Greider takes us through the story of David Stockman, and the at-the-time-still-recent implementation of supply side economics by the Reagan administration. I’m not sure Stockman is all that interesting of a person. He’s a conservative from Michigan, a Methodist, traditional values type Republican that believes deeply in the free market. He’s coming into politics in the 70’s, at the tail end of Jimmy Carter. So he looks around and sees these government progrmas first set up in the era of the New Deal kind of die on the vine and become ineffectual. He sees waste.
He becomes a congressman in Michigan and advocates for privatization and cutting back the federal budget. He’s even a rare breed of Repulican that believes in scaling back corpoarate subsidies. Before long, he’s bought into supply side economics. Democrats will derogatorily refer to it as trickle down economics. It will also be called Reaganomics once Stockman’s done with it. The idea is that if you lower income taxes, and lower corporate taxes, then you can send a signal to the markets and to private industry that the politics of the government is moving in the right direction, and this will in turn lead to greater investment and new jobs. It’s faith-based economics.
Stockman is not the the most reound advocate of this kind of economics (that’s probably Laffer and his silly curve), but Reagan puts him in charge of blaancing the federal budget. The thing is, Reagan puts these blockades in the way, things in the budget that Stockman isn’t allowed to touch. The first is the defense budget which has to go up to 30% of the total budget. The other is social safety net programs he promised he wouldn’t cut in his campaign. that’s 50% of the budget. The crazy part is his campaign was very vague so he actually had no idea what he was gonna do.
The first thing Stockman does is plugs the numbers from Reagan’s tax cuts into a computer and what does the computer say? That he’d have the worst debt crisis in peacetime of all time. So he changes the computer, again based on the faith that the economy will naturally follow good politics.
And that’s basically how the administration proceeds, haphazardly and by the seat of their pants, holding fast to the idea that if you shift the political model, good economics will follow. That the programs that had been massively effective since FDR didn’t need changing, and some needed to be obliterated completely. He begins slashing any program from any department he can, ruthlessly and without prejudice. Education programs, clean energy, affordable housing, by spreading it around he creates a political environment where every cabinet member has to fall in line.
Living this out, forty years later, is a nightmare. The safety net that once held this country high was torn to shreds by Stockman. And by the end of 1981, when this article was written, Stockman had already realized he was wrong. Nothing changed. And things only got worse.