The dynamics of democratization Book

19 Jan. 2017 - My thoughts 30 years after reading this book:

1. It was a gripping and exemplary history of how this OMB Director in the first Reagan term actually tried to implement Reagan's proposed cuts in the Fed. budget and departments.

2. It showed how most of Reagan's cabinet appointees were far from part of the process to cut the budget, but were rather on the "receiving end" of the cuts, and not happy or supportive.

3. Weinberger (Defense) AND Haig (State) were particularly egregious offenders of Reagan's overall policy of cutting government, and purposely intimidated Stockman and his allies (Paul Craig Roberts and Martin Anderson) to stem any cuts in their departments.

4. Stockman made a very solid case for all the cuts. I have very warm memories of his vigor and comprehension of the need for and desirability of the cuts. From what I remember, he laid out the overwhelming benefits to society from the cuts, far outweighing the downsides to specific bureaucrats or other constituencies.

5. The main problem I had with the book was that it showed that Stockman never understood that any tax increases, which he advocated, would be totally counter-productive to the cuts in spending, and would slow down the economy and needed recovery. He thought tax increases were important, combined with the cuts in spending, to balance the budget. He totally ignored (probably more a fundamental misunderstanding than ignorance) that any increase in taxes would counter the forces for economic freedom and growth of the economy. Making the government smaller overall and especially a smaller part of the economy is key to continuing growth, productivity, innovation, justice and freedom. You know, the kinds of things that people immigrated to America for, fought a revolution to preserve and prospered under over a span of more than 200 years!

6. For these reasons above, I remember loving and hating the book, depending on the passage. I remember the first half or more being the good part - description of his life and the spending cuts process, though frustrating in many ways, because of the opposition from Reagan's own appointees. The second half was his realization that the cuts would not be deep enough, that "politics" was getting in the way, so deficits and increases to the national debt would be coming. At this point his personal turn from the Reagan Admin. was to announce this to Congress/press(?) and also to support tax increases. The famous "taking out to the wood shed" scene played out, where Reagan had to fire him, was described from personal experience.

So - I highly recommend the book for historical insight, and for Stockman's excellent explanations of the benefits and need for government spending cuts, and for knowing just the kind of person Stockman is. Being aware of the massive flaw in Stockman is demonstrated by the later parts of the book and exhibited in his later career in investment banking and trying to own/run an auto parts manufacturer. It seemed to me an incredible betrayal, within Stockman's own philosophy or at least to general economics, to have misunderstood the importance of tax cuts so fundamentally.

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Stockman went on to work in investment banking with Peter Peterson, another even more dubious character, at Blackstone Group. His record there was mixed, but then he went on to found his own Investment group, which did fine for a while, but then invested in an auto industry supplier, and went bankrupt during one of the inevitable and fairly well documented difficult industry extended down-turns.

After some significant time, he came back, with a splash, and started speaking and writing about the looming problem of government spending and the deficit. He had found out about and studied, to some extent, Free Market/Austrian Economics in the meantime, and so his arguments for cutting government spending are even more powerful and insightful now. HOWEVER, he still appears to be hung-up and totally confused on the issue of taxes and the "morality" of the deficit/debt. I remember reading and seeing interviews he granted just before and after his new book release on this subject (with Bill Moyers) and just being incredibly disgusted, especially in light of his increased knowledge and articulation of Austrian insights in how the business cycle works. He cannot plead ignorance of the better ideas at all now.

So, anyone who reads Stockman should be totally aware of this horrible dichotomy between his good side and bad side. For me, the good does in no way outweigh the bad, especially since he has been exposed to and had plenty of time and opportunities to fathom and absorb the reality and true morality of the situation.