politics, David’s memoir of his time. The subtitle is Why the Reagan Revolution Failed and—if you’re interested in political economy as well as gossip—it’s really one of the great memoirs.
But the book we’re talking about tonight is Trump’s War on Capitalism. The title says it so well there isn’t even a subtitle. Why don’t you start by telling us what was Trump’s war on capitalism? He is a businessman. He talked about having the greatest, the biggest, the best economy ever when he was president. What’s the essence of Trump’s war on capitalism?
Stockman: Well, the question I think you’re getting at is, why did I write it? And the answer is I had already written three books trying to expose the fact that Donald Trump isn’t remotely an economic conservative; he doesn’t believe in small government. I don’t think he believes in free markets. And certainly he had no affinity whatsoever for sound money or fiscal rectitude. So in 2016, I wrote a book called Trumped! to warn people. In 2018, I wrote another book called Peak Trump to say I was right. In 2020, I wrote a third book called Dump Trump. Well, the fourth time would be the charm, right? And the book came out five days before the Iowa primaries. It was too late. But there is a bigger point to it, and that is: We’re never going to get the kind of government, I think, that all of us believe in—the kind of society, the kind of liberty, the kind of economic prosperity, the kind of market capitalism and so forth. Unless there is an honest contest in the process of democratic governance in the United States between one party that more or less lines up as the government party, the party of state, the party of the political class, the bureaucratic class, the apparatchiks in Washington. And there’s a second party that represents the hinterlands and all of the impulses that go with us, to leave us alone, to tax us less, to spend less, to intervene less, to get out of our way, to allow the private society and economy to breathe. So we really need a government party contesting with an anti-government party.
The problem is, today we have a uni-party in terms of the primary leadership in the Republican Party in Washington. When I look at [Mitch] McConnell, who’s been there 55 years on the government payroll, I can’t really tell any difference between him and our senator from New York, the leader on the Democratic side. And so, what I think the great danger is that the problems in the United States today in terms of our position in the world—which is a disaster in terms of our public debt but we can get into a lot of those numbers in a minute—and in terms of a rogue central bank that is totally out of control is that, if we don’t address any of that, then [we will have continued rule of the uni-party], and we can’t have [that]. We need to break it up. But Donald Trump, despite all of his rhetoric and all of his loud boasting about draining the swamp and being the outsider and coming in to clean up the whole thing, is just as much a statist when it comes to all the key issues. And we go through them in the book, as well as most of the mainstream politicians in Washington.
So the last thing we need is a fight in 2024 between Trump and Biden. It’s pointless. It’s useless. We need to have a clean break in the Republican Party, blow it up if we have to, and not allow the second party in our democracy to be Trumpified. Because if it’s Trumpified, then we get more of what we had during the four years that he was there. I’ve got a lot of data on that, but let me just cap it here with one, and then we can go into some of the details. When Trump was sworn in, the public debt was $20 trillion already, and it had been swelling rapidly for several decades. When he left, it was close to $28 trillion. So let’s just call it $8 trillion in four years. Now, someone might ask later, numbers of this magnitude are almost hard to grasp, to understand, but here’s how to understand: The first $8 trillion, equivalent to the $8 trillion that Trump racked up in four years, had taken from the first day of the Republic to 2005 to approve. That is, the first 43 presidents in 216 years generated $8 trillion in public debt. Trump replicated that in four years, not only because of huge tax cuts that he didn’t try to offset with spending but because of the whole disaster of the pandemic, the COVID, the lockdowns, and $6.5 trillion worth of bailout and relief and free stuff that came out of the effort to try to tell people, “Yeah, we’re sending everybody home. And don’t worry, we’ll send you money too.” So, that’s the heart of the matter.
Anybody that can generate $8 trillion in four years of additional public debt, equal to the first 43 presidents—and there were some real rascals, obviously, and bad guys in that lineup, including [Franklin D. Roosevelt] and LBJ and a lot of others in between—that’s the kind of number that grasps you by the collar and tells you, this guy is part of the swamp. He’s not part of the solution.
Gillespie: What is wrong with running up massive debt?
Stockman: Someone asked me that in 1970 when I first went to work on Capitol Hill. I ran for Congress in 1976 against the outgoing [Gerald] Ford deficits, which were large. And the question was raised, and here we are. And it’s now $34 trillion and rising and so, maybe it’s no problem after all.
No, the answer is there are two ways to finance the deficit, both of them bad. The first way is the honest way: You finance it in the bond pits by borrowing out of the private savings stream. The effect of that, though, everybody understood when I was first on Capitol Hill in the ’70s and into the early ’80s, is that when you finance the public debt deficits the honest way, it causes crowding out. It forces up interest rates higher and higher, because whatever the given supply of savings is at the moment. Uncle Sam is the sheriff. His elbows get first call on the money. Crowding out happens. Rates go up. That’s where we got the famous bond vigilantes and so forth. And that’s why, actually, when we were trying to cut taxes in the early ’70s,
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