So you thought "voodoo economics" was just a George Bush campaign wise- crack about Reagan's policies? I hope you have been reading what OMB Director David Stockman has been confessing privately to my Washington Post colleague, William Greider, in an Atlantic article entitled "The Education of David Stockman."
The article provides a stunning, candid insight into the formulation of economic policy by the Reagan administration. It validates in undisputable terms what critics of Reaganomics have said from the beginning--that cutting taxes excessively, and pumping up the military budget would not produce balanced budgets, but only big deficits and high interest rates.
The young budget director--a dynamic force behind Reagan's widely acclaimed budget-cutting offensive earlier this year--admits that the actual cuts were made to look far more important than they really are. What's more, he acknowledges what many have long suspected, that the optimistic forecast of the economy that provided a rationale for big tax cuts and a swelling of the Pentagon budget was really a phony.
"None of us really understands what's going on with all these numbers," Stockman told Greider.
For all of the elaborate rhetoric on how the Kemp-Roth bill would stimulate investment by cutting marginal tax rates, for all of the baloney spoon- fed to willing congressmen by Arthur Laffer, Jude Wanniski and Rep. Jack Kemp, Stockman confesses that he knew from the very start that "the supply-side formula was the only way to get a tax policy that was really 'trickle down.' Supply side is 'trickle down' theory."
Stockman concedes the point that the tax cut is a rich man's bill. "Do you realize the greed that came to the forefront (when the tax legislation went to the Hill)?" he asked Greider. "The hogs were really feeding. The greed level, the level of opportunism, just got out of control. . . . The politics of the bill turned out to be very traditional. The basic strategy was to match or exceed the Democrats, and we did."
Although the Democrats have little to be proud about, considering their role in expanding this year's tax give- aways, Greider's piece undoubtedly will provide a field day for them as they search for a new political platform: Stockman is saying flat out that Reaganomics is a failure, and the economic arguments for it were fraudulent --and he knew it. What he calls for, in effect--at the obvious risk of his job-- is a drastic revision of Reaganomics, something that the White House team headed by Ed Meese isn't ready to do.
"This government must stiffen its spine and not throw in the towel on our fight to get federal spending under control," said President Reagan at his Tuesday press conference. But what Stockman is saying is that the president will never get spending under control or achieve his other goals with this program. And he's right.
This reporter and many others have cited as the key internal inconsistency of Reaganomics the attempt to blend an expansionary fiscal policy with a restrictive monetary policy. Since April, one concludes from the Greider account, Stockman has reluctantly come to the same conclusion.
When the financial markets hit the toboggan during the late summer, White House spokesmen whined about Wall Street's lack of "support" for the Reagan program. But Stockman was telling Greider in a weekly t.ete-Ma-t.ete that Wall Street was right.
"I take the performance of the bond market (which was deeply depressed) deadly seriously," Stockman said. "I think it's the best measure there is. The bond markets represent worldwide psychology, worldwide perception and evaluation of what, on balance, relevant people think about what we're doing. . . . It means we're going to have to make changes. . . ."
For most of this past week, President Reagan and Treasury Secretary Donald Regan--who seems to be moving into the key economic advisory slot --have been insisting that the administration would stick firmly to its economic proposals, even though recession, and the realities that Stockman recognizes, have made mincemeat of its predictions.
The president now says that there will be no balanced budget in fiscal 1984 and admits that "none of us" had predicted a recession, expecting merely "a stagnant economy."
What President Reagan has to acknowledge beyond that is the main thrust of the Stockman confessional: there's no way to get the economy out of the mess he's put it in unless he agrees to junk supply-side mythology. By January, when he must revise budget forecasts, Reagan will need a new and more plausible scheme. Painful as it may be for him, it will have to incorporate a lesser tax cut and a lesser defense buildup in fiscal year 1983 and beyond.