Felix Salmon Says Bear Stearns--Except for Its CEO--Was Smarter than Lehman Brothers
Political Science

Hoisted from Archives: David Stockman and William Greider

Brett Ellingson asks for background on William Greider and David Stockman:

Grasping Reality with Both Hands: The Semi-Daily Journal Economist Brad DeLong: At the risk of sounding incredibly stupid, I don't understand the problem with the article or at least what dishonesty the intro is referring to...

So here is the story, hoisted from the archives from two years ago:

The Education of William Greider (Why Oh Why Can't We Have a Better Press Corps?): William Greider defends David Stockman against the civil securities fraud charges that the Securities and Exchange Commission is thinking he might be guilty of. Greider starts:

Hold the Schadenfreude: People ask me how I feel about Stockman's new troubles because we were friends in those olden days and I collaborated with him in a truth-telling exercise that deeply shocked official Washington at the time.... Stockman in Washington days was a true believer, brainy and tenacious, in the mysterious arts of federal budget making, and he did indeed assert his faith in public long after the adverse realities were persuading him that Reagan's agenda of tax cutting and doubling defense spending wasn't going to balance the federal budget. His greatest sin, however, was telling the truth, albeit belatedly...

But there was no truth-telling exercise to collaborate in. Republican Vice President George H.W. Bush knew that Reagan's fiscal policies didn't add up: he and his people coined the phrase "voodoo economics." Republican Senate Majority Leader Howard Baker knew that Reagan's plan made no sense: he called it a "riverboat gamble," meaning an imprudent and unwise throw of the dice. Those working for Reagan in 1981 fell into four groups:

  1. The innumerate and gullible--most of them willfully so--who did not look into assurances that the Reagan administration's plan would balance the budget.
  2. True believers in broadening the base, lowering the rates, and balancing the budget who looked on in horror and who hoped to fix things later.
  3. Those who didn't care that the Reagan administration's budget policies were bad for the country in the long-run if they were poitically advantageous in the short run.
  4. Those who knew that the tax cuts and defense spending increases would unbalance the budget, and thought that the deficits created would put irresistible pressure on congress to do what it would never do otherwise--shrink a social insurance state. This was Stockman's group.

Back in 1981 only the first group within the Reagan administration, bamboozled by the other three--and only those outside the Reagan administration who were bamboozled by it and its "he said-she said" enablers in the press--actually believed in cutting taxes and balancing the budget.

Greider continues:

The Reagan cabinet officer (practically a kid in those days) shared his true opinions privately with me--an assistant managing editor at the much-loathed Washington Post--and I disclosed the bracing realities in the Atlantic Monthly...

But there were no "bracing realities" to be disclosed. All this--that things didn't add up, and that there were these four feuding groups within the Reagan administration--was common knowledge to budget experts, economists, and journalists.

What Greider got from his breakfasts with Stockman was some juicy quotes that he used in his Atlantic Monthly article and in a very good little book he wrote--The Education of David Stockman and Other Americans. What Stockman and company got out of Stockman's breakfasts was Greider's promotion within the Post of the "he said-she said" coverage that pretended to take the Reaganites' claims to be able to cut taxes and balance the budget seriously--Greider, you see, was keeping his knowledge of what was really going on from the reporters who worked for him as Assistant Managing Editor because he wanted to make a big splash with his Atlantic Monthly article.

In short, Greider didn't do his job at the Post: he approved a great many stories about the Reagan budget that he knew, from his contemporaneous conversations with Stockman, were false. Greider then used what he had learned to make a personal splash in the Atlantic that told me, at least, little other than that Stockman personally was in Reagan group 4. And Greider sells this shabby story as a "truth-telling exercise."... Greider committed a fraud on his employer--the Washington Post--in 1981. Stockman committed a fraud on his boss, Ronald Reagan, in 1981--for Reagan was in group 1, and accepted Stockman's assurances that the numbers would add up. And Stockman committed a fraud on the non-budget expert public--a fraud that Greider tiptoes around, saying only that Stockman did "indeed assert his faith in public long after the adverse realities were persuading him that Reagan's agenda of tax cutting and doubling defense spending wasn't going to balance the federal budget."