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David Stockman Explains America’s Economic/Political Crisis

Posted by Steve Markowitz on July 19, 2012

The United States is clearly in a long-term economic crisis.  Since the second half of the 1990s the Country has jumped from one bubble crisis to another and with shortening cycle times.  In 2007, the United States had the mother of all bubbles pop, the housing market, leading to the worst financial crisis since the Great Depression.  Since then the Country has been mired in recession, then slow growth and continued high unemployment, and now slowing growth that may lead to a double dip recession.

Since the Great Depression, Keynesian economics has ruled.  A mainstay of Keynesian theory is that when economies slow governments must step in to fill the void with deficit spending.  Progressive governments have been all too happy to embrace this theory as it enables politicians to benefit by collecting votes in return for handing out taxpayer funds to special interest groups.  This corruption maintains their power, and yes increases their wealth.

There is a second significant piece to Keynesian theory that dictates during good times governments must run and save the surpluses that will then be used for its deficit spending during the next difficult economic period.  Progressive politicians have completely ignored this key point of Keynesian theory resulting in the United States having $16 trillion in debt with unfunded liabilities now in the range of $60 trillion.  As a result, the government may have run out of ammunition that could have been used to support economic growth during the ongoing lengthy economic downturn.

David Stockman, previously a budget advisor during the Reagan Administration, was recently interviewed by Bloomberg during which he put context not only to the current economic problems, but also political crisis that perpetuates it.  The video below reviews not only the economic issues the Country faces, but also the political realities behind the ineffective government in Washington.

While a conservative, Stockman is known for speaking his mind irrespective of political consequences.  He resigned from the Reagan Administration after negatively critiquing some of the voodoo economics used during that administration.


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