Former Reagan Budget Director David Stockman joins today’s Liberty Report to talk about his upcoming book, “Trumped: A Nation on the Brink of Ruin…And How to Bring it Back.” What are Stockman’s suggestions on foreign and monetary policy and would they help?
Ron Paul: Hello everybody and thank you for tuning in to the Liberty Report. With me today as co-host is Daniel McAdams. Daniel, good to see you.
Daniel McAdams: Happy Friday.
Ron Paul: Good. We have a very special guest today. He is somebody I have known for a very long time. He is an author and he has a real spirit in the defense of Liberty and he has been at it for a long time. He’s also the founder and the editor of the David Stockman Contra Corner, s therefore David, I’d like to introduce you and say hello to our audience.
David Stockman: Very great to be with you and we go back a long time, that’s in the mid-1970s in Congress. I was thinking about that today because after Janet Yellen’s pressconference this week where she just rattled on about we don’t have enough inflation, which is crazy, but I do remember voting against the Humphrey-Hawkins Act of 1978, that was one of the things among many to unleash this regime of money printing we have at the Fed.
But, the interesting thing I wanted to bring up even if it is slightly off topic is that no one even back there, not Hubert Humphrey, not Augustus Hawkins and none of the Keynesians felt that we had too little inflation. The very idea that we have a deficiency of inflation that the Fed has to run the printing press and keep the interest rate zero for 94 months, because we don’t have enough inflation, was not even crossed anybody’s mind and that is how far we have drifted and we were both in Congress back then and it’s kind of unfortunate the situation that we face today.
Ron Paul: I do want to mention and saw a picture of your newest book that’s coming out, ‘Trumped’ and this is about your third or fourth major book, so we will be putting that up on the screen, but you do bring back memories, because our tour of duty in Congress was for over a two year period and some other interesting things that happened that I recall is that we had the Chrysler bailout and the one thing that drew attention to you, to me, was that you were the only one from Michigan that voted against the bailout, so I thought this guy is a little bit different than the average politician.
But, the other thing that came up at that time was the Afghan crisis, the invasion of the Soviets into Afghanistan and there we have a picture up now of your new book, but that invasion led to the reaction by Jimmy Carter and he thought how we’re going to punish them, we are going to punish them by making sure our athletes couldn’t go to the Olympics and then later on the Congress said we overly punished those athletes, let’s vote a gold coin for all the athletes and what would that gold coin be worth, I think it would be worth melting or something.
David Stockman: Right. There are a lot of things that happened in those years that still haunt us today. I remember the Chrysler bailout well, that set the precedent, I was one of the 19 Congressmen from Michigan and I went to a caucus meeting, in which Lee Iacocca, the great salesman and spokesman for Chrysler was presiding and he had met me before and he looked up and down the road and said where is this trainer, where is this Stockman guy who doesn’t know that it is the job of Washington to help companies when they are in trouble and unfortunately they were bailed out, in fact they were bailed out twice, eventually it led to 2008 bailing out Wall Street, becoming the bailout state.
That is number one. Second, when we got in the middle of that thing in Afghanistan, we not only boycotted the Olympics, but then we put an embargo on grain exports, being exports from Iowa, but more importantly that the CIA got involved in organizing the Mujahideen and when the war was over and the Soviet Union disappeared, we had to arm them, train them, facilitating them and then the next thing we knew it was Bin Laden, it was the whole terrorist mess that we have today. In other words, it was a great lesson on minding our own business, we have learned, as you know Ron, you are a great historian, Alexander the Great had learned in 330 BC, you don’t invade Afghanistan, you don’t invade the Hindu, because it’s pointless.
We should have let the Russians and the Soviets learn their own lesson, we didn’t meet there, but we didn’t need to be there, but frankly a part of my book is about what I call Imperial Washington and this interventionist foreign policy, I think it really got its start. Unfortunately, we sowed the seeds of disaster when we intervened in the middle of that in the 1980s.
Ron Paul: That’s right and I often wondered how much were you aware as a member of the Cabinet where the discussions about Charlie’s war going on, or did they even tried to keep it quiet among the administrators at that time?
David Stockman: That was very interesting, I was the budget director, so I should have known every set that was flowing through the budget, but I learned about Charlie’s war in the movie, I didn’t know about it at the time, it was all being done secretly, but I will tell you what I did learn and that’s really a great question that you raised. As they were building up this huge Reagan defense budget, I fought it hard and I thought it as totally out of hand and it was predicated on a view that the Soviet Union was on a verge of a first-strike nuclear capacity, all of that turned out to be mythology, it turned out to be lies really that come from the neocons as part of their takeover of foreign policy.
But, one of the things that happened is that we raised defense budget from 140 billion, which was more than enough under Carter to 350 billion in four years if you can imagine that and they couldn’t figure out what to do with all the money. In other words the topline was growing so fast they couldn’t figure out what to do and I begin to get suspicious because I saw some years the ammunition accounts and spare parts accounts and accounts for lubricants and fuel, were going up by 70 or 80 percent a year and I said how is this possible, what are we doing and when I got into it, they said you just never mind, because what was going on, those were the accounts where they were hiding all of the black operations that were being funded by the CIA and the so-called secret part of government.
Ron Paul: That means that we should be very much aware of the deep state even back then about how things operated where you were in that position and you couldn’t be privy to what they were really doing.
David Stockman: Yeah, the deep state was buried in the spare parts account, that is what I had learned and unfortunately nothing has really changed. Here we are, we have no industrial state enemy left in the world. I was saying the other day, I wasn’t being totally facetious, but like Sarah Palin I can see Russia from here in my apartment on the 19th floor in New York City, but it’s not Russia the landmass, I can see the economy that is bigger in the New York Metropolitan area and the GDP of the New York Metropolitan area is bigger than the GDP of all of Russia.
Russia is a third way rate economy, it’s a big oil an gas patch with a few little nickel mines and some large wheat fields, but it is a very weak and very backward economy. It is a country that spends on its military about 40 billion a year or what we spend in less than two weeks, so the very idea that somehow there is a new Cold Wa being instigated, that Putin represents some modern day version of Hitler, which we heard from Hillary Clinton and that we need to be having a confrontation nose-to-nose on the Russian borders in Eastern Europe is really appalling.
And part of my book, the whole chapter or a whole section is a part three, called Imperial Washington and its global depredate and global depredations and I think it’s important that in this campaign is far off as Trump is on many things, he at least said wait a minute, is NATO obsolete, didn’t the Cold War end in 1991. I think he is right, he said I think maybe I can make a deal with Putin, I think he should and this whole confrontation over the Ukraine would very quickly end. He said and I have heard you say it over and over, what are we doing playing monkey in the middle in Syria. We are trying to overthrow the regime at the same time we are trying to extinguish ISIS. You can’t do that, we have made a huge mess there.
So, as off base as Trump gets from time to time, at least he is raising some basic questions hat we haven’t heard about for several decades. Now, unlike Trump, I call Hillary the class President of a failed generation. Ever since we were all on the barricades in 1968 protesting the Vietnam War, we were right, we have been making mistake after mistake since then and as far as I can tell, Hillary has never seen a war she didn’t like. She was for Bosnia, she was for Kosovo, she was for Iraq I, Iraq II, she made a mess out of Libya, she wants it in the middle of Syria, we can go on.
Ron Paul: David, Daniel has something he wants to follow up on that with you. Daniel?
Daniel McAdams: I was just going to say David, first of all I love your website Contra Corner, I think everyone should frequent, it has got a great mix of economic news and analysis and foreign policy and I am always thrilled to see some little thing that I have done on there too, so it’s a great site and this is a great segue into the book. The book is called ‘Trumped’ and the subtitle is ‘A nation on the brink of ruin and how to bring it back’ and I think any potential reader might look at it as a book, just simply an open praise for Trump. It is actually a very interesting phenomenon, I think you captured it well, because I think what you did is you explain the problem and here is from your first chapter, I think this really summarizes it perfectly. “We have a ruined national economy that has morphed into rank casino capitalism under the misguided policies and faithless rule of Washington and Wall Street elites.”
So you identify the problem, you identify the phenomenon that follows the problem, which is Trump and Sanders and then you offer some suggestions, some deals on how you can take this and move us in the direction toward more freedom and liberty and I think it makes it such a fascinating approach to the issue. One of the main things that caught my attention is you suggestion about we need a peace deal. I was wondering maybe if you can outline what your peace deal looks like.
David Stockman: Ok. I might just say by the way of predicate that the book is not a testimony on behalf of Trump, it is an indictment of the status quo and my thought is on Hillary Clinton as the embodiment of the status quo, I call it her 30 year old bag of horribles in terms of ideas and policies that have failed, but then as I go after the diagnosis of the problem, I try to take Trump’s vernacular, he considers himself as the greatest deal maker of our times and he has made a lot of great deals, I think we should nod that, but if he wants to make deals to change the fundamental direction of the country, I suggested 10 great deals for the Donald that could make a difference if you could just get his mind and his political campaign around them.
The first of these was the peace deal. Everything depends on the peace deal, because what I learned during the early 80s during the Reagan administration is that if you are funding a massive defense establishment, you simply can’t get these politicians to walk the plank for domestic cuts or entitlement reforms and all the rest that we have to do. It starts with a peace deal and I said look, make a deal with Putin, a deal that says we are backing off this unnecessary confrontation on the borders of Russia, that really Bush Sr. was correct when he promised Gorbachev at the end of the Cold War that NATO wouldn’t expand by a single inch, instead we added 16 countries, so the heart of the peace deal would be an agreement to end the confrontation over the Ukraine and dismantle NATO over a period of time, join forces in the Middle East to allow the Syrian situation to be cleaned up, frankly by Russia and its Shia allies.
The real containment force for ISIS is not the US Air force or cruise missiles from [14:28], it’s the Shia. So, we start with a peace deal and I even put before Trump, go back to the 1920s, all these liberal historians make great fun of Harding being a poor President, actually he realized that World War I was an enormous mistake, it shouldn’t happen again, organize the Washington Naval conference of 1922 and began the world on a part towards disarmament that unfortunately was interrupted by the 30s, but it was the right direction, so that’s the first thing.
Ron Paul: David I wanted to ask you something related more to economics right now, because the discussion of the Presidential race, there has been a shift that sometimes is related to Trump and that is that they have worn out monetary policy, which is way beyond wearing it out and they are admitting that we can’t to anything and there is some Wall Streeters, some very wealthy well-known people saying what they like now is the emphasis on not solving our problem by the Fed, maybe they haven’t known exactly what they have been doing, so now we have to emphasize fiscal policy, so spending money on the military, on the infrastructure, on education, on medical care is a stimulus and they are forgetting about the deficits.
I would think this would remind you of the 1980s, where the spending went up and the deficits got worse and they cut taxes and I am always for cutting taxes, but this seems to be the mantra right now of just saying that we need to solve this problem by spending money and I think that might bring on a cataclysmic end to this and that is another thing if you could mention when you think this is all going to come apart, because that is the question I get asked the most, but it’s pretty difficult to pinpoint that point in time when this all ends.
David Stockman: Oh my goodness, you are right on the right track. There is 4 or 5 points where the first one is the underlying predicate of Washington is what you and I call stateism and it’s the view that capitalism is constantly tending toward collapse, decline, a black hole, a depression, unless there is constant intervention and stimulus and support from the fiscal and monetary authorities. I think that is totally wrong, I think finally the Fed has proven that you can print money until the cows come home, but you are going to actually make the economy worse, not better, because it hurts the savers, it hurts the wage earners and benefits just a few speculators.
Now, they are saying that since monetary policy seems to have run into a dead end and they are out of dry powder as I surely think, it’s time to go back to fiscal policy and stimulate. I have news for them, there is a 20 trillion debt right now, there is built-in according to CBO’s own estimates and as we know you can’t trust CBO, they lowball the projections with rosy scenario forecast and so forth, but even they say 10 trillion more of debt is built in the next decade. I go through that in one chapter of my book and say not true. If you use a sober set of economic projections for the next ten years, we are going to end up with another 15 trillion of public debt, on top of the 20 we have today. That adds up to 35, even by basic arithmetic.
I show in that chapter the GDP and nominal terms, it is not likely to be more than 24 trillion by the middle of the next decade, so that says if you knew the basic math that we are heading towards a 150 percent debt-to-GDP ratio, which puts you in the Greek category, puts you in the Italian category, puts you in a situation that becomes impossible given our demographics. We really have some pretty demographics, because we got 10,000 baby boomers retiring today, I am part of that generation, there will be 70 or nearly 80 million retirees very soon and as a result of that the fiscal situation is going to become virtually impossible, because there will be nobody to tax and there will be no the 58 million beneficiaries that we have today, but a 100.
I go through that whole thing and I say if we have another recession, which we are going to, it’s programmed in, they haven’t abolished the business cycle, when we get into the next recession we will be back in the trillion dollar deficit category, there will be an impossible equation to manage in Washington and frankly I think either whoever of these two candidates is elected is going to have to deal with that, but the idea that you can solve the problem then by throwing on some fiscal stimulus or a big infrastructure program is completely wrong, it will be making the situation worse.
Ron Paul: David, we have to move along because our time is running out, but Daniel has another follow-up question on this, short.
Daniel McAdams: It’s short, it feels like we are playing ping-pong, but there is so much to take apart in the book that is interesting and I guess if I could make it very short, which I need to, I think probably the piece of advice you are offering in ‘Trumped’ is I would guess the least likely to take and probably should consider the strongest is when you talk about Iran. You make the important point that after the end of the Cold War, the demonization of Iran was critical to the neocons to maintain the military industrial complex and their control over Washington.
Here is what you say from the book. “The idea that Iran is an expansionist power, bent on exporting terrorism, is a great fiction.” You end by suggesting that Donald Trump take this on board and actually go to Tehran and make a deal with the Iranians. I think it is pretty unlikely considering his rhetoric, but it would not be a bad idea.
David Stockman: Yeah, thank you. That is the very last chapter of my book, chapter 26, it’s called ‘In Praise of the Iran nuke deal, a chance for peace if we can keep it’ and I basically lived through the whole history of how there has been a false narrative put down by the neocons of Washington, how the Iranians have been demonized beyond all recognition, relative to the facts, but I said Trump considers himself a dealmaker, take a leaf therefore from the playbook of Dwight Eisenhower, who in the 1952 Presidential campaign said we are in a dead end in Korea, if I am elected I will go to Korea even before I am sworn in and begin a process of negotiations and put an end to this bloody stalemate that we are in.
I suggested maybe a little bit tongue-in-cheek, but actually in a serious way, that Trump has his own plane and as soon the election is over and he wins, he should get on it, go to Tehran, sit down with Rouhani, who I believe is a pretty constructive, well-intended statesman and say the era in which Iran has been made a pariah state in which there has been endless threats from the war party, both here and in Israel, it is going to come to an end, you are welcome back to the community of nations, we are going to work with you to bring peace to the Middle East and end the scourge of these medieval butchers and terrorists who have established this caliphate in Iraq and Syria.
Ron Paul: David, this has been great and I think we can go on for a long time and some day we will do it even more so, but I want to thank you very much for being with us today and I am sure our audience will find your book ‘Trumped’ as very interesting and well worth the discussion and the reading. But, thanks very much for being with us today.
David Stockman: To be on with you again.
Ron Paul: Good and I want to thank the audience for being with us today, because this has been a real delight for me to visit with David Stockman and I am sure you will find his book ‘Trumped’ very interesting. But, thank you for being with us and please come back to the Liberty Report soon.