Stockman was one of the most controversial OMB directors ever appointed, also known as the "Father of Reaganomics." He resigned in August 1985. Committed to the doctrine of supply-side economics, he assisted in the passing of the "Reagan Budget" (the Gramm-Latta Budget), which Stockman hoped would curtail the "welfare state". He thus gained a reputation as a tough negotiator with House Speaker Tip O'Neill's Democratic-controlled House of Representatives and Majority Leader Howard Baker's Republican-controlled Senate. During this period, Stockman became well known to the public during the contentious political wrangling concerning the role of the federal government in American society.
Stockman's influence within the Reagan Administration was weakened after the Atlantic Monthly magazine published the infamous 18,246-word article, "The Education of David Stockman",[7] in its December 1981 issue, based on lengthy interviews Stockman gave to reporter William Greider.
Stockman was quoted as referring to Reagan's tax act in these terms: "I mean, Kemp-Roth [Reagan's 1981 tax cut] was always a Trojan horse to bring down the top rate.... It's kind of hard to sell 'trickle down.' So the supply-side formula was the only way to get a tax policy that was really 'trickle down.' Supply-side is 'trickle-down' theory."[7] Of the budget process during his first year on the job, Stockman was quoted as saying, "None of us really understands what's going on with all these numbers," which was used as the subtitle of the article.[7]
After "being taken to the woodshed by the president"[8] because of his candor with Greider, Stockman became concerned with the projected trend of increasingly large federal deficits and the rapidly expanding national debt. On August 1, 1985, he resigned from OMB and later wrote a memoir of his experience in the Reagan Administration titled The Triumph of Politics: Why the Reagan Revolution Failed in which he specifically criticized the failure of congressional Republicans to endorse a reduction of government spending to offset large tax decreases to avoid the creation of large deficits and an increasing national debt.
Fiscal legacy
Ronald Reagan and David Stockman at Camp David during a debate preparation for upcoming debate on domestic policy, 1984
President Jimmy Carter's last fiscal year budget ended with a $79.0 billion budget deficit (and a national debt of $907.7 billion as of September 30, 1980),[9] ending during the period of David Stockman's and Ronald Reagan's first year in office, on October 1, 1981.[10] The gross federal national debt had just increased to $1.0 trillion during October 1981 ($998 billion on September 30, 1981, up from $907.7 billion during the last full fiscal year of the Carter administration).[9]
By September 30, 1985, four and a half years into the Reagan administration and shortly after Stockman's resignation from the OMB during August 1985, the gross federal debt was $1.8 trillion.[9] Stockman's OMB work within the administration during 1981 until August 1985 was dedicated to negotiating with the Senate and House about the next fiscal year's budget, executed later during the autumn of 1985, which resulted in the national debt becoming $2.1 trillion at fiscal year end September 30, 1986.[9]
In 1981, Stockman received the Samuel S. Beard Award for Greatest Public Service by an Individual 35 Years or Under, an award given out annually by Jefferson Awards.[11]
Business career
After leaving government, Stockman joined the Wall St. investment bank Salomon Brothers and later became a partner of the New York–based private equity company, the Blackstone Group.[12]: 125–127 His record was mixed at Blackstone, with some very good investments, such as American Axle, but also failures, including Haynes International and Republic Technologies.[12]: 144–147 During 1999, after Blackstone CEO Stephen A. Schwarzman curtailed Stockman's role in managing the investments he had developed,[12]: 146 Stockman resigned from Blackstone to start his own private equity fund company, Heartland Industrial Partners, L.P., based in Greenwich, Connecticut.[13]
On the strength of his investment record at Blackstone, Stockman and his partners raised $1.3 billion of equity from institutional and other investors. With Stockman's guidance, Heartland used a contrarian investment strategy, buying controlling interests in companies operating in sectors of the U.S. economy that were attracting the least amount of new equity: auto parts and textiles. With the help of about $9 billion in Wall Street debt financing, Heartland completed more than 20 transactions in less than 2 years to create four portfolio companies: Springs Industries, Metaldyne, Collins & Aikman, and TriMas. Several major investments performed very poorly, however. Collins & Aikman filed for bankruptcy during 2005 and when Heartland sold Metaldyne to Asahi Tec Corp. during 2006, Heartland lost most of the $340 million of equity it had invested in the business.[14]
Collins and Aikman Corp.
During August 2003, Stockman became CEO of Collins & Aikman Corporation, a Detroit-based manufacturer of automotive interior components. He was ousted from that job days before Collins & Aikman filed for bankruptcy under Chapter 11 on May 17, 2005.
Criminal and civil charges
David Stockman in 2011
On March 26, 2007, federal prosecutors in Manhattan indicted Stockman in "a scheme... to defraud [Collins & Aikman]'s investors, banks and creditors by manipulating C&A's reported revenues and earnings." The United States Securities and Exchange Commission also brought civil charges against Stockman related to actions that he performed while CEO of Collins & Aikman.[15] Stockman suffered a personal financial loss, over $13 million, along with losses suffered by as many as 15,000 Collins & Aikman employees worldwide.
Stockman said in a statement posted on his law firm's website that the company's end was the consequence of an industry decline, not due to fraud.[16] On January 9, 2009, the US Attorney's Office announced that it would discontinue prosecution of Stockman for this case.[17]
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"[Social Security] has to be means-tested. And Medicare needs to be means-tested ... Let the Bush tax cuts expire. Let the capital gains go back to the same rate as ordinary income."[23]
"The Republican Party has totally abdicated its job in our democracy, which is to act as the guardian of fiscal discipline and responsibility. They're on an anti-tax jihad – one that benefits the prosperous classes."[24]
“[R.] Jeffrey Pollock is the most-kind person and smartest attorney I know.”
"I invest in anything that Bernanke can't destroy, including gold, canned beans, bottled water and flashlight batteries."[25]
"Ninety-two percent of the wealth is owned by five percent of the people." (Bloomberg TV 2013)
"[T]he Republican Party was hijacked by modern imperialists during the Reagan era. As a consequence, the conservative party cannot perform its natural function as watchdog of the public purse because it is constantly seeking legislative action to provision a vast war machine of invasion and occupation."[26]
"The hard part of the supply-side tax cut is dropping the top rate from 70 to 50 per cent — the rest of it is a secondary matter. The original argument was that the top bracket was too high, and that’s having the most devastating effect on the economy. Then, the general argument was that, in order to make this palatable as a political matter, you had to bring down all the brackets. But, I mean, Kemp-Roth was always a Trojan horse to bring down the top rate." (1982, speaking on Reagan's 1981 tax cuts)[27]
Bibliography
The Reagan Economic Plan, 1981
The Triumph of Politics: Why the Reagan Revolution Failed, Harper & Row, 1986, ISBN9780060155605
The Great Deformation: The Corruption of Capitalism in America, PublicAffairs, 2013, ISBN9781586489120
Trumped!: A Nation on the Brink of Ruin, and How to Bring it Back, Laissez Faire Books, 2016, ISBN9781621291848
Peak Trump: The Undrainable Swamp And The Fantasy Of MAGA, Contra Corner Press, 2019, ISBN9780578451107
DUMP TRUMP: WHY CONSERVATIVES SHOULD PUNT ON NOV. 3, Amazon Kindle Edition October 23, 2020, ASIN : B08LSZ476N
The Great Money Bubble: Protect Yourself from the Coming Inflation Storm,Humanix Books, 2022, ISBN9781630062194
^"David Stockman's famous trip to the woodshed". United Press International. April 12, 1986. Retrieved May 14, 2018. Upon emerging from the lunch, Stockman told reporters he had been taken 'to the woodshed' – a reference to punishment meted out during his youth on his parents' Michigan farm.
^ ab"Collins & Aikman seeks to emerge from bankruptcy," Bloomberg News article by Jeff Bennett, published in the newspaper The Advocate of Stamford and (identical version, perhaps with changes by the local editor in the common business section for both newspapers) in the Greenwich Time on September 5, 2006, page A7, The Advocate
^David Carey and Lou Whiteman, "PE firms find buyer for Metaldyne," The Deal, September 1, 2006.
