The Triumph of Politics: How the Reagan Revolution Failed

Stockman's book essentially provides overwhelming evidence that supply side economics was an intellectual fraud from the start.Stockman established that, even if all of the planned spending cuts had been approved,which was a pipe dream from the start(ANYONE WHO BELIEVES THAT THE AMERICAN PEOPLE WERE GOING TO SUPPORT THE ELIMINATION OF THE ENVIRONMENTAL PROTECTION AGENCY,DEPARTMENT OF EDUCATION,AND DEPARTMENTOF COMMERCE IS REALLY LIVING IN THE TWILIGHT ZONE)the deficits in the federal budget would have continued to explode. There is one area that Stockman really does not cover sufficiently.This area was the deregulation and privatization of the financial sector of the economy that allowed the Wall Street speculators and investment banks,aided by all of the major commercial banks and the Federal Reserve Board in Washington,to escape from the bottle of regulation that had been imposed on them since 1933.The last Securities and Exchange chairman to take his mandate to protect society from financial speculation and manipulation seriously was Bill Casy(1971-1973).The Reagan administration relied on the same kind of faulty supply side analysis from Wall Street(A Laffer,J Wanniski,and G Gilder were all closely connected to the Wall Street investment bank speculators )to support financial deregulation .This program was carried out by Phil and Wendy Gramm and others.The result was the creation of a shadow banking structure that is currently(2006-2008) collapsing.Naturally,they seek massive (and have been getting)government bailouts to protect them from economic obliteration.THe wisdom of Adam Smith could have prevented all of this.Simply prevent the supply side speculators from getting their hands on the bank loans needed to leverage their debt positions in the first place.This is what has not been done since 1978.

David Stockman's "The Triumph of Politics" is a sober look at how the chronic budget deficits of the past quarter-century came to be. Stockman was the OMB director for Ronald Reagan in Reagan's first term. The president's large tax cut passed in 1981. However, when it came time to pass the commensurate spending cuts to ensure that budget deficits did not go into orbit, Stockman was dismayed to learn just how tenacious the special interests were in defending all of their spending--only a few token cuts here and there could be made without committing political suicide. Stockman's book is still relevant today. Given that a) the Baby Boomers have now begun retiring, b) we ran large budget deficits even during the blazing economy of 2003-07 before the Boomers began retiring in earnest and putting more pressure on Social Security and Medicare, c) voters really, really, don't like tax increases, and d) voters really, really, don't like spending cuts, unbearable pressure will soon be put on the system. One wonders how the budget conundrum will be solved during the 2010s, when a much larger percentage of the Boomers will have retired and the nation's fiscal day of reckoning will no longer be something that can be kicked down the road.

To discover the subject matter of this book, you can look to other reviews. I will confine my comments to my own opinion, for what it's worth. I have read this book several times, now randomly picking pages for a starting point. No other book comes close to understanding America's domestic political process. It is an intelligent view from the trenches, like Robert Graves' "Goodbye to All That". A reader must understand that Stockman writes with a quick, wry sense of humour. He's beyond tongue in cheek. It could be titled "The Education of David Stockman". The content is fascinating (the right should take notice), but so is the style (the left has to marvel)! This one is an esoteric classic - better than 'Six Crises'.

It's unfortunate that a couple of my fellow reviewers let their partisan ire blind them to the valuable lessons in national fiscal policy in this book. Stockman's basic thesis is that the supply-side revolution had three main components:(1) a large tax cut package, (2) "painful" spending cuts, and (3) a hard-money monetary policy. Stockman makes a very persuasive argument that the Reagan Administration was unwilling to soften hard-line stance on the tax cut when it was obvious that (2) was not being taken care of and (3) was inconsistent with this policy. Even when the dangers of this course became clear, the Administration shut its eyes to reality and hoped for the best.Contrary to the reviewer below, I don't think Stockman argues that the Laffer curve was "discredited" in an intellectual sense, but rather that it was only applicable in an inflationary economy; Paul Volcker's tightening actions at the Federal Reserve denied this crucial condition. As to the reviewer with the childish "liberal propaganda" claim, Stockman clearly makes the point that Republicans and Democrats alike were unwilling to make the drastic spending cuts needed to offset the revenue loss. (And regardless of your political affiliation, I'm not sure how you can defend the economic wisdom of a president who doesn't understand such rudimentary concepts as the difference between current and constant dollars). And as to the idea that Rosy Scenario wasn't all that important, how else would you explain that the mounting debt feared by Stockman actually materialized? Say what you will, Stockman's predictions turned out to be right. It would be wrong to characterize Stockman's book as an attack on Republicans, or supply-side economics per se. It is rather a warning to would-be ideologues who would attempt to impose their dreams on an uncooperative world, a lesson that both liberals and conservatives should take to heart.

David Stockman, the former head of the OMB (1980-1986), does an outstanding job of explaining the government's inability to control the explosive growth in national debt levels. In Stockman's memoirs there are no heroes or villians, just varying gradations of politicians dedicated to "bringing home the bacon" to their districts while piously proclaiming their allegiance to balancing the budget and restoring fiscal sanity to the political process. Republicans are portrayed as replicas of their Democratic counterparts, equally adept at seizing national assets for their paymasters. Perhaps Stockman's greatest sin, in the eyes of his former conservative comrades, was his depiction of Ronald Reagan as an old, harmless softy whose refusal to demand discipline from his staff, party, and the American people helped contribute to the deficit chaos that ensued during his tenure.