Farrell and Stockman - Latter Day Prophets of Doom

Michael Collins
Paul Farrell of MarketWatch caused quite a stir with his recent article, Reagan insider [David Stockman]: GOP destroyed U.S. economy, Part 2, May 24. Farrell breaks some new ground in the strident critique of long standing policy trends and offers a highly functional description of the destructive personalities controlling Wall Street. This article describes the several high points of the Farrell-Stockman thesis, a frontal assault on the modern Republican Party. It also provides important cautions on key information absent from the Farrell-Stockman broadside. (Image: Art & Perception)

Farrell makes his case by using Stockman's July 2010 New York Times OpEd, Four Deformations of the Apocalypse, New York Times and his recent book, The Triumph of Politics: Why the Reagan Revolution Failed.

Farrell should be commended for many of his insights, particularly those in an earlier essay he wrote warning of the trends that will destroy the country: 10 Doomsday trends America can’t survive August 19, written almost a year after the Stockman New York Times editorial.

In the August 19 column, Farrell warned of the destructive, invisible hand of Wall Street:

"Today, this conspiracy of Wall Street, Corporate CEOs, politicians and Forbes 400 billionaires operates openly, with absolute power and an arrogance that is corrupting the nation’s soul, their souls, your soul. This conspiracy has no moral compass, yet ironically, is legal." Paul B. Farrell, August 19

Farrell asserts, "Doomsday Politics: Monopoly of Super-Rich Anarchists rule America:"

"Forget buzzwords like oligopoly, plutocracy, socialism. Today Washington is a pure anarchy, a game played by tens of thousands of high-priced lobbyists squeezing the best deals out of America’s budget, solely for their clients’ interests, never the general public. Our economy is a monopoly of Super-Rich Anarchists. They know the only votes that count are in Congress. And they’re for sale." Farrell, August 19

The anarchist analogy offers a major contribution to the current dialog. The rapacious Wall Streeters look like oligarchs and plutocrats but, there's a drive and a disregard for anything other than more of whatever they want at any given moment. That makes the "superrich anarchist" label important (no offense to traditional anarchists).

Stockman's Arguments

Farrell and Stockman, make some very strong points.

They chastise Nixon for the mother of all currency manipulations, the end of the Gold Standard. Stockman sees this as the onset of our great decline:

."So for the past 40 years, America's been living "beyond our means as a nation" on "borrowed prosperity on an epic scale ... an outcome that Milton Friedman said could never happen when, in 1971, he persuaded President Nixon to unleash on the world paper dollars no longer redeemable in gold or other fixed monetary reserves." Reagan insider: 'GOP destroyed U.S. economy', Paul B. Farrell, August 10, 2010

Stockman's second point is that the Reagan administration created an enduring pattern of, "Crushing debts from domestic excesses, war mongering." Farrell quotes Stockman:

"Yes, the GOP does have a welfare-warfare state: Stockman says, 'the neocons were pushing the military budget skyward. And the Republicans on Capitol Hill who were supposed to cut spending, exempted from the knife most of the domestic budget -- entitlements, farm subsidies, education, water projects. But in the end it was a new cadre of ideological tax-cutters who killed the Republicans' fiscal religion.'" Reagan insider August 10, 2010

After this juncture, the Stockman analysis seems anticlimactic. The neoconservatives, including Dick Cheney, Don Rumsfeld, pushed for and realized an excessive military buildup (but no real wars) during the Reagan's administration. Somehow, this was supposed to meet the diminished threat of an already dying Soviet empire. At the same time, Stockman notes that the Republicans in Congress continued with their support of entitlements and corporate welfare, Stockman notes.

The nexus of Stockman's argument is simple: the Republicans campaigned on tax cuts, more efficient government, and fiscal stewardship. They delivered on tax cuts but failed at efficiencies and any semblance of fiscal responsibility. The rest is history.

In, Reagan insider: GOP destroyed U.S. economy, Part 2, May 24,, Farrell's explication of Stockman becomes positively apocalyptic.

Farrell outlines Stockman's main points. "Politicians are addicts [who] can’t stop spending." They can't stop giving tax cuts, which are now a "cruel joke" played on America's children (who are stuck with the bill).. There will be no Social Security crisis in 2036. The program, "is a myth." The surpluses are lost and gone forever. More war, bank bailouts, and a Goldman toady at Treasury fill the horizon as final horsemen of this apocalypse.

Historical Perspective - Stockman was a Willing Accomplice

Farrell veers off course, at times, when he uses David Stockman as his guiding light for his doomsday scenario. Stockman was the architect of the Reagan tax cuts without spending cuts.

Reagan's election was anomalous. He defeated a weak president beset by the humiliating Iran hostage crisis. His victory was not ideological. At the time of Reagan's inauguration, the US House of Representatives and Senate remained under firm Democratic control.

Tax cuts were at the core of Reagan's program. The White House proposed the cuts. A bipartisan coalition passed the program in Congress. That coalition failed to make the major spending cuts required to accommodate the loss of tax revenues. Supporters offered promises of cuts down the road and savings through greater government efficiencies. They never delivered. (Graph: WikiCommons)


OMB director Stockman aggressively pitched and sold the White House's economic theory of tax cutting to Congress and the press. The Laffer Curve was a key rationale. Economist Arthur Laffer argued that lowering taxes would somehow increase government revenues. Therefore, the projected deficits were not deficits at all. They were opportunities for increase revenues. These increased revenues, the Reaganites argued, would actually reduce deficits. Stockman and Laffer later quarreled as the 1982 recession deepened. But they were aligned at the start on the disastrous core policy - above all else, cut taxes.

Among those working on Capitol Hill at the time, it was common knowledge that the Republican strategic goal was the elimination of social welfare programs left over from President Lyndon B. Johnson's Great Society. Republicans sought to end antipoverty programs, help for the seriously mentally ill, support for education, and the provision of critical support for women, infants, and children. A revenue shortage resulting from the Reagan-Stockman tax cuts was the ticket. Congress would have to either cut entitlements and military spending, not an option, or make up for lost revenues by cutting the so-called welfare programs instituted during President Lyndon B. Johnson's Great Society.

This does not negate the validity or importance of some of the Stockman and Farrell arguments. It is critical, however, to realize that Stockman is late convert to the politics of responsible governance. He talks about the days when Republicans believed that, "prosperity depended upon the regular balancing of accounts "in business, government, and homes. This Republican utopia could not have been during Stockman's tenure at OMB when public debt soared in actual terms and as a percent of gross domestic product.

Historical Perspective - Farrell's Claim of a Loss of "Moral Compass"

Farrell falls into another historical trap. In part one of the Stockman duet, he asks, "How did the great nation of America lose its moral compass and drift so far off course, to where our very survival is threatened?"

The United States is a great nation with a vibrant, adaptive people who possess any number of admirable talents. However, the nation began with great moral contradictions. Slavery survived despite the universal rights promised in the Declaration of Independence. Jefferson, Madison and other founders from slave states were well aware of this contradiction. They did nothing. Before, during and after slavery, the Native American population experienced nonstop tragedy at the hands of early US leaders. Andrew Jackson's Cherokee "Trail of Tears" represents one of the most appalling episodes in our history.

The list goes on including the continued disenfranchisement of immigrants, violence against labor organizers and unions, the Robber Barons and their monopoly on wealth, etc.

Farrell also laments the decline of the Republican Party years starting around 1970. Let's go back to the Great Depression. The Republican Party was steadfastly opposed to even the moderate recovery programs of President Franklin Delano Roosevelt (moderate compared to the Socialist Party of that time and populist Huey Long). Republican intransigence lured Roosevelt into a misguided balanced budget policy after 1936 that triggered the "second Depression." This flight of fiscal fantasy was felt by millions thrown back into poverty as a result of the bipartisan policy changes.

Then we had McCarthyism and the crony capitalism under President Dwight D. Eisenhower. During Ike's eight years, the nation's military and intelligence function were used too often to advance US commercial interests under the guise of the anti-Communist crusade.
In truth, we have had just one party for the past forty years, The Money Party, that bipartisan coalition with no more than six degrees of separation between the Republican and Democratic wings. The Party monopolizes political discourse and governance. It consists of the great concentrations of wealth, advances those interests, and responds to the needs of the people only when forced (e.g., the civil rights movement) or, in the past, when disaster strikes.

When were those happy times in our history when a truly free and competitive markets reigned? When did we have opportunity for all? Just ask black Americans, Japanese Americans, and the poor of Appalachia

Our history shows a non-stop tension between those who made and struggled to retain great wealth and those who wanted more than they had or, at least, enough to afford what they needed.

Worth reading but please remember…

Farrell's "10 Doomsday trends" essay and the two part series on Stockman are worth reading. They are strong indictments from unexpected sources. That alone is a strong recommendation.

Please remember that many of these arguments have been made by others well before Stockman; some during the so-called period of fiscal responsibility. Many warned that LBJ's Great Society program and the Vietnam War were incompatible. You cannot have "guns and butter," we learned. Put the Social Security trust fund in a "lock box," Al Gore argued in 2000. The anti war movement of the 1960's outlined the perils of imperialism, militarism, and the sorrows of empire that would follow. That goes unmentioned by Farrell and Stockman.

Are we facing a doomsday scenario?

That outcome presumes a straight line of current trends and variables with no accommodation for sudden political changes or scientific revolutions that might address the critical issues that imperil our survival. A look back at history shows periods of sudden decline for great empires, Austria-Hungary (the Habsburgs), for example. It also reveals periods of sharp decline without a total collapse of the seat of empire, the United Kingdom. We cannot rely on scientific revolutions to save us. At the same time, we would be naive to ignore the history of considerable advances in science. These can be sudden and revolutionary.

A narrow economic analysis simply swaps out "Let the markets take care of it" for "Let the bookkeepers take care of it."

It is an odd way to solve problems of epic proportion; transform them into an aesthetically pleasing balance sheet and we have arrived.

Why not start with the problems that imperil our nation and the world. Define them in terms of human needs and impact. Proceed to a solution that incorporates the considerable power of capital as a tool, rather than balanced budgets as the ultimate solution.

Money and currency have been rendered largely valueless through greed and manipulation.. Nevertheless, the problems we face are approaching the dire stage. We can no longer afford to live within our means when the definition of those means entails an arbitrary doctrine of fiscal responsibility that constrains urgent and comprehensive action.


The story of The Raft of the Medusa: [The French ship Medusa was transporting people and cargo to their new colony, Senegal in 1816. The ship hit a sandbar off the African coast and had to be abandoned.] "Eventually, everyone was forced to abandon ship. The wealthy and well connected were given space on the lifeboats while the rest, 149 people, were forced onto a makeshift raft which was tied by a rope to one of the lifeboats. At some point, the raft was either intentionally or accidentally cut loose. What followed was a two week nightmare of stormy seas, brutal murders, insanity and cannibalism. Just fifteen men survived the ordeal, and five of them died shortly after their rescue." Art & Perception

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Farrell pulls no punches

At least he is one of the few in the MSM showing that it was Reagan who really started the downward economic spiral.

Nice call out on the fallacy that America was born as the land of the free, home of the brave, uh, only if you were a white male landowner was that true.

Farrell has guts

He and Stockman lay it out. I really like the term Anarchists to describe the way Wall Streeters behave with the country. As for Stockman, it's never too late to repent. He doesn't need to do this and it doesn't help him much. I admire him for that.


Pretend, just for a second, that Republicans and only Republicans held all seats in the House and Senate and also the presidency the last 30 years.

Wouldn't it be fair to say that under this scenario they would have delivered on all 3 planks? In other words defense increase yes, tax cuts yes, but ALSO cuts in domestic and entitlement spending.

So if this is true, isn't it then the presence of Democrats that prevented the domestic spending cuts? Are you telling me that Republicans would have kept the Dept of Education if no Democrats existed? Likewise wouldn't they have cut whole swaths of social spending and government if they could have?

Aren't we seeing now with the Mediscare tactics exactly why they couldn't? Wouldn't they have been savaged at the polls for doing so? Wouldn't the media have joined Democrats in tearing them apart?

So then, if we buy that Democrats did indeed have the power to prevent Republicans from making these cuts, then it seems reasonable that they could have used this same power to prevent the military spending and the tax cuts. But they didn't. Didn't the Democrats ALSO want to look strong on defense back in their district? Didn't they ALSO enjoy the moniker of being tax cutters? Bet your sweet they did.

It always takes two to tango. But now, according to Stockman we're supposed to believe that it only took one to tango. Given that between the House and Senate literally hundreds of seats have been in Democratic hands the last 30 years, and Clinton + Obama = 10 years of the presidency, this doesn't add up.

Not buying it.

It does take two to tango

While I agree with their critique, the Democrats were in there full force. They have a point, however, on the start of the crisis. In the 1980's, the Republicans knew what the third rail was, entitlements. They were still using the Nixon doctrine of piecing off the seniors against the rest of the population. It wouldn't take a brain surgeon to figure out that exactly what happened would happen. The Republicans of old were never going after entitlements and never going near defense. One could argue that defense is the bigger problem since it's a much smaller contribution to the economy, hence, a greater deficit buster.

As for Ryan, if it's just a numbers game, he's off too but closer, marginally.  But it isn't.  Here's what he does to Medicare, by turning it over to the rivals of Wall Street crooks, the US private insurance industry.

Killing Us Quickly - Ryan's Medicare Proposal

By doing this, here's what seniors have to pay, based on OMB numbers:


This chart is conservative since it exscludes "other Provider payments" - out of pocket, deductibles, etc.  Even so, when the plan kicks in, people 6 will pay 35% of their income to cover medical costs, much higher than today.  They'll have to give up health insurance.  They'll get sick and die.  Ryan's proposal is about as practical as Stockman's tax cuts.

But, as you correctly point out, it is a bipartisan affair.  I'm just reading Gretchen Morgenson's new book.  She starts out during the Clinton administraiton with Robinson's antics at Fannie Mae.  That's ground zero for the housing bubble and our troubles today.

Together, the Republicans and Democrats are a terrific wrecking crew.

Ryan is a joke

That said, of course due to the health lobbyists, real cost reduction won't happen and that's the real problem, we pay the most and get one of the least of any other industrialized nation.

I put a couple of good articles in the Saturday reads on this.

The Money Party

The deficits run at compound interest meaning at some point they become unsustainable without a change in the future that allows the loan to be repaid. The next step is to strip assets in the same way that wars were waged only now it will force the selling of prime assets and destruction of public programs to pay for the debt. We see this situation in Greece today. The process is called "privatization". Every money-saving plan of the GOP is tagged with a corporate tax cut of the same amount. It is not a problem for the GOP to target the elderly in this "war" by depriving them of their medicare and social security. All democratic government is targeted. Decisions will be made by those who extended credit. When the bonds come due, we shall see the results of this plan to use debt in place of war. Perhaps Europe will lead the way with the collapse of the EU. The question is why were some so eager to extend credit or run up deficits knowing they were creating an unsustainable situation? Who are the predatory lenders?

Good question

"The question is why were some so eager to extend credit or run up deficits knowing they were creating an unsustainable situation? Who are the predatory lenders?" The big banks, Fannie Mae, propelled by Wall Street. I think your answer is in your earlier statement, "All democratic government is targeted. Decisions will be made by those who extended credit." Those who extend the credit are ending up running things, even if the credit is bogus.

I think much of this is simply personal greed on the part of CEO's and traders to enrich themselves and their clients in the moment. The way it is working out, however, is as you say - they're in charge, ultimately.

Paul Farrell always puzzles me

His writing is firmly in what is known in business circles as the Apocalypse Chic genre, which one would think would be printed by something called Armageddon Publishers. Instead, he is given space on Market Watch, which is owned by The Wall Street Journal, which is in turn owned by News Corp., whose principal shareholder is Rupert Murdoch.

Murdoch's publishing empire is so big that you have to take his word for it that he doesn't monitor the editorial or opinion statements of his writers and broadcasters, including Roger Ailes. That is probably not true when it comes to Ailes - Murdoch's son is said to be a firm opponent of Ailes and FOX News. Paul Farrell could easily slip under the radar, except that he has a popular following on Market Watch. He makes a very compelling case for the rottenness in the American capitalist system, which has turned into crony capitalism found commonly in banana republics. Farrell is thriving in a main stream outlet with the sort of stuff we've been writing about in the blogosphere for nearly 10 years. Since Murdoch is a quintessential crony capitalist, what is this all about?

1) The evidence for capitalism gone off track is too pervasive to ignore any longer.

2) Large numbers of professionals in politics, finance, and business in general now appear to share the same anxieties as the average person over the direction of the global economy and the potential for another crash.

3) People like Lloyd Blankfein and Jamie Dimon are so steeped in the workings of the system that they can't see what the professionals under them are beginning to realize. I still can't get it out of my head that Dimon told Congress not one of his executives predicted the housing collapse - group think at the very highest levels is allowing these firms to carry on trying to patch up the system as if nothing major needs to change.

4) Some of the elite, however, are not subject to group think. Entrepreneurs like Murdoch, caught up as he is in advancing his interests through special deals and lobbying, nonetheless like to hedge their bets. He dumped the Tories when it looked like Tony Blair was going to win big, and he cozied up to Hillary Clinton during the 2008 primaries. He may or may not read Paul Farrell, but he has got to be thinking how to save his business empire if global capitalism collapses. Can he still get deals done if major political parties are thrown out of office, and no one party is trusted to have the answers to the general level of misery afflicting so many people? He has to see from one country to another that voters are beginning to search for a new way and perhaps new political parties, some of which will be deliberately set up to quash crony capitalism.

5) Paul Farrell and David Stockman are excellent fellow travelers. They see the damage that has been done and they probably see that the Republicans and Democrats may not survive in their current form when the next crash arrives. These guys are finding main stream platforms, in part because their message is so compelling that it already gets a wide following on various blogs, YouTube, etc. I'm waiting next for Paul Craig Roberts to be allowed to come in from the wilderness. He was banished from the Republican Party for saying the sorts of things Stockman is now saying, and there have been deliberate attempts to deprive him of a platform. People want to read Roberts not just because he makes sense, but because they want to prepare themselves for major changes coming.

It seems, therefore, only a matter of time before we read other writers in major media outlets publishing material similar to Farrell and Stockman. This is going to make it harder, though not impossible, for crony capitalists to steal taxpayer money in the collapse to come. They will try to do it by stealth through the central banks, all done under the scenes with no publicity whatever. It may prove to be the end of central banking as we know it, which is something Ron Paul has been calling for, and writers like Farrell, Stockman and Roberts are beginning to explore.

Wall Street Journal too

More and more I see articles pop up which amplify the middle class squeeze and such. Bloomberg also has been all over the financial crisis, Fed. Honestly, I think this is going on because us lowly bloggers give them some competition. Fiction no longer gets much of an audience, as we see by CNBC super low ratings.

Marketwatch, consistently gets the economic reports mostly right as well. Cannot say that about many other MSM who cover them.

Why, indeed?

Farrell doesn't get the same treatment as Paul Craig Roberts. Arguably, Roberts goes further than Farrell. He called the neocons Jacobin's (I'm sure they can look it up on Wiki). He pointed out that Bush was a war criminal. And Roberts has been clear in his rhetoric - bringing down the country is intentional for very specific purposes on the part of those he accuses.

I think you're right on why Farrell is allowed to stay in MSM. You said, "Entrepreneurs like Murdoch, caught up as he is in advancing his interests through special deals and lobbying, nonetheless like to hedge their bets."

It is a hedge. And that's precisely why Farrell and Stockman make it all about balance sheets. There's not one ounce of humanity in the two pieces. I'm not saying that they're not concerned, personally. But in their world, it's all about a change in fiscal policy and the behavior of those in charge.

If a grass roots uprising takes place, Murdoch will be there to staff it with people who forget why governments exist - for the welfare of the people.

When I said, we can't afford to live within our means, I was serious. We don't have the dollars to solve the life and death problems facing us. But if we don't solve the problems, what use are the dollars?