IN ALFRED HITCHCOCK's classic film, The Lady Vanishes, the professor is confronted with evidence proving, incontrovertibly, that his explanation of the case is wrong. "Nonsense," he replies, unfazed. "My theory is perfectly correct. It is the facts that are misleading."
That's no way to solve a mystery, and, according to David Stockman's book, that's no way to run a government. Yet that is exactly what he set out to do as Ronald Reagan's first director of the Office of Management and Budget, a position he held for 4 1/2 years. The theory he espoused was supply-side economics, a doctrine that promised inflationless growth through tax rate cuts and a return to the gold standard. The facts that confronted him were triple-digit deficits stretching far into the future and threatening the nation with massive fiscal disorder.
It took Stockman only a few months to realize that the facts contradicted the theory. The tax cuts had to be paid for with radical cuts in federal spending, cuts that would destroy the welfare state and completely transform the role of government in American society. Even the "safety net" programs that protected the poor, in Stockman's view, "had to be shredded in order to close the budget gap."
What Stockman found out is that no one wanted to make these cuts.
*Not the "weak-kneed, weak-minded politicians." Their careers depended on the "booty and spoils of the organized thievery conducted within the desecrated halls of government." (Even Republicans, Stockman found, were a "gutless herd" who, "by a gradual but certain process," had become "the legislative chambermaids of the welfare state.")
*Not the voters. In a moment of revelation, Stockman discovers that the American public rather likes the welfare state and the economic security it provides. ("What you see done in the halls of the politicans may not be wise, but it is the only real and viable definition of what the electorate wants."
*Not the naive and doctrinaire supply siders. They adopted the view that "spending is not the issue" and accused Stockman of perpetrating "Hooverism" and "root canal politics."
*And not the Reaganites. In the final analysis, they "were just plain welfare state politicians like everybody else." Reagan himself "was a consensus politician, not an ideologue. He had no business trying to make a revolution because it wasn't in his bones."
Poor David. He had a revolution to sell and nobody would buy it. "Politics had triumphed," he concludes, "first by blocking spending cuts and then by stopping revenue increases." The result was a "half-revolution . . .and a fiscal disaster." His "dangerous experiment" had not only failed, it had created a permanent deficit that imperiled the nation's economic security.
ACCORDING TO STOCKMAN, William Greider's cover story in the December 1981 issue of The Atlantic caught him in "the first, conscious acts of finding out" what he had done. The story was treated at first with "considerable merriment" by the Reagan staff -- that is, until network television began to depict Stockman as "a Judas" who had betrayed the Reagan administration. In fact, he had been scrupulously loyal to the administration, leading the fight to get its budget and tax cut program through Congress even though, as he admitted to Greider, he had begun to realize that the program was deeply flawed. What mattered to the White House staff, however, was how the story appeared on television. They were "going to lynch me," Stockman says, "on account of a metaphor."
As Stockman tells it, his meeting with the president was far from a trip to the woodshed. Reagan was generous and sympathetic. He told Stockman, "You're a victim of sabotage by the press," and asked him to stay on. Stockman then invented the woodshed story . . ."a self-inflicted public humiliation" . . .to satisfy the White House staff. Since they didn't know the difference between metaphor and reality, he offered them a counter-metaphor.
In the book, however, Stockman admits that in a larger sense he did betray Reagan -- not by being disloyal, but by imposing his own, misconceived ideological agenda on the administration. Reagan, he claims, had conservative values but "no blueprint for radical governance, . . .no concrete program to dislocate and traumatize . . . American society. I supplied the latter."
It is at this point that Stockman decides to join forces with the congressional politicians in order to undo the damage he had caused. He becomes an anti-deficit crusader, conspiring with Congress to pressure the administration into accepting tax increases and cuts in defense and entitlement spending. "I had to resort to out-and-out subversion . . .scheming with the congressional leaders during the first half of 1985 to force a tax hike."
Stockman depicts himself as the ideologue chastened by reality. It is, in fact, a metaphor, and the reader has a right to be wary: he may be doing to us what he did to Reagan on November 12, 1981. Throughout the book, Stockman's tone shifts back and forth between penitence and cynicism. The penitent Stockman says that early on he should have worn a sign saying "Stop me, I'm dangerous." The cynical Stockman describes his position in 1984 as "a dutiful loyalty to nonsense." In the end, for all his penitence, Stockman says, "I never gave up my supply-side ideology. . . . I just put it in my safe, along with other intellectual valuables. It was simply not operationally relevant in the world of democratic fact." In other words, his theory is perfectly correct. It is the facts that are misleding.
Most of the book is taken up with an insider's view of the tax and budget battles of 1981, year One of the Reagan Revolution. It is not a pretty sight. "Anyone who is fond of sausages and legislation," it has been said, "should not watch either of them being made." A few people whom Stockman regards as his intellectual equals come off well, like Richard G. Darman of the White House Staff ("His was the only office in the White House where you found a whole table stacked with serious books that the occupant had actually read.").
Just about everyone elese is treated with withering contempt. House speaker Thomas P. (Tip) O'Neill, "with his massive corpulence and scarlet, varicose nose, was a Hogarthian embodiment of the superstate he had labored so long to maintain." House Majority leader James Wright was "a snake-oil vendor par excellence, a demagogue of frightening rhetorical powers." White House aide Michael Deaver "could not tell a budget number from a dinner check."
Stockman is especially scornful of those who were supposed to be allies of the Revolution but who were more concerned with protecting their budgets and pet projects. When the State Department was threatnened with the loss of 591 people from its 22,000-person payroll, Secretary of State Alexander M. Haig Jr. told the president, "If you accept the OMB proposal, your entire foreign policy will go right down the drain." Attorney General William French Smith responded to Stockman's demand for cuts in his agency by arguing, "The Justice Department is not a domestic agency. It is the internal arm of the nation's defense." Presidential counselor Edwin Meese III convinced Reagan that the federal government should protect the automobile industry and subsidize the nuclear power industry because they had been penalized by overregulation in the past. Senator Jesse Helms advised Stockman, "Don't let them OMB bureaucrats down there confuse you. The tobacco program doesn't cost the tax payers one red cent." Senator Strom Thurmond exhorted the budget director to "take good care of those REAs [Rural Electric Administration co-ops]. Them's some real fine people."
Stockman has a running battle with Secretary of Defense Casper W. Weinberger, whom he accuses of using devious and deceitful tactics to protect the Pentagon budget. At one meeting with the president, Stockman reports, Weinberger displayed a blown-up cartoon showing three soldiers. One was a pygmy with no rifle -- the Carter defense budget. The second was "a four-eyed wimp who looked like Woody Allen" carrying a tiny rifle . . .the OMB defense budget, i.e. Stockman himself. The third was a powerful G.I. Joe figure, fully outfitted and armed, pointing an M-60 machine gun at . . . -- the Stockman figures. That was the Department of Defense budget. "It was so intellectually, disreputable, so demeaning, that I could hardly bring myself to believe that a Harvard-educated cabinet officer could have brought this to the president of the United States. Did he think the White House was on Sesame Street?"
With President Reagan, Stockman's tone shifts from contemptuous to patronizing. Reagan is "kind, gentle, and sentimental" but not an intellectual powerhouse. He couldn't understand the difference between constant dollars and inflated dollars. Nor could he grasp the fact that economic recovery would not reduce the deficit, even though Stockman had charts specially drawn showing unemployment declining and deficits rising on the same page. "What do you do when your President ignores all the palpable, relevant facts and wanders in circles?" Stockman asks.
THIS KIND of stuff is undeniably titillating, and Stockman tries to protect himself by making fun of his own arrogance. In the end, however, one draws an inescapable conclusion: David Stockman is a stinker.
In part, Stockman's problems stemmed from his own failure of understanding. Take the case of government spending. Reagan drives Stockman crazy by telling stories about government waste, fraud and abuse but never acknowledging that shrinking the deficit requires a frontal assault on the welfare state. Stockman the revoutionary is unhappy that Reagan's view of government spending had never developed beyond the sort of thing Lenin used to call "trade union consciousness." "The deficit was a function of politics," Stockman writes, "not inadequate management." As it happens, Reagan's view of government spending coincides exactly with that of the American public. The voters did not elect him to dismantle the welfare state. They elected him to curb its excesses and bring government spending under control.
Or take taxes. At one point in the book, Stockman describes a multiple-choice budget quiz he devised for the president. He divided the federal budget up into about 50 major components and gave the president three spending-cut choices on each. Next to each choice was a description of its likely political and social impact. The President (who, Stockman says, "enjoyed the quiz immensely") rarely chose to make a major cut. In the end, Reagan flunked the exam; after making all his cuts, the five-year deficit stood at $800 billion.
Stockman saw his opening. Now the president would appreciate the need for a tax increase. The minute Stockman brought the subject up, however, the president banged his fist on the table. "I don't want to hear any more talk about taxes," he said. "The problem is deficit spending!"
There is an old Jewish joke about a little boy who has a morbid fear of kreplach, a sort of Eastern European ravioli. His mother consults a doctor, who advises her to show the boy every step on the making of kreplach so he will see that his fear has no basis.
The mother sits her son down at the kitchen table and begins to make kreplach.
"Look, I'm chopping up the meat to make the filling. Nothing to be afraid of here, is there?"
"Good. Now I'm rolling out the dough and cutting it. Nothng to be afraid of here, is there?"
"Fine. Now I'm putting the filling inside the dough. Nothing to be afraid of here, is there?"
"Excellent, Now, we just fold the edges of the dough over the filling like this . . ."
"Aiiee! Kreplach!" the boy shouts and runs out of the house.
Stockman just didn't understand. To Ronald Reagan, taxes are kreplach.
David Stockman, the man of metaphors, has a very strong one in mind for the failure of the Reagan Revolution. "If the SEC had jurisdiction over the White House," he writes, "we might have all had time for a course in remedial economics at Allenwood Penitentiary." He describes the Reagan economic program as the product of a conspiracy: "the work of a small band of ideologues," "the dangerous experiment of a few supply siders who had gotten the President's good ear." A great crime was perpetrated on the country in the form of a triple-digit deficit, and Stockman was a knowing accomplice.
He talks about "the fateful decision to cover up what we knew to be the true budget numbers" at a meeting in James Baker's office on June 5, 1981. The report of that meeting "amounts to the proverbial smoking gun." At one point, the conspirators realized that they were underestimating future deficits by substantial amounts. "Did we really want consciously to mislead the Congress and the public? . . . In response to this came a chorus of of no we dont's . . . Everyone protesting against exactly that which they were doing. Once again, the truth had been buried, and this time the White House had done it deliberately."
THE DEFICIT is Reagan's Watergate and David Stockman is John Dean. He writes, Dean-like, about "the siren of ambition" that led him to join the administration and pursue policies he knew were wrong. Like Dean, he tried to warn the White House of a cancer growing on the presidency. At a luncheon on August 3, 1981, Stockman told the president and the White House staff, "We're facing potential deficit numbers so big that they could wreck the president's entire economic program."
Now we know why Stockman kept taping interviews with William Greider of The Washington Post. He used Greider the way Richard Nixon used the tape recorder in the Oval Office. He wanted to get it all down, to have himself on record as saying, "It would be wrong, that's for sure."
And so we have Stockman the penitent, confessing his sins and exposing the (intellectual) corruption at the heart of the Reagan Administration. Stockman has become an economic evangelist, warning of certain doom if the administration does not end its profligate ways . . .the Charles Colson of the Reagan years.
Unfortunately, the Watergate metaphor falls apart on one crucial point. The country is not aware of any great crime. As Stockman acknowledges, the administration's mandate was to "restore non-inflationary prosperity." That is exactly what it did, at least to the satisfaction of a solid majority of voters. The economy is booming, the president's popularity is at a peak, the Republican Party has made significant political gains, traditional liberalism is in disrepute and a record two thirds of Americans say they are satisfied with the way things are going in the country, according to the latest Gallup poll. It is an off moment to bring out a book on "why the Reagan Revolution failed."
Stockman's book is really about why the Stockman Revolution failed, which is a different subject altogether. Stockman sounds like an antiwar radical of the '60s -- in fact, he was an antiwar radical during the '60s -- complaining about how "the movement" failed. The '60s radicals did fail to smash the evil and corrupt war machine. But they helped end the war and change the nation's foreign policy consensus (witness the current debate on Nicaragua). Now Reagan has changed the consensus about the role of government in American society (witness the Democratic Party's swing away from big government). Stockman is mad because Reagan didn't do it on his terms; he didn't smash the evil and corrupt welfare state.
There are two basic styles of political thinking. Pragmatists believe that whatever works is right. Ideologues believe that if something is wrong, it can't possibly work, even if it does work.
Reagan understands the essential pragmatism of the American public. He knew that in order to convince Americans his ideas were right, he first had to demonstrate that they worked. It made sense, therefore, for the administration to sacrifice everything to the goal of political effectiveness. By demonstrating that his program works, Reagan has attracted many people to his cause who do not necessarily support conservative ideas or values.
OF COURSE Stockman may be right that the nation's current prosperity is only an illusion and that we are due for "a frightful day of reckoning." He predicts that, as a result of the nation's mountain of debt, "the decade will end with a worse hyperinflation than the one with which it began." He not only predicts catastrophe for the future; he insists that nothing has gone right so far. Thus, he is appalled by the Republicans' 1984 campaign. "In 1984 we were plainly drifting into economic peril. But they had the audacity to proclaim a golden age of prosperity." How could they say the Reagan program was working if it was wrong?
In the book, Stockman is exasperated over Reagan's refusal to accept a tax increase. He attributes the president's refusal to sheer obstinacy. Actually, Reagan is the true ideologue. He refused to compromise his tax cut or his defense buildup on principle. "They're all just waiting for us to admit we were wrong so they can go back to tax and spend," the president says. And he is exactly right . . .in a political sense that escapes Stockman.
The president is determined to protect the anti-government consensus in American politics, even at the cost of a mounting deficit. The Reagan Revolution is, after all, an ongoing process. Right now, the Gramm-Rudman-Hollings bill is at least a gesture in the direction of spending discipline. And the tax reform program extends and improves the 1981 tax cut. Stockman wanted a revolution all at once. Reagan knew that prosperity would provide political legitimacy and that, in turn, would establish the basis for continuing the battle against big government.
The deficit may actually be part of that strategy. In 1985, Senator Daniel Patrick Moynihan, one of Stockman's early mentors, suggested that the administration may have pushed through the tax cut with the deliberate purpose of creating a giant deficit. It was not an idle observation. Stockman himself admits that early on, he saw the deficit as a "powerful battering ram" that would "force Congress to shrink the welfare state. It would give me an excuse to come back to them again and again." The deficit effectively prevents Democrats from talking about any new domestic spending programs unless they also talk about raising taxes. Which is exactly what Ronald Reagan wants them to talk about.
In the end, it is Stockman, not Reagan, who gives up on the Revolution. Chastened by his experiences, Stockman concludes that "economic governance must consist of a fundamental trade-off between capitalist prosperity and social security. As a nation we have chosen to have less of the former in order to have more of the latter." He believes it is time for politicians to tell the Americanm people that "a few ideologues made a giant mistake" and that in order to pay for the government the public wants, "new taxes . . .must be levied." Obviously Stockman hasn't been paying much attention to politics. He missed the entire Walter Mondale campaign.