His solution? Stop stimulus spending. Cut spending dramatically for several years. And raise taxes. Not a platform for getting elected, but it makes sense. Regardless of party affiliation, I think he's right. The long drunken party of spending beyond our means is over. We're broke and the debt must come down.
In a recent op-ed in The New York Times, Stockman wrote:
"In fact, since chronic current-account deficits result from a nation spending more than it earns, stringent domestic belt-tightening is the only cure. When the dollar was tied to fixed exchange rates, politicians were willing to administer the needed castor oil, because the alternative was to make up for the trade shortfall by paying out reserves, and this would cause immediate economic pain — from high interest rates, for example. But now there is no discipline, only global monetary chaos as foreign central banks run their own printing presses at ever faster speeds to sop up the tidal wave of dollars coming from the Federal Reserve."This weekend, Stockman's the focus of The Big Interview in The Wall Street Journal.
3 comments:
No, no, no. A thousand times , NO!
Cutting spending is the only rational response to deficits. The adverse effect of increased taxation is well documented. We can grow our way out of a deficit if the spending of the central government is reduced. But the additional burden of increased taxes will slow growth enough that the Keynesians will have a resurgence. And that is the kiss of death, as we have seen recently.
Did you say grow? Grow our way out of several years of a deflationary economy? Pray tell how?
And why would we be deflating? There are too many competing arguments here, but the overwhelming evidence of economic success with lower taxes and less government spending is a powerful incentive to try it again. Could it make the economy worse? I just don't see how.
Post a Comment