RandomGuy
09-10-2012, 10:10 AM
Former Reagan OMB director David Stockman
Obama's budget is a fantasy that will not fix our fiscal problems.
Ryan's budget is a fantasy that will not fix our fiscal problems.
Bush tax cuts have to expire for everybody. We have to do that, raise taxes beyond even that, AND cut our promises for entitlement programs.
The Fed is pursuing insane policies
http://video.cnbc.com/gallery/?video=3000109364&play=1
The following transcript has not been checked for accuracy.
our next guest doesn't like the offerings from the gop candidates or obama administration. joining us former reagan omb director david stockman, there's a lot more to you than the way we've been teasing you that you hate the romney-ryan budget and you sound like you're, i don't know, aturncoat republican thrown his lot in with the democrats. in fact, you think ron paul probably has the -- he was the only one that was right about the fed and the fed is the heart of the problem. we have destroyed the capital markets, the money markets, interest rates mean nothing, everything is trading off the fed, wall street isn't even home. it's a bunch of computers trading word clouds, you know, emitted by the central bank or that. now in that environment, everybody's being given the wrong signal, in other words the ryan-romney campaign is about restoring vibrant capitalism. how can you do that when the financial markets are dead? the lifeblood of a capitalist system. that is the problem today. the other thing he pointed out, why would either side come to the table to deal with long-term entitlement issues when you can borrow at zero? look at the yield curve this morning, three-year money, 33 basis points, that's absurd. one-year money, 11 or 16 whatever it is. all the way out to five years, you can fund that at 65 basis points. i spent a lot of years in washington in congress, i know what it takes to have people fall on the sword, to really reform entitlements, finally face up to the military industrial complex or maybe begin to reform the tax code. they'll never do it if you can keep borrowing free money forever because the fed and these lunatics who are running it, and i use that word advisedly, are basically telling the whole world untruths about the cost of money, about the cost of risk, about how you allocate capital. you wonder why we get bubbles and when you're keeping things at zero and obviously that's not what any of these yields, where they should be. let me ask one other thing -- you say that the reason you're mad at the republicans becauseabandoned the republican principles of their forefathers. exactly and everything that ronald reagan stood for in the 1980s went down the tubes in september 2008 when they bailed out wall street, when they came in with this t.a.r.p., which was an abomination, when they were unwilling to let morgan stanley go down the tubes which it should have because of the speculation it was doing and the irresponsible, reckless balance sheet that it had. if you can't fail you shouldn't succeed. that's exactly right, so we haven't even adressed any of that. we have simply said there were some great prices, we don't know where it came from, maybe an asteroid or meteor from outer space, but it's over and we're going to keep interest rates at zero for six years. go back to pre-1990, i was around quite a while. no one in 1990 would have thought keeping interest rates at zero for six years was anything but lunatic. the romney-ryan budget, some of the things you don't like about it, you hear that medicare is going to end as we know it and the republicans come back and say well wait a second, anyone who is over 55 won't be touched. that's what you don't like about it. takes ten years to address medicare. you want to address it sooner. you want to do a lot of cuts that the progressives would not like. of course. you admit there's tax -- of course. they got the wrong guy for their posterchild for the left. i think they do but here is the thing. we have an $800 billion defense and national security budge pet right. i call that the warfare state. it's absurd we're spending $800 billion when we have no industrial enemies in the world. ryan wants to hold it. 800 billion goes to social security, $40 million of the people on it need it, there's 15 million that are affluent that have many other assets and sources of income, they should be means tested now. medicare, he's taken a huge hit for medicare, doesn't touch it until 2023. why does someone think we'll get between now and 2023 -- third rail because he can't say 2023 without getting demagogued. what would you cut the defense budget by? a third. radically tell the generals put your toys way, get out your sharp pencils, we are going to bring this down to a level in real terms thaisenhower in 1960 said we can live with when we were facing an industrial enemy that was able to do some damage to the united states. where would you cut? i would means test heavily social security, medicare, drastically reduce defense spending. how would you handle medicare? would you like a voucher program? it's too late for that. you need to simply means test it, so if you're affluent, you're going to pay a much higher premium. everybody needs to pay bigger copays, bigger deductible. the equivalent of raising taxes on some people. we have to raise taxes on everybody. the bush tax cuts, all of them, for everybody. we cannot afford them. we couldn't afford them then. he's not the guy you thought he was. you want him to come in, you were going, we're not worthy, we're not worthy. that's not who he is, and you've written these things about the fantasy of the -- if you ever wrote about the obama budget it would be a nastier piece. the reason i haven't done that is i assumed people could see that. you can't assume that. we're going to meet all the actresses, you want to be a left winger so you can meet hollywood, that's not it, right? i tell you what, the obama budget is total fantasy. he is saying we're four square for protecting social security forever and medicare you can't take a dime out. you want to throw him off the set? he came in under false pretenses. i happen to agree with him as well. here's the thing about obama, to do all of that, fine, that's what a liberal democrat wants to do. at least you know what you're getting. a pro-big government democrat but you can't keep taxes low on 98% of the population. the bush tax cuts for the 98%. they love those. what are progressives thinking? half of the population doesn't even pay income tax and getting protected already. the rest of the population has to pay for the government that all these democrats and big government, big spenders want. and the problem we have right now is two free lunch parties giving bad signals to everybody. i want to go back to the junk bond rate of 4.95 on the bb. what kind of signal are you giving to the private sector that you can borrow way down deep in the capital structure of a bb credit, a junk credit, for 250 basis points over inflation. you're in the private sector, dinakar, what do you think? corporate balance sheets have gotten better in the last number of years. lower rates hasn't led people to borrow money. people have been in repair mode. government sector isn't borrowing money and private is shoring up cash as fast as they the issue with politics is practical. when we talked to companies and look at markets, to some degree you care whether taxes are at one level versus another. most of all you want people to stop yelling and have some predictability. if there's no predictability. there's a lot to yell about. how about corporate cronyism. it's terrible, the fiscal cliff everybody talks about as if it's a one-time event. it's not. it's a permanent event. we've got ourselves buried so deep in promises and parties dug in, the republicans are out of their minds saying that they can't -- you agree with david walker? he's good. he totals up our promises, it's not 17 trillion, it's like 60. joe when you get to the cliff, 500 billion of tax cuts expiring, 100 billion a year of the sequester and so forth. they're not going to solve it through some grand compromise.
Q:what would happen if the bush tax cuts expire?
A:the economy would go into recession, which it needs to.
i know that's controversial statement. our deficit woulgo away in ten years. we have to eat our broccoli, we can't stimulate artificially the economy by borrowing from the future. you can do it for one year at the bottom. this is month 39 of the recovery, 39 months. you don't see any hope the way it's being demagogued on both sides. of course not but what i'm saying the average cycle since world war ii has been 48 months. we're in month 39 and we have all of these boys and girls on wall street begging the fed for another injection of sugar. now this is how sick the system is, and you have to blame it on the federal reserve, so if romney were real about what he's saying about restoring capitalism he would say day one, hour one, job one, bernanke is fired. he does say that. he's not that clear about it. but until he says we're going to clean house at the fed because that's where this crisis came from in 2008, that's why we're still buried, we're crushing savers, we're giving specuors and traders free overnight money we're telling you through '14 you get free -- you weren't expecting this, i'm sorry. i think he's got pretty interesting views. i'm listening very closely. but isn't it true that when you tell traders that 'til 2014 the overnight rate is zero, you buy anything with a yield, anything with a duration, because the fed isn't going to surprise you. now i was there -- keeping a little bit of consistency. i was there when volcker was fed chair hahn. there wasn't a guy on wall street who wanted to take anything for granted because he was going to do what he thought was right, he wasn't going to placate the boys and girls who want a little more. david, it was great, thank you, and very much clearer now.
I fully agree with this guy.
Democrats have to man up to their left base and suck up the real fiscal medicine.
Obama's budget is a fantasy that will not fix our fiscal problems.
Ryan's budget is a fantasy that will not fix our fiscal problems.
Bush tax cuts have to expire for everybody. We have to do that, raise taxes beyond even that, AND cut our promises for entitlement programs.
The Fed is pursuing insane policies
http://video.cnbc.com/gallery/?video=3000109364&play=1
The following transcript has not been checked for accuracy.
our next guest doesn't like the offerings from the gop candidates or obama administration. joining us former reagan omb director david stockman, there's a lot more to you than the way we've been teasing you that you hate the romney-ryan budget and you sound like you're, i don't know, aturncoat republican thrown his lot in with the democrats. in fact, you think ron paul probably has the -- he was the only one that was right about the fed and the fed is the heart of the problem. we have destroyed the capital markets, the money markets, interest rates mean nothing, everything is trading off the fed, wall street isn't even home. it's a bunch of computers trading word clouds, you know, emitted by the central bank or that. now in that environment, everybody's being given the wrong signal, in other words the ryan-romney campaign is about restoring vibrant capitalism. how can you do that when the financial markets are dead? the lifeblood of a capitalist system. that is the problem today. the other thing he pointed out, why would either side come to the table to deal with long-term entitlement issues when you can borrow at zero? look at the yield curve this morning, three-year money, 33 basis points, that's absurd. one-year money, 11 or 16 whatever it is. all the way out to five years, you can fund that at 65 basis points. i spent a lot of years in washington in congress, i know what it takes to have people fall on the sword, to really reform entitlements, finally face up to the military industrial complex or maybe begin to reform the tax code. they'll never do it if you can keep borrowing free money forever because the fed and these lunatics who are running it, and i use that word advisedly, are basically telling the whole world untruths about the cost of money, about the cost of risk, about how you allocate capital. you wonder why we get bubbles and when you're keeping things at zero and obviously that's not what any of these yields, where they should be. let me ask one other thing -- you say that the reason you're mad at the republicans becauseabandoned the republican principles of their forefathers. exactly and everything that ronald reagan stood for in the 1980s went down the tubes in september 2008 when they bailed out wall street, when they came in with this t.a.r.p., which was an abomination, when they were unwilling to let morgan stanley go down the tubes which it should have because of the speculation it was doing and the irresponsible, reckless balance sheet that it had. if you can't fail you shouldn't succeed. that's exactly right, so we haven't even adressed any of that. we have simply said there were some great prices, we don't know where it came from, maybe an asteroid or meteor from outer space, but it's over and we're going to keep interest rates at zero for six years. go back to pre-1990, i was around quite a while. no one in 1990 would have thought keeping interest rates at zero for six years was anything but lunatic. the romney-ryan budget, some of the things you don't like about it, you hear that medicare is going to end as we know it and the republicans come back and say well wait a second, anyone who is over 55 won't be touched. that's what you don't like about it. takes ten years to address medicare. you want to address it sooner. you want to do a lot of cuts that the progressives would not like. of course. you admit there's tax -- of course. they got the wrong guy for their posterchild for the left. i think they do but here is the thing. we have an $800 billion defense and national security budge pet right. i call that the warfare state. it's absurd we're spending $800 billion when we have no industrial enemies in the world. ryan wants to hold it. 800 billion goes to social security, $40 million of the people on it need it, there's 15 million that are affluent that have many other assets and sources of income, they should be means tested now. medicare, he's taken a huge hit for medicare, doesn't touch it until 2023. why does someone think we'll get between now and 2023 -- third rail because he can't say 2023 without getting demagogued. what would you cut the defense budget by? a third. radically tell the generals put your toys way, get out your sharp pencils, we are going to bring this down to a level in real terms thaisenhower in 1960 said we can live with when we were facing an industrial enemy that was able to do some damage to the united states. where would you cut? i would means test heavily social security, medicare, drastically reduce defense spending. how would you handle medicare? would you like a voucher program? it's too late for that. you need to simply means test it, so if you're affluent, you're going to pay a much higher premium. everybody needs to pay bigger copays, bigger deductible. the equivalent of raising taxes on some people. we have to raise taxes on everybody. the bush tax cuts, all of them, for everybody. we cannot afford them. we couldn't afford them then. he's not the guy you thought he was. you want him to come in, you were going, we're not worthy, we're not worthy. that's not who he is, and you've written these things about the fantasy of the -- if you ever wrote about the obama budget it would be a nastier piece. the reason i haven't done that is i assumed people could see that. you can't assume that. we're going to meet all the actresses, you want to be a left winger so you can meet hollywood, that's not it, right? i tell you what, the obama budget is total fantasy. he is saying we're four square for protecting social security forever and medicare you can't take a dime out. you want to throw him off the set? he came in under false pretenses. i happen to agree with him as well. here's the thing about obama, to do all of that, fine, that's what a liberal democrat wants to do. at least you know what you're getting. a pro-big government democrat but you can't keep taxes low on 98% of the population. the bush tax cuts for the 98%. they love those. what are progressives thinking? half of the population doesn't even pay income tax and getting protected already. the rest of the population has to pay for the government that all these democrats and big government, big spenders want. and the problem we have right now is two free lunch parties giving bad signals to everybody. i want to go back to the junk bond rate of 4.95 on the bb. what kind of signal are you giving to the private sector that you can borrow way down deep in the capital structure of a bb credit, a junk credit, for 250 basis points over inflation. you're in the private sector, dinakar, what do you think? corporate balance sheets have gotten better in the last number of years. lower rates hasn't led people to borrow money. people have been in repair mode. government sector isn't borrowing money and private is shoring up cash as fast as they the issue with politics is practical. when we talked to companies and look at markets, to some degree you care whether taxes are at one level versus another. most of all you want people to stop yelling and have some predictability. if there's no predictability. there's a lot to yell about. how about corporate cronyism. it's terrible, the fiscal cliff everybody talks about as if it's a one-time event. it's not. it's a permanent event. we've got ourselves buried so deep in promises and parties dug in, the republicans are out of their minds saying that they can't -- you agree with david walker? he's good. he totals up our promises, it's not 17 trillion, it's like 60. joe when you get to the cliff, 500 billion of tax cuts expiring, 100 billion a year of the sequester and so forth. they're not going to solve it through some grand compromise.
Q:what would happen if the bush tax cuts expire?
A:the economy would go into recession, which it needs to.
i know that's controversial statement. our deficit woulgo away in ten years. we have to eat our broccoli, we can't stimulate artificially the economy by borrowing from the future. you can do it for one year at the bottom. this is month 39 of the recovery, 39 months. you don't see any hope the way it's being demagogued on both sides. of course not but what i'm saying the average cycle since world war ii has been 48 months. we're in month 39 and we have all of these boys and girls on wall street begging the fed for another injection of sugar. now this is how sick the system is, and you have to blame it on the federal reserve, so if romney were real about what he's saying about restoring capitalism he would say day one, hour one, job one, bernanke is fired. he does say that. he's not that clear about it. but until he says we're going to clean house at the fed because that's where this crisis came from in 2008, that's why we're still buried, we're crushing savers, we're giving specuors and traders free overnight money we're telling you through '14 you get free -- you weren't expecting this, i'm sorry. i think he's got pretty interesting views. i'm listening very closely. but isn't it true that when you tell traders that 'til 2014 the overnight rate is zero, you buy anything with a yield, anything with a duration, because the fed isn't going to surprise you. now i was there -- keeping a little bit of consistency. i was there when volcker was fed chair hahn. there wasn't a guy on wall street who wanted to take anything for granted because he was going to do what he thought was right, he wasn't going to placate the boys and girls who want a little more. david, it was great, thank you, and very much clearer now.
I fully agree with this guy.
Democrats have to man up to their left base and suck up the real fiscal medicine.