is waiting with great curiosity and interest for further onlications, in particular the issues you said you couldn't answer questions on because it has not yet been published. as a final remark, i think one of the things that set a democracy apart from an authoritarian we also have democratic oversight. also parliamentary oversight. do what we can. we would be truly grateful for any information if you would feel the urge to share that with somebody and. thank you very much. thank you for your time. that concludes the session. goodbye. [applause] [captioning performed by national captioning institute]

[captions copyright national cable satellite corp. 2013] >> us 2013 reps up, we are on the front of the u.s. capitol to speak of the review series, a look of five important issues we have covered. >> immigration laws. an essay surveillance on wednesday, a look at gun laws. we ramped up the week on friday with the federal government shut down. kwa >> this week on "q&a," former congressman and reagan's administration budget director david stockman discusses his latest book, entitled "the great deformation: the corruption of capitalism in america."

>> david stockman, the author of the book "the great deformation. 1981, when you were budget director for ronald reagan? >> the last thing was that the machine of the government in the united states is pretty brittle, and if mistakes are made, and, clearly, we made a huge mistake when the taxes were double the size that we intended. people forget that, but it was true, but once it got put into law, and people began to take partisan positions, and republicans took everlasting credit for it, the deficit widened, and it became almost impossible to reassemble a coalition to undo the damage that had been done or the harm that might have occurred, and we did, you know, have several tax increases to close some of the gaps, but what i learned is when

mistakes are made in this big macedonian government we have with the divided powers and checks and balances, it is very dangerous. that is why the lesson is so a propos today, because we have a massive keynesian state, as i call it, dedicated to stimulating and boosting and propping the economy. as a result of that, we have a $1 trillion deficit, both sides are dug in, everybody knows this cannot last. it is dangerous rolling down the road, and yet, the system has a serious inability to make compromises, to find packages that you can assemble a governing majority, so it was

very limited scope issue in 1981 to 1985 when i was there, but at large, the lesson from that time is what the clear and present danger is today. our fiscal process is paralyzed, dysfunctional, broken, and that is what i call the budget a doomsday machine, something that is going to roll on, and no one can seem to stop it. >> 34 years old though. omb director. is there a personal residual, where some still do not like you because of what happened? >> i am sure there are, because it is the one job in government there is no other place in our government where the buck stops, where choices have to be made, priorities set. the agencies are advocates. the congressional process is

divided into dozens and dozens who often become advocates for their little piece of the pie, who like the logroll. "i will help you, you help me." it is a professional machine. the cabinets and departments are not that much better. there is one little place which is at the kind of junctions which of this great and massive government we have, where there is a dedicated force of people whose job is to examine and second-guess, let's say, and to say no or to make priorities, and that is a pretty rank breed. today, omb cannot even get their budget out on time anymore. it is months later, dead on arrival. >> right before you were named a director of the office of

management and budget, you ran how many times? i was elected a third time in 1980. it was right after i voted a very controversial votes against the bailout, the first one. i knew that was right at the time. the ranking members -- i was the only one to vote no. there were a lot of plants and suppliers in my district, but the odd thing was the rank and file and the businessmen, on wall street new they were not going to be bailed out, because we were not dealing with the squeaky wheel, and as a result, i got the largest vote i received in 1980, said there is a lesson. you can say no to the squeaky wheels. i do not say this as bridges, but it is true. that lesson has been lost.

today, a problem in government is no one will say no to any squeaky wheel because of the immense lobbies, the immense pac's, the billions in money that flow into the process of making it almost impossible. >> let's look at a clip of you before the confirmation hearings back in 1981. [video clip] >> the tax burden today in my view is so debilitating to the kind of activities and investment, savings, risk- taking, innovation, entrepreneurial activities that our country needs to grow at about a growing economy, we simply cannot hope to achieve a balanced budget, and so, therefore, our economic program that we should together has to be an innovative program, one that diagnoses the problem correctly and that includes those elements in those policies which can help achieve the goal that we want. >> at that time in the process,

you were already sitting down with bill greioder, and i think i read that 18 times you had a breakfast with him. what did you decide to do that? >> it actually started when i was nominated for the position in december 1980. i had been kind of an enterprising young fellow. i like to write. i wrote op-ed pieces for "the washington post" quite often when i was a congressman, so i knew the editorial staff there, and i knew bill from that, and he was editing the front page of "the washington post." i knew the reagan program, we were going to cut deeply, and we were going to reform things from farm subsidies and import/export bank in between, and it would be presented in a biased way as basically an attack on poor people rather than what i thought was what i was trying to do which was an attack on weak claims, not weak clients, some aspiration at the time was i will sit with him off the record, try to give a persuasive and clear and balanced view of

what we are trying to do. government leaks like a sieve, so it was going to be leaking every day. i wanted to get ahead of the weeks, and it was off of the record, and it worked. we got better front page coverage out of "the post" then you might have expected from the conservative government in several decades, but we did not have, unfortunately, a clear understanding of when we called it off the record for this season. we did not define the season. i thought it would last for years, and he apparently thought it was something that lasts four months. he wrote the "atlantic monthly" article, and i was shocked. it was not heretical. i was not dumping on the program. i was not trashing the program. calling the pentagon the "swampland of waste."

it was then. it still is today. i did not really called the tax cut, you know, a trickle down machine. i said that would be one effect of it, that the rate cuts were meant for everybody, not just the wealthy. anyway, a lot of this got distorted, and i guess i learned a lesson. you have to be very careful with the press. >> this is the education of david stockman, which came out later by david. supposedly, you talked about having been taken to the woodshed by ronald reagan. i have asked for years about ronald reagan, and you never quite get what ronald reagan was like up close. tell us. how many times did you meet with him? >> practically every day for most of the time i was there. >> start with the woodshed thing. when you were taken to the

woodshed because you had been talking to bill, what did he say? >> first of all, as i laid out in the book, and it is no secret after all of these years, that was a photo opp. it was what the gamblers at the white house came up with. actually, when i had lunch, i went to the same explanation of the story that we just talked about, and he was totally sympathetic, and the two of us were in the oval office, no one else, having our lunch, soup, whenever it was, and he said, "you know, that reminds me when i was president of the actors guild, and we were having what i thought was an off-the-record meeting with executives, and there was some press in there,

and all of a sudden, i had a firestorm in my hands. i know what happens when you get betrayed by the press." we had a very amicable lunch, and then looking to do something to calm this down. >> did you know that this was a setup to get a photo opportunity? >> he took me to the woodshed after supper. >> he said that would be great. >> and i said i would say it. >> this was in 1981 or 1982? >> 1981. >> a lot of people were astounded he did not fire you. were you? >> yes. we actually accomplished the reagan program. then, there was basically the keepers of the body, as they were called. they wanted to fire me. the california right wingers. but i think baker prevailed because he realized that the whole reagan program was being held together by bubblegum and baling wire, that the spending cuts had to be defended, explained, and we needed more of them. defense was getting out of control.

so he came to my defense, and the president understood that this was not intentional. i was not sabotaging the program. i began to realize that the things that my old boss, the congressman, the third-party candidate in the 1980 campaign, said, "you cannot massively cut taxes and balance the budget, too." i thought that to be done through on his math. by then, i was realizing it could not be done. it was pulled apart. the teams of horses were going in different directions, but i was for the direction. i was totally on board with the idea of shrinking the government, lowering the taxes as far as we could, taking the waste out of spending and reforming entitlements. but i knew we were going to have

to make compromises and adjustments and probably make some deals with the democrats, and that is where the baker wing was. they used to think you could govern by waving. >> what was ronald reagan like up close every day? >> he was a very amicable guy. a tremendous personality. i have been in politics and was in politics of long time. it is a world of massive egos of people who are always looking around to see if they are being slighted and so forth. he was not that way. he was a strong man of conviction. i think he was wrong on many things, like the defense buildup, and i have said it, and his stubbornness with the taxes.

it was wrong. but he had a tremendous personality, no ego that got in the way, and therefore a great politician. if he had been a little more flexible on some of his good principles that were carried too far, like the defense buildup, which we really did not need, he would have been far more successful. now, i think the success that has been achieved to reaganomics is totally unwarranted. we had the greatest keynesian deficit binge between 1981 and the end of the first bush administration. those 12 years, all the reagan program, and so we did have an economy that rebounded because volcker dealt with inflation, and the deficits were enormous. but they established a precedent

for continuous chronic massive peacetime deficits and put the republican party, but old defender of the treasury gates, into the position that cheney so ineloquently expressed that it does not matter, and that was the beginning of the end, because it is not a conservative party that is defending the treasury, the taxpayers, and fiscal rectitude. you're going to have a free- lunch competition between tax cutters, the republicans, and spenders, the democrats, and that is why you have $17 trillion of national debt today and why it is out of control and why we have kind of a doomsday machine. >> how smart was he? >> i have learned enough to know this is not an iq-rating game. as a political leader, and a massive i.q., you are probably going to be a tremendous failure. reagan had a tremendous temperament.

he had a pretty decent iq. he had some fundamental convictions that philosophically were correct, but he had an inability to deal with that. he had an inability to make practical choices when he and his advisers were divided. when his advisers agreed and took the decisions and, "here are three choices. we go for the middle." he was ok. sitting at the oval office desk for hours once, let's say $220 billion in spending. he wanted $250 billion. he could not decide. we would make our arguments. he could not make the decision. i finally gave in because it was embarrassing. the president of the united states could not make a decision.

that was his problem. when it came really too tough choices. social security. there was massive waste because there were too many dead people still getting benefits, so we were demonstrating to him that that was not the problem. the problem was there were too many affluent retirees getting benefits. basically, for the most part, he was unwilling to take on the big parts of the welfare state. he liked to give the speech, but you really would not go after it. >> did anybody that you saw when you were around, did they make fun of him in any way? those who did not agree with them, working around the way he operated. when they were out of the oval

office? >> not really. there was a tremendous respect. even among the white house staff. they were enormously divided between the adam smith waivers and the pragmatic wing, the so- called baker -- some of those guys. but everyone had pretty good respect for him. >> i want to go back to this business of your controversy. bob novak had a few things that he said about you. let's watch this and get your reaction. [video clip] >> on the phone, and we have breakfast at the hay adams every other saturday, and he did not talk to me. he talked to bill greider, a left-wing journalist, and he was quoting david stockton. just talking to the reagan administration. i said the book was like in the middle of a russian revolution, and it was an incredible shot over the bow.

reagan could not believe it. he believes stockton did not intend to do it. he was a destructive force for the rest of his time in the white house. >> disruptive. >> well, you know, bob novak with a microphone or a megaphone for the hard core of supply- siders, of which there were about four. jack kemp, who was a great guy but unbelievable there on tax- cutting, and formerly the wall street journalist, a fanatic, and art laffer, who is a charlatan. he claims to be an economist, and he waves his hands. he is still at it until this

very day. so that group wanted to dominate reagan policy, and novak was there, the voice in print, and when i realize that we were going to have to backtrack and some of the supply-side doctrine and some of the old bridge on the tax cuts, these guys that i have described, not so much jack, but the other two, and some of their fellow travelers, they used novak to do whatever to me they could. unfortunately, it was not a lot. it did obviously complicate my life. the tax grabber. we were facing a deficit of about 6% of gdp, and that scared the hell out of people. it was billions of dollars as far as the eye could see, which is the equivalent of our trillion dollar deficits today, and i was trying to work with the congressional leadership to find the least damaging way to raise the revenue, defense cuts, looking at things to close the gap, at least something that was sustainable, and then what do i

get for it? i get this cadre of fanatical, using bob novak of accusing me of being a tax grab. i am going to grab taxes because it is fun? >> can you give us a short definition of supply-side economics? >> the idea is is it is the opposite of demand side. keynesian economics. great miracles of growth, and prosperity will happen. the economy is like a bathtub, and if it is only 97% fall of

demand, this will be sent into the economy. that was wrong. the great thing reagan did i thought was kill the keynesian predicate for a generation. he did not. i am still a supply side. my whole book is a supply-side scream in that respect because it is an unrelenting attack on 80 years of keynesian, you know, misguided policy. >> on the defense issue, when you're in the management of budget, the reagan's administration went up to about 595 naval ships. >> correct. >> we are now down to 285 naval ships. this is way beyond what it was when you were there. how does that happen? he wanted a 600 ship navy. how can we get along with the 200? >> that was probably the neocon beating of the war drums part of a program to counter the legend soviet strategic nuclear threat. it turns out it was never real.

that real, honest conservatives should have known all along that socialism was bound to fail. the soviet state was already in an advanced state of economic failure, and yet, in the early days of the reagan administration, there was this topline, 7% real growth. we had a five-year plan of defense spending. it was agreed the 10th day we were in office. timothy geithner and myself, we were talking about it. we ended up agreeing it was $1.40 trillion because he demanded it, and it stopped for the rest of the term. the pentagon did not even know what to do with all of that money, so the next thing is a 600 ship navy and attack helicopters and tanks and armored vehicles.

you get missile programs. none of this is relevant for the unreal, nonexistent soviet nuclear threat, the conventional war machine, and it eventually ended up being used by the bushes for their wards of occupation and invasion, which were totally wrong, so the reason we have these ships today is there are bigger and heavier and are more expensive, so we do not need 300 today, and we certainly did not need a 600 ship navy then. >> "saturday night live" back in the days during the controversy. let's watch. [video clip] >> first, what is your evaluation of the economy? >> it could not be in better shape. the reagan economic policies are absolutely foolproof. >> do you think the supply side theory of the across-the-board tax cuts is worth it in the face of balancing the budget?

>> positively. [laughter] this is definitely realistic, and i see no problems at all in president reagan's plan. >> do you think it will expand with savings and investment by stimulating business enterprise activity? >> of course. >> do you remember that? >> yes. not only do i remember it, but in the days of youtube, you can find it easily. but it does go to show that the one true agency of truth in our society is "saturday night live." they will consistently expos the foibles and the exaggerations and the overconfidence and so forth of both parties, so that was good fun. >> when you started your book tour, "the new york times" gave

you quite a sendoff. this is the front page of the sunday review session that kicked it off. and you also wrote on their website heroes and villains, and i want to ask you about the heroes and villains. there is a gallery of economic and villains. franklin roosevelt, richard nixon, milton friedman, arthur burns, lawrence summers, george w. bush, john mack, henry paulson jr., and barack obama. now, let's look at the gallery of economic heroes. carter glass, william martin, dwight eisenhower, george humphrey, douglas dillon, william simon, paul volcker, bill clinton, paul o'neill, and sheila bair. explain that.

>> the last 80 years of fiscal monetary financial history, how we got into the mass of bubbles and the fiscal and monetary crisis of today. basically using the standard of threefold items. free-market, fiscal rectitude, which we balanced budgets, we do not make excuses for deficits because you do not think the economy is not performing up to your doctor and expectation, and not using the central bank and ordered to try to centrally manage the economy and, wall street and encourage risk-taking and all of that.

these are not bad people and good people. these are good policies and bad policies in well-known careers. not one party or one doctrine. so i took these individuals as examples of fiscal rectitude, and that is why clinton is on there. that is why eisenhower is on there. i have a huge problem with defense spending. this is also why eisenhower is on there. on the other hand, using the government to inflate the economy, to bail out the private sector, and so forth, it is bad, and that is why nixon is on there. frankly, that is why obama is on there. >> but there is somebody not on either list. >> he kind of sits in the middle. >> and ronald reagan. >> he kind of sits in the middle. >> what about george herbert walker bush? >> i did not agree with the persian gulf war. the 49 provinces of iraq, which was created by the british

foreign office in 1919 anyway. whether kuwait is part of it or not. caring about the emirate of kuwait. it was just a nasty dictatorship of saddam hussein. so we should not have been in it, and i gave him a bad mark for building up the welfare state and creating the monsters of cheney and all the rest of it that came the next time around. on the other hand, he did try to balance the budget, and even though he said he was not going to, and i give him credit for that, and he is not on either list. ronald reagan, i think he massively made mistakes on defense. the defense budget was not just a waste of money in those eight years, it was what created the war machine that created so much havoc in the world and created so much anger and problems throughout the world that were totally unnecessary. the hubris that imperial power.

that was a real negative. on the other hand, he did stand up for limiting the state. big government, the state is not the solution to every problem. in fact, it can weigh down the private economy. therefore, the idea of technological change, the idea that people should make their own decisions without some big man in washington, he stood for all of those things. i agree with all of those things, so that is a plus, and the negative, he really needed to stand up for closing the deficit.

the idea -- ronald reagan spent a lifetime before 1980 as the greatest courageous opponent of deficit spending there ever was, and he left a legacy of massive deficits, which permitted his followers to say the reagan deficits do not matter. that was like a historical error of enormous proportions. it was unfortunate, you know, deformed, if i can use that term from my book. it is a wash. >> this book is 743 -- >> that counts the index. basically, almost everything in here is either out of my personal recollection or experience -- most of the book

is about the big picture, the framework, the flow of history. most of the facts are public domain facts. i am a note in the back that most of these economic numbers are from the national income and product account or the commerce department, a list of publications. everybody can google it today. i am not an academic. i am not trying to prove anything. as i said in the notes on resources, this is a polemic. how it evolves from the founding of the fed through the depression through the eisenhower golden era through the reagan errors that occurred and into the bubble and the finance of greenspan and then the collapse in 2008 and so forth, and so i think the facts can easily be checked, and the interpretation, the argument, the keynesian life.

>> i want to ask you what you did after omb, but first, here you are back at the press club in 1986. [video clip] >> who is your loyalty to right now? >> least of all, according to your lights, it can be a blind thing. to rationalize nonsense, that you whitewash reality. that you justify what you personally feel cannot make sense, and therefore, that is why i am writing this book. i cannot justify what happened. i cannot justify the outcome. so i have to explain it as i see it, and if somebody thinks that is disloyal, then they have a rather -- view of loyalty. >> what do you think? >> --

>> you imply you were getting beat up in the press. were you getting beat up, and what did you think? >> the book was very controversial, and there was a lot of negative. everything was coming up roses. people were under the illusion that the reagan program was working, so therefore, how could you possibly write a book saying all of these huge mistakes were made? that is how i saw it then. that is how i see it now, and i think history indicates that. the reagan era was a massive deficit stimulus to boost the economy, bolster the economy for a while, and it left a lot of debt that we are still dealing with today. a legacy that neutered the conservative party, that disabled the conservative party from doing its job, and this was

the great debate, by the way, that i gave to supply-siders. they said the conservative party had to stop, the party of root canal, of saying no, dispensing pain. why do we not become the party of santa claus and all of the good things and grow our way out of the spending problem? that legacy, that debate was one of the bad things that came out of this era, and i tried to lay it out in my first book, and i think it is fairly obvious now. look at the folly of new year's eve this year, looking to extend the bush tax cuts that we cannot afford. and all of the liberal campaign. $4 trillion in deficits that our

children are going to pay so the top half of the households, a lot of them do not even pay income taxes, the progressive have of the population, they can go out and buy some more flat screen televisions or some other consumption expenditure. it does not make sense. that is the bad thing that came out of that era that i was trying to call attention to what i wrote the book in 1986. >> you went on to wall street yourself. you worked for goldman sachs. >> salomon brothers. >> where are they today? >> they were bought by smith barney, and they emerged. one of the crucial areas of the modern times to repeal that to allow investment banks and trading houses to be part of a commercial bank, deposit insurance, and all of the moral hazard.

a terrible error. it eventually ended. but it was the original big time trading house that came out of the era of easy money and floating currencies around the world that nixon initiated in 1971 at camp david. that is another part of the story. >> you went to work for blackstone. >> yes. >> what is that? >> is the biggest private equity house. i was in the leveraged-buyout business from 1988 until 2005, so i was caught up in the bubble like everyone else, and as long as greenspan was printing money and making wall street boom, and that was there for the taking, a whole business developed of going out, buying companies, stripping out, loading them up with debt, stripping out the cash, paying the interest,

eventually reselling them in the public market, to the next guy who thought he could do better, take the capital gains, and move along. now, there is nothing wrong with private equity if you have an honest market, where debt is not unduly cheap and a level tax playing field where debt and equity are taxed the same, but what involved in the 1980's and 1990's, the fed policy made it dirt cheap, and then that was deductible. they would load up the companies

with too much debt, and then when you sold them, you would take capital gains and only pay 15%. it was the biggest way to launder ill-gotten gains with the government policy. it was not something nefarious that people did. i was in that business. i had some serious issues i had to deal with after those bankruptcies, and in the wake of that, and began to realize how in the world did this happen in the first place? five or six times leverage on companies, violently cyclical? so it made me realize that bad policy causes good people are just everyday guys trying to earn a living whether they are on wall street or in a hedge fund, to really do counter- productive things, but i do not want to regulate them. i want to remove the incentive for all of this debt and all of the speculation and all of this leverage, and you can only do it

if you have an on the central bank that is not basically in thrall to wall street, which is what we have today, and we have as a result a central bank that is basically a serial bobble creator. it is not helping the mainstream economy. it is not raising the living standards of the american people. it is simply creating a bubble after a bubble. making a huge windfall offer, and everyone else suffers with the periodic consequence when we have a crash. >> your personal life, when did you beat your wife? >> in washington. she was working for ibm, and, actually, we met because i needed to buy a computer for my office.

i was a young, eager-beaver congressman, advanced, wanting to be the first congressman with a computer in my house. >> we have a picture of the two of you on the screen. it is your wife, i assume. >> yes. >> it started there. and we have another picture of heard year when she is by herself. i do not know where that event is. it looks like she is right in the middle of social new york. she is still president or chairman of the guggenheim? >> yes, and the guggenheim museum, and i am very proud of the work she has done there. it has got a financial aspect, but it also has a cultural and as the edit, and she is an avid collector.

she knows the artists. she knows the galleries. she knows the people involved in this world. it is very fascinating. it is an intellectually based world. there are the bubble aspects of it and the high prices and the options. >> you dedicate this book to "my daughters, rachel and victoria, whose futures inspired me to write this book." tell us about rachel and victoria and why they inspired it. >> two daughters. they are in the middle now of launching very budding careers, and we are quite proud of them. rachel is a journalist. she is in your business. she went to one of the great journalism schools at northwestern. she has moved through the ranks, green bay, phoenix, now in a big station in atlanta. and really interested in journalism and law and

constitutional issues. i am very proud of her. and victoria is a budding scientist. she has just been accepted to the ph.d. program in neuroscience at columbia. she will be spending a lot of years working on her research and degree, and she really wants to make a contribution in the field of science, so we could not be more proud of the way our two daughters are. two very different types of careers. >> a book publisher known for not paying high advances. in other words, you have got to make it on your own. because of that, do you expect to make a lot of money off of it? >> that was not the purpose.

if you're expecting to make a lot of money, i would say, "do not be an author." >> when did you start thinking about this? >> i started thinking about it when i was so put off. i was a close to outraged when the tarp bailout occurred. the bush white house totally collapsed and essentially allow the coup d'?tat to take over the government, hank paulson, them running around, the treasury. that offended me deeply because it was a total betrayal of everything the free-market conservative people have been trying to do ever since the

great depression. the new deal, for crying out loud. and in a moment of spasm and panick -- i have got chapter after chapter that shows all of the urban legends and basically the lies that bernanke and paulson told. the exaggerations and the war stories that were not real, like great depression 2.0. that is economic equivalent of dumping. it was never going to happen. it was not a prospect. it was simply a rationalization of the crazy bailout they were doing to stop the hissy fit on wall street because they were not willing to allow wall street to take its medicine, and i think it should have, so that we remobilized me, and i got to work after that and spent a lot of time revising my history. i had been kind of a buff of monetary fiscal history ever since i was in graduate school,

and then outlined the story, it started mainly as a polemic against the bailout, but as i got into it, how did the whole government get buffaloed? how the bush sit there and the white house clueless? that is the question i had to deal with, and i began to realize that the seeds had been planted deeply over many years and many bubble episodes. 2001. why did they panic when the dot com crashed? you have to have that every now and again. cutting the interest rate to zero. starting a housing bubble. and this went back to 1994. this began to go back into the roots and the period of the fed, until i got myself back to the founding of the fed, and the reason i did was not simply a matter of economic archaeology

but also because i believe that partisans today, with the crisis we have, have mythologized enormously things that have not exist. keynesian economics and the new deal, first, was not implemented, and second, it was not the great depression. reaganomics and the 1980's was not the greatest thing since sliced bread. part of the book is designed to demystify the legends of both the left and right and trying to get out of the truth. >> let me go to something that seems to keep happening. this is the way it is. some say, "i really did not mean it then." i just had to say it. when are we going to get, from your perspective, the trick? do we have to wait until people get out of office? >> as i try to explain before, i was not trying to save a i did

not believe in what we were doing. i was saying problems were developing, and balance would be difficult. but then i saw how far off course we were. the belief that if you just dig away at it, pretty soon, everybody else is going to see the light, pretty soon, the decision makers, in this case, you will correct the problem, and that is the better thing to do. you're investing in all of the

knowledge and the to and fro of what went on. the point is after a decent interval, a sufficient period of time, when it should be obvious to a rational person that you are not going to turn this around, you are not going to correct the error, that the decision makers are not listening, then you have an obligation to stand up, me, and resign and tell the truth. i resigned in 1985 because i kept trying and did have a brief increase in 1982. another one in 1984. we did make some head room. but then when reagan won the election overwhelmingly, with the adam smith ties, all of the california right wingers came in and said no more talk of raising taxes. the deficit will take care of itself. we won the election.

i said, "that is it for me." i did the best that i could for one more budget cycle. then i got out. >> what label do you put on yourself? >> i would not run in either party. i have said and i believe that both parties to they have totally failed and are corrupt. they introduce politicians to the money, the pac's, and k street. when the republican party says that since do not matter, it stands for nothing, when they put money what there is no tomorrow, it has no principles. so why do we need a republican party? >> are you a democrat? >> no, i could not possibly be a democrat, because they are least admit they are for big government, and i am against it.

>> you are criticized the last couple of years for not dealing with your own failure with the companies you were running, but in this book, it is buried -- i am not accusing you of burying it, but as in the romney chapter of about five pages where you deal with these. you said -- rather than me read it, why did you put this in here? where you stung by criticism? >> i think the part you did not read as that i go through romney and the bubble collapse. a point that even romney who was involved in lbo's from 1984

until 1999 did not realize that he was fortunate because of greenspan and this massive bubble. flip it out in an ipo. i accused him of being there for the wrong candidate in 2012, who had been clueless about how he made his money and that was not a sound basis for running an economy, that he was not a job creator. and then i took myself on. i was involved in the bubble, too. for years, until finally, when collins & aikman blew up, and i was in the street, i had to think about the dangers. >> you were indicted. >> yes.

>> it was you made a mistake. they do not send you a note of apology. they dropped the case. it is one of the things that happen in a bankruptcy. >> nuisance money. >> it was mostly nuisance money. the trust department, the sec, all of these class action suits, and that is essentially where all of the settlement money came from. for three or four years, contesting all of these class action suits that were piggybacked on top of the government case or settle them, so i settled them, and then the sec -- >> how much did it cost you for

your legal business defending all of this? >> it was incredible. it is one of the things wrong with the current system. not only me, but there were four other people who worked for me at the company, people doing their jobs every day. we were bailing and bailing to try to keep it stable. when we could not, four of them got indicted. they were bankrupt by it. it in the government dropped the case against me. "we made a mistake against you. you are not indicted anymore. you are un-indicted," and then the others pled guilty. and then they had their guilty pleas withdrawn. you confessed to something that did not happen. now, it took $100 million for all of those people, all processes to finally bring some nuisance money to the class action bar. some justice to these innocent men and women, men, actually, in

this case who were indicted for years. pushed into a guilty plea, when by its own action, it was not. >> where are these people today? >> it is pretty easy for me to explain myself. i get a form here and there. once you get indicted and pleaded guilty to a crime, it does not matter that you had withdrawn because the government says you made a mistake. so the attorney who brings this, somebody who had been prosecuting drugs and gangs did not know the difference between gaap, which is accounting, and rap, which is what they are dealing with gangs down the street. before she even brought the case, she quit and is hanging out a shingle at a big wall street law firm and now makes a huge amount of money. it is literally despicable. >> how are you financially at this stage in your life?

are you whole? you're at a nice place. >> well, i think at this point, i was very fortunate. over a long career. but i am not sort of in the money-making business now. i am trying to assess a pretty unique career. 40 years. wall street. i think i understand finance. i think i understand what goes on in the system in wall street. plus, i had long, long experience in the fiscal monitor process. so putting the two together i think is pretty unique. therefore, i have something to contribute.

>> you are 67 now? >> 6. >> 66. >> for the moment, yes. >> what do you do for the rest of your life if you are out of the business of running companies? >> i have investments, and i in trying to stay out of the market because i think it is totally unsafe. but, you know, there is a lively debate going on in the country. there are articles i have been writing over the years. this book certainly will add to it. the keynesians are going nuts. because i am making a pretty strong, detailed, in-depth, historical statement that the current wisdom, you know, that is extant in current policy is wrong.

there are a lot of people who love the status quo. it is either their brainchild or they benefit from it, and i think the status quo is very dangerous, and i am trying to give reasons why. >> were you a chronic capitalist? >> i guess you could say that. i was in the bubble. i was an unwitting crony capitalist. if the debt had not been deductible, if it had not been happening with the greenspan fed, we never would have borrowed nearly as much money as we did. the leveraged buyout business would not have been anywhere near. because it can work well for some companies that need to be shaken up, so, yes, i am i guess a last crony capitalist. >> the name of the book is "the great deformation: the corruption of capitalism in america," and our guest has been

david stockman, and we thank you. >> thank you. [captions copyright national cable satellite corp. 2013] [captioning performed by national captioning institute] our year up tonight, in review looks at immigration policy. our first ladies series features the life of lou hoover. a discussion on