David Stockman says Wall Street 'doesn't deserve' extension of tax cuts; US becoming 'banana republic of finance'
A former Reagan administration budget director who was behind the largest tax cut in US history now says the US can't afford any more tax cuts, and both major parties are participating in a "big lie," pretending that no tax hikes are necessary despite a three-decade record of growing budget deficits.
In an interview with ABC's Christiane Amanpour, David Stockman warned that government services, including military spending and social programs, would have to be cut back significantly and taxes would have to be raised to avoid financial "disaster."
Stockman strongly criticized the GOP for their push to extend the Bush tax cuts.
"This is not 1981," Stockman said. "This is not 'morning again in America.' We've drifted now for 30 years."
Stockman continued, "In that 30 years, the deficit has gone up 14 times, but our economy is only four times larger. We're losing the race, and we're now becoming the banana republic [of] finance, printing -- the Fed, these mad men who are out of control at the Fed are printing new money equal to 100 percent of the debt that we're issuing each month. This will not end well. It's going to end in a disaster."
Stockman argued that cuts to government services such as Social Security and Medicare will be necessary. He suggested "means-testing" Social Security benefits such that the top one-third of earners wouldn't receive benefits. He also said Medicare would have to be scaled back "drastically."
In an interview with 60 Minutes last week, Stockman argued the Bush tax cuts must be allowed to expire -- not just the ones on the wealthiest earners, but on everyone.
"We just can't afford them," he told Lesley Stahl. "We couldn't afford them when they were adopted in 2001 and 2003. Since then, we've had two giant unfinanced wars, a huge bailout of Wall Street. This trillion-dollar stimulus program, and we have now created so much national debt, and such large permanent deficits that we're going to have to do some very difficult and painful things to close the gap, or we're going to destroy the economy, and render the federal government insolvent. As hard as that is to believe, we're edging in that direction."
On ABC's This Week Sunday, Rep. Mike Pence (R-IN) disputed Stockman's assertion.
"I don't think higher taxes [are] going to get anybody hired," Pence said. "I think raising taxes in the worst economy in 25 years is a profoundly bad idea."
Stockman argued that raising taxes is ordinarily a "bad thing to do," but the US "is in such dire shape that we have no choice but to accept the negative trade-off of some harm to the economy to start paying our bills."
And he had harsh words for Wall Street as well.
"Two years after the crisis on Wall Street, it has been announced that bonuses this year will be $144 billion -- the highest in history. That's who is going to get this tax cut on the top -- two percent of the population. They don't need a tax cut. They don't deserve it."
Stockman was appointed by President Ronald Reagan in 1981 to run the Office of Management and Budget. He is considered to have been one of the most influential people to have held the position. Stockman was instrumental in passing Reagan's controversial 1981 budget, which included a five-year plan that brought down the top income tax rate from 70 percent to 50 percent.
This video is from ABC's This Week, broadcast Nov. 7, 2010.
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