Ep. 60 Krugman Copes With Trump: Special Guest David Stockman

13 November 2016     |     Tom Woods     |     23

Even though Donald Trump supports massive infrastructure spending financed by debt in order to put people to work (sound familiar), Krugman is of course horrified by the election result. This week we’re joined by David Stockman, director of the Office of Management and Budget under Ronald Reagan, to review what Trump is likely to accomplish, what the Democrats will block, and what it all means for the economy.

Krugman Column

Thoughts for the Horrified” (November 11, 2016)

Contra Column

Paul Krugman Says Markets Will ‘Never’ Recover from Trump; Dow Hits Record High,” by Blake Neff

Guest’s Website

David Stockman’s Contra Corner

Recent Books by the Guest

Trumped!: A Nation on the Brink of Ruin…And How to Bring It Back
The Great Deformation: The Corruption of Capitalism in America

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  • Nonlinear Sandwich

    Dr. Murphy, you are a great economist and a very funny guy. But please stop saying “per se” gratuitously.

    • Kevin Burciaga

      Or “by the same token”. Haha.

      • Nonlinear Sandwich

        I hope Dr. Murphy doesn’t think we’re picking on him. I’m actually reading “Choice”. But some of us just like to watch other people’s language. Thanks to the division of labor, we have time for such trivial pursuits.

  • ax123man

    Is it just me, or does it sound like Stockman is saying something like “I’m really not a huge fan of this keynesian, Fed driven economy. What we need is a DIFFERENT form of central planning with just the right amount of lever pulling here and there”. Stockman appears to talk a good talk, and would certainly be better than what we do see with a Trump Presidency, but it sounds like a whole lot of rhetoric and finger pointing with no solutions. Also, Bob being there was a bit weird. Like he was tagging along on an episode of the Tom Woods show. I pictured him in the background biting his tongue. But maybe I”m wrong…

    • http://www.TomWoods.com Tom Woods

      I don’t agree. Stockman isn’t an anarchist, so he does believe in some government functions and the funding of those functions. But he’s against both fiscal and monetary stimulus, root and branch.

      • ax123man

        Thanks Tom, that’s good to know.

      • http://www.jesus-on-taxes.com/ Ned Netterville

        Anarchism, better nominated “voluntaryism,” is the logical terminus of laissez-faire economics and of libertarian thinking, even if Mises, who conducted us so far along the way, never arrived at that destination before he passed away, but I believe he would have with his student Murray Rothbard holding his hand.

        It seems to me that David Stockman has come along way from the conservative tent down the road of libertarianism, but he has to take the next logical step if he is going to leave a lasting mark.

  • http://www.jesus-on-taxes.com/ Ned Netterville

    More than David Stockman, the new administration needs me if President-elect Trump really intends to “drain the swamp.” Unless my swamp-draining plan is followed, the swamp will immediately be refilled. I have sent my resume into the administration, but if Stockman does indeed get a high position working for Trump, ask him to personally hand my resume (attached) to the President elect:

    RESUME

    Ned Netterville, DSDE, EDACS, I-TP, PhD
    (Address, phone number. email address redacted)

    PROFESSIONAL CREDENTIALS

    Licensed and Certified Swamp Draining Engineer
    Licensed and Certified Dangerous Animal Control Specialist
    IRS-Certified Illegal-Tax Protester (1971 to Present)
    PhD in Austrian Economics

    EDUCATION & DEGREES AWARDED

    Okefenokee School of Swamp Engineering, Doctor of SDE
    Dunlap Exotic and Dangerous Animal Control School, EDACS
    Internal Revenue Service Certified Illegal-Tax Protester, I-TP
    Lone Oak , TN, Intl. School of Common-Sense Economics, PhD

    D.C. PLAN

    My dissertation for the terminal engineering degree (DSDE) in swamp draining technology was a plan to drain the D.C Swamp and keep i drained.
    It received the Dean’s Medal for Innovation, was designated “America’s Most Dangerous Plot” by the Service Employees International Union and was lauded by the National Taxpayers Union. It remains the only plan in existence for draining the D.C. Swamp and keeping it drained by blocking the inflow of money that becomes stagnant when it reaches D.C. The plan includes the humane capture and relocation of alldangerous denizens of the swamp including alligators, rattlesnakes, water moccasins, and an invasive species, the Entitled Bureaurat. Any swamp administrator who does not effectively eliminate the hazardous species will quickly be co-opted or eaten by the resident swamp creatures before any draining project can begin. The key to my plan’s award-winning design is the repeal of the federal individual income tax as the only way to ensure the D.C. swamp is never refilled with stagnant money and reinfested with dangerous critters. (Proof of dangers: D.C. Election Results: Clinton 93%, Trump 4%)

  • tgmolitor

    Regarding Stockman’s “Fly-Over America” remedies: We have to look at the big picture. Which do we want, lower prices on Chinese goods, or millions of jobs and a manufacturing base? Trump is merely saying that we as a country will be better off with a manufacturing base. And if this brings about higher costs on Chinese goods, then this is the cost of legitimate prosperity.

    Moreover, if we lower corporate and individual taxes, strip away the massive regulations, and abolish the labor union monopolies, we can have both low priced goods and jobs, right here in America. And the goods will be American made, not Chinese made.

    This, however, will require enacting penalties for those corporations who don’t care about America and jobs for Americans, those corporations who care only about one thing, their own profits. Corporations must be lured back to America with a rational trade policy. This luring must take place with both carrot and stick methodologies. The carrot is lower taxes and a cessation of regulations, while the stick is tariffs attached to the goods of those corporations who are willing to gut America of her jobs so that they can make billions more in profits.

    Trump merely says there will be consequences for these types of corporations. On what authority is he able to say and do this? The Constitution gives government the power. Article 1, Section 8, Clause 3 states: “The Congress shall have Power To regulate Commerce with foreign Nations.”

    Congress has to make up its mind. What is more important, low cost Chinese goods or abundant manufacturing jobs for American workers? If history is any judge, the latter is far and away more important. No nation remains strong and prosperous without a strong manufacturing base. We had this base prior to 1993 and the chain of multilateral trade agreements that Washington put us into (NAFTA, WTO, TPP, etc.)

  • David Arum

    Even though it may not have been apparent ,the USA likely was losing breadwinner jobs in the 1990’s .

  • Liberty Hawk

    How is the income tax distinguished from other payroll taxes? That is, according to Stockman, which payroll taxes should be reduced?

    • martinbrock

      By “payroll tax”, he means the FICA (Federal Insurance Contributions Act) tax that theoretically funds Social Security and Medicare. I agree with Stockman’s proposal to cut it, but the FICA tax is already insufficient to fund current Social Security and Medicare benefits. Cutting it requires depleting the “trust fund” even faster or making up the difference with other tax revenue or with more borrowing/money printing. The third rail is still hot, and Trump has already promised not to touch it, so I doubt that Stockman’s proposal has a prayer.

      • Liberty Hawk

        Thank you. I could only think he was referring to Soc. Sec. and Medicare, but as he didn’t address the obvious problem with those already being under-funded liabilities, I thought I must be missed something.
        One other puzzling assertion I heard Stockman make was that monetary policies should support increasing employment/labor while reducing consumption. Doesn’t supply-and-demand work such that diminishing consumption will lead to a lower demand for labor?

        • martinbrock

          I don’t know how a change in monetary policy has this effect, but I understand the goal. Reducing consumption need not reduce demand for labor, because all consumption is not the same. Spending a trillion dollars on a fruitless war is “consumption” for example, but this consumption may employ much less labor than other expenditures, and it also consumes (and destroys) productive resources that could employ labor otherwise. Employing people to build an F35 is the worst sort of jobs program imaginable.

          I hesitate to advocate any policy at the Federal level, but I would favor replacing the income tax with a progressive consumption tax, and I suspect that Stockman would too. By “progressive consumption tax”, I mean something like the existing, progressive income tax with an unlimited deduction (or deferral) for investment, essentially lifting the limit on contributions to IRAs, 401ks and the like. If Bill Gates reinvests a billion dollars, he pays no income tax on this income. If he consumes, rather than investing, only $100,000 in a year, he pays no more income tax than someone who earns only $100,000 and consumes it all.

          Of course, I couldn’t support this reform if it were revenue neutral, since it would likely increase my tax burden, but I don’t want revenue neutral tax reform. I want Congress forced to slash spending, first and foremost in the DOD. I agree with Ron Paul that phasing out the welfare state must be more gradual.

          • Liberty Hawk

            I agree that revenue neutral tax reform is not the answer. Likewise, the idea of a balanced budget initiative is worrisome: so long as taxing and borrowing increase to keep up with budget demands, there would be nothing to restrain federal spending. So I didn’t understand Rand Paul’s support for such an amendment.
            Coincidentally, I was 18 in 1980, as well. I remember when my state’s governor, Ronald Reagan, closed state-run mental hospitals to cut (or redirect) spending. I still hear Californians complaining about it. I live 15 minutes from such a facility, which became a public university. These, as we all know, are currently helping to create a nationwide education bubble with $1 Trillion in student loan debt.
            So many issues to be addressed! It’ll be interesting to observe the fights on Capitol Hill in Trump’s first few months in office.

  • http://tklist.us TKList

    3 Cs of economic growth:
    Cut Regulation, Cut Spending, Cut Taxes

    • travis690

      One more: Cut out government.

  • http://tklist.us TKList

    David Stockman, Tom Woods and Bob Murphy for president for 24 years.

  • travis690

    Maybe when they have the upcoming government shut-downs, they will actually shut down useless parts of the government on a permanent basis. I also agree that the Fed Put will vanish when it’s most expected to be implemented.

    President-elect Trump can start with a proclamation on January 20 that effective January 21, all federal agencies that begin with a letter are henceforth shut down and eliminated. And that whatever agencies are left, will be permanently eliminated on January 22.

    The next step would be to declare that the Legal Tender laws were illegally enacted, and are no longer enforceable, followed up by stating that the United States Dollar is now fully convertible into gold. Unfortunately, it would be at a much higher price than what current markets value it.

    I know…some of this is fantasy, but it helps the mind to dream sometimes.

  • Uffe Merrild

    I was so much waiting to hear Bob and Tom discuss the Krugman column in face of “defeat at the polls” – but I was disappointed by hearing so much David Stockman talk, not even related to the Krugman column 🙁

    I really look forward to hearing the next episode as this one was more about David Stockmans critizism of the current system, rather than a discussion of Paul Krugmans latest creation on text.

    I know you guys like David Stockman, and of course this is your podcast, your choices.

    Personally I would have preferred a three-way discussion as you have had on the podcast many times before, among the best one being with Gene Epstein.

    Can I cast a vote for more talking time for Tom and Bob going forward? 🙂

    • hyraxx

      I agree. I had severe ADD trying to listen on my commute home. The equivalent of a wall of text.

      To be fair, I felt the same way about listening to Scott Horton. Maybe I just need to learn to focus more.

  • asertus

    Tax reform should go towards a new TVA replacing sales tax along with a big reduction in payroll tax and “normal” income tax.

    TVA is how countries protect local companies from abroad competition, because companies get refunded for the TVA they pay, but not so importers, making imported products more expensive.

    Problem is that, in my country, in Europe, there is always a discussion about rising TVA and reducing SS costs to improve competitivity, but, in the end, polititians only agree on rising both of them, TVA and SS payments…

  • Matt Voegtli

    I think you guys underestimate bartending/waiter jobs using the 50k dollar a year benchmark that he uses for breadwinning jobs that david uses. Having been a waiter most my life i make between 27 and 37 dollars an hour with my average being 32. I do not live in a california or seattle, but in an averagr cost of living city. Granted, I am the highest earner in the restaurant (Im a capitalist after all) but many people much less skilled than me are still pulling in about 25 an hour.

    And bartenders do much better than that. Most of them are making at least 70k if they work full time. I know a few who make over 100k, working 40 hours or less a week.

    Not only that we have inflation security these other “breadwinner” jobs dont. I get a raise when minimum wage increases, and with inflation as the restaurant raises their prices. Breadwinner jobs however do not, and may have the opposite effect as the company has to pay some employees worth less more.

    Now many people in restaurant tend towards the lazy side so may only work 15-25 hour weeks. But that does not neccessarily mean working normalhours they would not hit the breadwinner status.

    Anyway, love your work. Just wanted to point out out i think you have restaurant serving/bartending jobs wrong as breadwinner jobs. I suspect bartendibg in particular, per hour, is going to be very high paying.