Soldier of a Revolution
Tuesday, March 27, 2007
David A. Stockman left the nation's capital for Wall Street two decades ago, but he is still remembered, often passionately, by both friends and foes alike.
Stockman's indictment yesterday for allegedly defrauding investors while he chaired Collins & Aikman, a major auto-parts maker, caused Washington insiders to reminisce about the one-time wunderkind who helped to create and then undermine President Ronald Reagan's supply-side economic revolution.
"It's a shame that a guy who made such a great contribution as a member of Congress and the Reagan administration has this happening to him," said M.B. Oglesby, a former deputy chief of staff to Reagan. "He was the driver in the whole budget process in the beginning of the administration that set the tone for the tax cuts and the budget cuts."
"I have vivid memories of his misusing and misstating data and using obviously phony economic forecasts," said veteran budget analyst Stanley E. Collender. "You wonder if those were habits that stuck with him when he became a Wall Street dealmaker."
Stockman rose from the back bench of the House, where he served from Michigan, to become Reagan's budget director at the precocious age of 34. He became the White House's detail man in one of the most audacious fiscal experiments of the last 50 years -- a real-world test of supply-side economics. The theory held that marginal tax rates could be cut and yet still produce greater revenue for the government because of increased economic growth.
The failed assassination attempt of Reagan just 70 days into his presidency catapulted through Congress the budget that Stockman was instrumental in designing. It cut tax rates on individuals and offered tax benefits to corporations while beefing up Pentagon spending as the way to win the Cold War against the Soviet Union.
The combination was both admired and reviled, as was Stockman's role in the enterprise. Stockman's defense of it soon was undercut by his published conversations with a journalist, which revealed Stockman's doubts about his own budget's fiscal soundness.
He was then famously -- and very publicly -- "taken to the woodshed" by Reagan, an admonition that reduced his effectiveness and eventually led to his abandonment of Washington for New York and investment banking.
"I talked about that to him about that; he said he kind of gave up on Washington, D.C.," said Steve Bell, former Senate Budget Committee chief of staff and later a managing director, with Stockman, of Salomon Brothers.
Bell is among Stockman's many fans. He remembered Stockman as a master of the budget, always lugging six-pound documents under his arm that provided ready answers to his vocal critics.
Bell said Stockman took that focus and commitment to Wall Street and parlayed them into sizable wealth, first with Salomon Brothers and later with Blackstone Group and Heartland Industrial Partners, the private-equity firm he co-founded that bought Collins & Aikman.
"With a guy who's that detail-oriented and that hardworking, you wonder: How did this happen?" Bell said about the indictment. "I was surprised. It makes you wonder what's really going on."
Former senator Warren Rudman (R-N.H.) serves on the board of Collins & Aikman. He joined at the request of Blackstone's senior chairman Peter G. Peterson, a longtime friend of his. "I never had any problem with him personally," Rudman said. "I had plenty of disputes when he was OMB director, the same disputes that everybody else had -- I didn't believe his budget numbers and it turned out that the budget numbers were wrong; they were overly optimistic."
"I thought he was very bright, but intellectually a little dishonest, as he later acknowledged," said Rep. Barney Frank (D-Mass.), now chairman of the House Financial Services Committee. "He never thought that cutting taxes was going to generate revenue."