The great part about David Stockman's political memoir "The Triumph of Politics" is that it's one of very few in which the author made himself look like a total jackass. And deservedly so. Stockman is one of the great unsung villains of modern American politics. He should have gone to prison. He knew he should have gone to prison. And he said he should have gone to prison. (He did, later, go to prison on an unrelated charge).
Stockman was also Ronald Reagan's first budget director, and one of the major architects of Reagan's fiscal and economic programs. And it was in that office that he should have landed in prison.
For you see, Stockman knew that he was selling a fraud to the American people. He knew he was lying to his boss, Reagan, he knew he was lying to Congress, and he knew that he was committing fraud against the American people while holding the office of director of the Office of Management and Budget.
The nature of his fraud? Rosie Scenerio and the Magic Asterisk.
Now it is only fair to say that he was not the only user of these tools. And in his wake they've become much more common.
What are they? Rosie Scenario refers to making budget projections not on economic projections, but rather on political ones. The Supply Siders, who dominated Reagan's economic policies, simply made up figures for what the economy would do under their policies, and then based their budgets on that. The result was that the economy never grew as fast as they predicted, and their tax cuts never generated the revenue to pay for them that their theories promised.
The Magic Asterisk is the policy of justifying budget numbers with footnotes claiming "savings and cuts to be designated later". They never were.
So the revenue side of Reagan's fiscal policy was based on fictional economic projections, and the spending side was based on false claims of spending cuts not identified, but they really, really, meant to make those cuts. Someday. In the meantime, Reagan doubled the national debt, had essentially no net new business investment in the nation over an 8 year administration, and had weaker than average job growth with no wage growth at all.
Why am I bringing this up now?
Because this is exactly the economic policy that Mitt Romney is running for president on. If you listened to Romney in the presidential debate, this is just what he was saying. His entire policy is based on the idea that he will get more tax revenue because there will be far higher job growth and wage growth. And if he doesn't get them, then he gets massive deficits, above and beyond anything seen before. And yet his economic policy is to do even more of what did not produce business investment while Reagan was in office, and did not produce business investment again while GW Bush was in office, and did it even more aggressively. So now Romney is basing the fiscal and economic future of the country on doing even more of what has been entirely a failure during two 8 year administrations.
What do they call the definition of insanity? Doing the same thing over and over again and expecting different results.
For further reading:
http://delong.typepad.com/sdj/2008/06/the-magic-aster.html
http://delong.typepad.com/sdj/2008/06/more-david-stoc.html
http://econospeak.blogspot.com/2012/08/who-has-rosy-scenario-about-gdp-growth.html
http://marginalrevolution.com/marginalrevolution/2009/03/what-is-the-rosy-scenario.html
Stockman was also Ronald Reagan's first budget director, and one of the major architects of Reagan's fiscal and economic programs. And it was in that office that he should have landed in prison.
For you see, Stockman knew that he was selling a fraud to the American people. He knew he was lying to his boss, Reagan, he knew he was lying to Congress, and he knew that he was committing fraud against the American people while holding the office of director of the Office of Management and Budget.
The nature of his fraud? Rosie Scenerio and the Magic Asterisk.
Now it is only fair to say that he was not the only user of these tools. And in his wake they've become much more common.
What are they? Rosie Scenario refers to making budget projections not on economic projections, but rather on political ones. The Supply Siders, who dominated Reagan's economic policies, simply made up figures for what the economy would do under their policies, and then based their budgets on that. The result was that the economy never grew as fast as they predicted, and their tax cuts never generated the revenue to pay for them that their theories promised.
The Magic Asterisk is the policy of justifying budget numbers with footnotes claiming "savings and cuts to be designated later". They never were.
So the revenue side of Reagan's fiscal policy was based on fictional economic projections, and the spending side was based on false claims of spending cuts not identified, but they really, really, meant to make those cuts. Someday. In the meantime, Reagan doubled the national debt, had essentially no net new business investment in the nation over an 8 year administration, and had weaker than average job growth with no wage growth at all.
Why am I bringing this up now?
Because this is exactly the economic policy that Mitt Romney is running for president on. If you listened to Romney in the presidential debate, this is just what he was saying. His entire policy is based on the idea that he will get more tax revenue because there will be far higher job growth and wage growth. And if he doesn't get them, then he gets massive deficits, above and beyond anything seen before. And yet his economic policy is to do even more of what did not produce business investment while Reagan was in office, and did not produce business investment again while GW Bush was in office, and did it even more aggressively. So now Romney is basing the fiscal and economic future of the country on doing even more of what has been entirely a failure during two 8 year administrations.
What do they call the definition of insanity? Doing the same thing over and over again and expecting different results.
For further reading:
http://delong.typepad.com/sdj/2008/06/the-magic-aster.html
http://delong.typepad.com/sdj/2008/06/more-david-stoc.html
http://econospeak.blogspot.com/2012/08/who-has-rosy-scenario-about-gdp-growth.html
http://marginalrevolution.com/marginalrevolution/2009/03/what-is-the-rosy-scenario.html
