Policy

Video: David Stockman on TARP, the Fed, Ron Paul and Reagan

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Federal Reserve Chairman Ben Bernanke's decision to pump even more money into the economy was quickly followed by a stock market surge and a U.S. credit rating downgrade. 

Back in 2011 Reason TV sat down with Reagan budget director David Stockman to discuss the Fed's growing involvement in the U.S. economy and the dangers of stimulus spending. 

Here is the original text from the January 11, 2011 video:

At the very start of the "Reagan revolution," David Stockman exposed the myth that Ronald Reagan and the modern Republican Party are dedicated to small government.

In 1981, the 35-year-old Stockman gave up his Michigan seat in Congress to become Reagan's budget director. A vocal critic of what he continues to call the "welfare-warfare state," Stockman had signed on because he believed in the limited government rhetoric that Reagan espoused. Once inside the White House, Stockman quickly became disenchanted, and gave an interview to journalist William Greider that became the basis for an explosive Atlantic Monthly article in which Stockman admitted that Reagan's spending cuts had been a "Trojan horse" used to justify tax cuts. In his 1985 memoir, The Triumph of Politics, Stockman chronicled Reagan's reluctance to fulfill his campaign promise of shrinking the size and scope of government and balancing the budget. The result? The gross federal debt tripled while Reagan was in office.

Last fall, Stockman was the GOP-defector du jour once more, arguing against extending George W. Bush's tax rates in the New York Times, on 60 Minutes, the Colbert Report, Parker-Spitzer, ABC, NPR, and MSNBC. Stockman's argument—that it's irresponsible to cut taxes when cumulative U.S. debt is steadily mounting as a percentage of GDP—is based on the simple principle that balanced budgets come only when revenues actually meet expenditures. If we're not willing to actually shrink government spending, he says, then we should pay full freight now, rather than forcing our children and grandchildren to foot the bill down the line.

Here's what didn't come across in Stockman's media blitz: Since writing The Triumph of Politics he says he has "completed his homework" by reading libertarian economists such as Ludwig von Mises, Friedrich Hayek, and Murray Rothbard. He thinks TARP was a big-government boondoggle and the bailouts of GM and Chrysler unconscionable. Stimulus spending is a hoax. He sees the abandonment of the gold standard in favor of floating exchange rates as the root cause of both the country's fiscal problems and the 2008 financial crisis. He says that Rep. Ron Paul (R-Texas) is the only politician today "who gets it" and he's hopeful that Paul's growing power may begin to shed light on "the scholastic arrogance" of the Federal Reserve. He's still against the welfare-warfare state and he thinks government should be cut down to size.

Reason.tv's Nick Gillespie sat down with Stockman for a wide-ranging discussion that touched on tax cuts, monetary policy, TARP, Ronald Reagan, his tenure as a Michigan Congressman, and the gold standard. The complete 42-minute interview is here.