People old enough to recall the fall of 1981 might remember the huge fuss that occurred when the Atlantic published William Greider’s article “The Education of David Stockman,” in which Reagan’s budget director went overnight from whiz kid to Deep Throat. For readers too young, or anyone wanting their memory refreshed, here’s part of my account of the debacle in The Age of Reagan:
“I’ve never believed that just cutting taxes alone would cause output and employment to expand,” Stockman told Greider. It got worse: “Kemp-Roth was always a Trojan horse to bring down the top rate.” Greider thought “This seemed a cynical concession for Stockman to make in private conversation while the Reagan Administration was still selling the supply-side doctrine to Congress.” From the immediate sequel in the article, it appears Greider pressed Stockman on this issue, and Stockman admitted that Reaganomics was no more than its liberal critics had made it out to be. Stockman: “It’s kind of hard to sell ‘trickle down,’ so the supply-side formula was the only way to get a tax policy that was really ‘trickle down.’ Supply-side is ‘trickle-down’ theory.” Later in the article Stockman seemed to imply that supply-side economics was a “crackpot theory.”
At first the article received only secondary notice in the media, with a few short wire service stories buried far back in the news pages of the major papers. But when CBS Evening News led with the Atlantic story two days after the magazine hit the newsstands, it propelled it into a bombshell. The New York Times put the story on the front page: “Stockman’s Views Touch Off Furor,” and the story was the focus of the punditocracy for more than a week. Typical of the media judgment of the episode was Hobart Rowen’s column in the Washington Post: “Stockman is saying flat out that Reaganomics is a failure, and the economic arguments for it were fraudulent—and he knew it.” The New York Times editorial page said “The Reagan Administration’s vaunted economic policy cannot work; the Administration knows that; and yet the Administration keeps on flogging it as just the medicine America needs,” and went on to compare Reagan’s “deception” to Lyndon Johnson’s disastrous decision to pursue “guns and butter” in the 1960s. Ecstatic Democrats claimed vindication, and read the entire article into the Congressional Record as though it was the equivalent of the Pentagon Papers. Tip O’Neill was triumphant: “The architect of the Administration’s program is admitting exactly what I and other critics have been saying for six months.” . . . The Atlantic article finished off what little political momentum Reaganomics had left.
This episode is relevant because of Ryan Lizza’s recent New Yorker article “The Obama Memos,” especially its revelation of a 57-page memo on economic policy that Larry Summers sent to Obama during the transition period, in which Summers warned Obama about the limits of Keynesian stimulus spending and the broader fiscal abyss the nation was facing. (You can view the actual memo here.) Although Summers joined the Administration as director of the national economic council, Obama and his political team obviously ignored Summers.
Lizza’s New Yorker article ought to be to Obama what Stockman’s confessions to The Atlantic were to Reagan: a major media bonfire. It has attracted some attention, but not as much as it ought to have. My AEI colleague James Pethokoukis outlines 11 stunning revelation from the Summers memo, with quotes from the text:
1. The stimulus was about implementing the Obama agenda.
The short-run economic imperative was to identify as many campaign promises or high priority items that would spend out quickly and be inherently temporary. … The stimulus package is a key tool for advancing clean energy goals and fulfilling a number of campaign commitments.
2. Team Obama knows these deficits are dangerous (although it has offered no long-term plan to deal with them).
Closing the gap between what the campaign proposed and the estimates of the campaign offsets would require scaling back proposals by about $100 billion annually or adding new offsets totaling the same. Even this, however, would leave an average deficit over the next decade that would be worse than any post-World War II decade. This would be entirely unsustainable and could cause serious economic problems in the both the short run and the long run.
3. Obamanomics was pricier than advertised.
Your campaign proposals add about $100 billion per year to the deficit largely because rescoring indicates that some of your revenue raisers do not raise as much as the campaign assumed and some of your proposals cost more than the campaign assumed. … Treasury estimates that repealing the tax cuts above $250,000 would raise about $40 billion less than the campaign assumed. … The health plan is about $10 billion more costly than the campaign estimated and the health savings are about $25 billion lower than the campaign estimated.
For the other eight of Jim’s observations, click here.
My question is, where is the CBS Evening News on this story? Why isn’t the New York Times all over it? Oh, why am I asking such a silly question? Mitt Romney’s tax returns are so much more important, obviously.