freeborough if you're running video for your media drug free media done to our teeth dot com. hello i'm going to washington d.c. and here's what's coming up tonight on the big picture troy davis was denied a stay of execution this morning by a georgia appeals board meaning less than twenty two hours davis is slated to face lethal injection of the reverend jesse jackson on the show later just us that story plus how republicans in states like texas pennsylvania in the grass go messing around with the two thousand and twelve elections more in this in the second half but we begin tonight with a special edition of our conversations with great it's. the

night's conversations with great minds i'm very pleased to be joined in the studio tonight by david stockman former united states congressman representing the state of michigan was elected to three terms before stepping down to head up the office of management and budget under ronald reagan president ronald reagan in one thousand nine hundred one he is credited with writing the reagan budget and continued his work on federal budget in three one nine hundred eighty five after leaving politics david stockman pursued a career in investment banking and joined rockstone group as one of it's really his partners he's the author of the book triumph of politics of the reagan revolution failed and his new book tentatively titled the triumph of crony capitalism would spur crony capitalism reached a peak during the recent financial meltdown it's scheduled for release next spring as our nation deals with perilous financial problems and a weakening economy certainly his insights are worth hearings and i do woodstock and welcome thank you glad to be here have you with us here. just to the moments in

time right now then i want to back into history with you but i'm curious your thoughts thoughts on president obama's new jobs plan well i really don't think it's the right solution right now it's too late unfortunately we have used up our national balance sheet we've had a thirty year kind of party in this country we ran deficits year after year with tax cuts are you couldn't afford with wars that we didn't need and didn't fund and so we ended up today with an economy in great difficulty but a federal fiscal circumstance that is truly alarming and dangerous we're out of credit card we're out of money and as much as he might think this would help i don't think we can afford it and we're going to have to face some very difficult and lean and painful times as we try to work ourselves out from under this

really financial boom bubble that we've had for several decades now at the end of world war two we were at one hundred twenty six percent of g.d.p. we're eighty seven percent of the great now g.d.p. in terms of our. truman and mostly eisenhower didn't cut our way to prosperity in fact i'm not sure of any country that has they spent money like crazy you know the national highway system the g.i. bill. even the marshall act is that oh well i'm glad you bring that up because those are some of the things that i'm working on to clarify in my book right now it is true that it one moment at the end of world war two federal debt was one hundred twenty percent of g.d.p. but in the depression we wiped out all of the private debt during world war two there was rationing and massive pressure for people to save because there was nothing to buy the shelves were empty so even though we had a lot of. we had virtually zero private so that from the beginning to the end of

the war believe this or not the total debt of our society for a business household government went down not up then we had truman who balanced the budget three or four times we had eisenhower who yes did the interstate highway system and that's been productive but i was dedicated to fiscal responsibility he balanced the budget and even more importantly he dramatically cut defense spending from the huge levels that he inherited from truman believing that our real national security depended on a healthy strong fiscally stable economy so there is a lot of mythology i don't know if you are actually and i think you know the story because you're in that period of time i mean right now it could be corporate income tax share of federal incomes federal seat over the last ten years depending on which area what you have is run between seven and eleven percent during the truman

years and during the eisenhower years it was never below thirty percent and sometimes it was as high as forty percent so we've got the corporations are paying a quarter of what they used to in terms of you know the overall and you had the top marginal tax rates of ninety one percent throughout that period so i and i would not talk top marginal tax rates below well below fifty percent that seems to be the threshold above which you have financial stability in that there's not hot money out there for people to churn the white or below which are below the lower which the hot money starts appearing and bubble started appearing i mean doesn't how does that play into it i'm not trying to play as i think these are good points now. the problem today is we have the lowest aggregate federal tax rate fifteen percent of g.d.p. that we've had in fifty years in fact you have to go back to nine hundred forty eight truman budget at the point at the end of demobilization so there. for the

republican position i think is nonsensical you know it's indefensible if we were able to you know have the size of government we had nine hundred fifty to be one thing but it's much bigger today defense is much greater good it was in the fifty's we have the huge growth of the role for state social security and so forth so we're spending twenty four percent of g.d.p. we're taking in the lowest rate of taxes in history and this simply is a prescription for financial disaster and what we're doing is forcing the fed to print money to absorb all of that debt and it's creating enormous instability and bubbles on wall street so we have got we are really way off the beaten path in terms of fiscal sanity and what we need to be doing now corporation tax is only generated one percent of g.d.p. today it was three or four percent back then the income tax is generating far lower as a share of g.d.p.

than it was in truman eisenhower what is higher today is the payroll tax oddly enough so i think we have a huge debate in this country about where we're going to get the revenue to pay for the size of government but after thirty years of debate from reagan's first day in office to the present we have more or less decided as a country that we i personally think we have to have some kind of consumption tax on top of some other things we're doing but i also think we should have a transaction tax on wall street there's massive churning by robots frankly trading with each other billions of shares you know every day and week and that what we learned in supply side oddly enough is that if you want more of something to accept less of you want less of something tax that more we don't need all that churning we don't need all that speculation we don't need all of that you know unproductive activity on wall street so i would put a tax on trade. exaction it's called transactions it's called

a tobin tax every stock every bond outs every derivative every commodity bought and sold the other thing that we could seriously consider is getting rid of the capital gains tax and i was in congress when we passed a lower rate for capital gains but that was because the inflation rate is everybody remembers in the seventy's was eight nine ten percent so big gains were a real part of was inflation that is now obsolete that has a long time ago we have no inflation today there is no justification for a lower rate on capital gains fifteen percent then the average middle class income earner paying payroll tax and income tax is paying thirty five percent so i think obama is trying to get at some of these things i'm not sure i would agree with every feature of how he's trying to do it but clearly we can't afford to have

fifteen percent tax rate on the hedge fund guys and the private equity guys and capital gains when we desperately so it might avoid doing away with capital gains tax you're not saying that the capital gains tax should be reduced to zero but rather that somebody who runs their living using money rush should pay the same income tax rate as somebody or as they're living sweeping floors or or exactly i mean that's what i'm saying when i say get away do away with i mean the special low rate right in other words i think all income should be taxed the same and to the extent that we treat capital gains at a lower rate today we just encourage the tatts lawyers in the accountants and the consultants in the planners to find ways to transform income from normal income to capital gains or a lower rate it's unproductive it's unfair and we're losing tens of billions i would say one hundred billion a year of revenue that we could be putting into the coffer and helping to close this massive. here you end up with c.e.o.'s taking their pay and stock options your

salary because tax that you're very you know it's crazy. ron so it's kind of is talking about how in the obama administration tim geithner. basically ignored the advice of president obama in fact in many ways kind of defeated to break up the banks i'm curious in your years in the reagan administration with the head of the own be an advisor to president reagan would that kind of thing have been tolerated . you know i think there's shades of it ok there was vigorous debate within the administration within the white house and as the deficit balloon i began to see we couldn't our way towards balance i became an advocate of raising taxes to recover some of the revenue we lost in one nine hundred eighty one and of course that wasn't popular and it was a very contentious thing but it was out in the open and at the end of the day the

president did sign five or six major tax increase bills ronald reagan did the republicans have totally forgot about that today but he did in one nine hundred eighty two eighty three eighty four eighty five now that's different than what i read about this and i find this very disturbing because i think that president obama has been sold down the river by his secretary of the treasury it's i think mr geithner is been a bag carrier for wall street throughout his entire career he was behind the bailout of wall street in september one thousand to zero eight it was totally unnecessary it was. unjustifiable policy and he has continued that theme that approach the policy now that he in the years that he's been secretary of the treasury so. i think that the president has gotten some very bad advice and repaint we're all paying the price well and your new book

is about crony capitalism. isn't stealing your lines and hence it's it's funny to hear her talking about that but. is this a case of that yes that is. the problem is the federal reserve is supposed to be the central bank of the country that is really mission number one is to keep our financial system stable and the dollar's value constant. over time but in the last ten or twenty years it's become kind of the handmade not wall street it is been more focused on getting stock prices and more focused on keeping wall street happy then it is been on doing its job and as a result of that we have gotten sort of this easy money zero interest rates and constant infusions. of fed money into

the financial system that of that is actually undermined and harmed our economy and created huge windfall gains for a very small number of people and speculators and hedge fund investors and so typically when one thinks of crony capitalism one thinks of. lobbyists or some variation of their of saying to a politician hey you know pass this but like with they're all i say you know or i'll put this highway by my office building office building goes up in value. how does the fed become a crony crony capitalism is basically the idea that the free market really doesn't . you know drive things after all and that very powerful interest groups get ahold of the tools of government the tools of public policy and bend them and.

directly on towards their own private gain and those tools are both the budget tools the tax laws lots of other things that we can talk about but it's also the central bank in the money printing process and the intimate relationship that exists day by day between the central bank or the federal reserve system and wall street so i think the worst crony capitalism in america is in the financial system and its control over both the federal reserve and the congress and the white house and what you might call the washington realize you're sounding like bernie sanders . you know you come out this from different directions but it is not valid capitalism when you have firms that made huge mistakes in two zero eight and then get bailed out like a sore like goldman sachs or like morgan stanley or like the other financial institutions that got bailouts they should have paid the price and the idea that we

were going to go into some new version of the great depression if we didn't do that i think is fundamentally wrong and it's one of the reasons why i'm writing this book because i want to refute that idea because that's why people have tolerated those bailouts and if we don't refute the idea now it's going to happen over and over over and. over again good to get that on the record more conversations with great minds with david stockman when we come back in just. drives the world the fear mongering used by politicians who makes decisions break through get through to be made who can you trust no one who is you in view who would have lobel mission to read see where are we heading state controlled capitalism is called satchels when nobody dares to ask we do our t. question morning.

welcome back to this special edition of conversations with great minds tonight i'm joined by economist and author david stockman who served as the director of the office of management and budget under president reagan as well as a three term congressman and author. back back in the seventy's back in the late seventy's jude when a skier who was a writer not an economist but the. fairly influential want to republican circles

wrote a piece that later made its way through the wall street journal and others but was seventy six called to santa clause three in which he pointed out that the democrats had always been the santa clause they brought social security unemployment insurance forty hour work week bloody bloody well and the republicans were always the scourges they were always saying no can't do that for the. can't do that and he said we have to figure out a way to not only make the republican santa clauses but force the democrats to shoot senate and the strategy for doing that that he laid out was that when republicans were president they should basically spend like drunken sailors run up huge debt never mention the debt and benefit of course in the stimulus that spending and then as soon as a democrat comes in office or it's screaming about the debt and force the end if the debt could be made a large enough then you could actually force the democrats to cut back on their own social programs and shoot cynical and it has been i mean ever since nine hundred

eighty that's exactly the strategy sure seems to me has been played out. did you know jude was this a cot topic of conversation in the white house in the one nine hundred eighty s. during the reagan administration was a bit on above your level below your level didn't just happen what are your thoughts well you know i obviously did know him and there's always a danger of reading back into history through the lens of current outcomes and it is true that jude when in ski was a raving wild ok and. you know he wrote things for effect. but the point i would make is that this theory did not really drive what happened in one thousand nine hundred eighty two in one thousand nine hundred three the people who helped formulate the original reagan program and i was one of them still believe in traditional republican fiscal responsibility we were scared to death of huge deficits we thought that we could

bring it all together you know more defense which turned out to be in error and got out of control that we could cut taxes because the taxes had risen a lot in the seventy's simply due to inflation not for any other reason and third it was time for a thorough going review of this huge. government had built up over thirty or forty years some of those things were all appropriate they were all justifiable but once we got into the heat of politics it came unstuck the defense budget got way too big the pentagon got out of control and unfortunately ronald reagan was unwilling to discipline the pentagon and he hated big government but it stopped at the potomac river took whatever they asked for on the other side of the river they got so first part of the equation got out of control secondly when we passed the tax cut in order to pass it we had to put in every kind of ornament and special interest

gimmick and tax break in loophole imaginable there was almost like a feeding frenzy on capitol hill and so the tax bill ended up being forty percent bigger than we had tended and in the out years it was double the size that we intended then finally the republicans had a chance after you know complaining for decades about the new deal in the great society and the big spenders in washington they had a chance to face down those issues and decided as a group there really wasn't all that much they wanted to cut yes some things around the edges certain programs great society programs they did cut but not very much it was less than five percent of the inherent budget so when you put all of this together suddenly by one thousand nine hundred eighty two we had a situation that was careening out of control a massive deficit that wasn't planned wasn't intended not part of some conspiracy theory or santa claus theory it simply happened in then the part of the right house

divided between i would call the rational people who realized things were out of balance the numbers weren't working the tax credit been too big and we're going to have to take some of that back on the other hand the true ideologues who insisted let's just write it out. and continue to fan this massive tax cut that we couldn't afford that happened in one nine hundred eighty one in a debate in the fall of eighty one when it was becoming evident where this was going and the debate has been going on for the last thirty years in unfortunately there are very few people left in the republican party who are on what i call you know the this great conservative side of the debate and more and more and more they took on this catechism of tax cuts any time anywhere for any reason and that you never have to pay their bills of government just hope some day you'll get enough

growth to make a difference and blame it on the democrats anyway this is now become totally dysfunctional and it is basically left our political system on balance the republican party's job in the political system is not to be santa claus it's the job of the democrats the republican party is job in our american democracy is to be the party of restraint to be the party of discipline to be the party that takes away the punchbowl necessary if the party gets out of hand and you can't have a democracy that works if you don't have a conservative economic party we don't have one today we have two santa claus or i call them free lunch parties the democrats on spending the republicans on tax giveaways that never stop and dry part here and bipartisan consensus on the biggest defense budget in history and real terms that is eighty percent bigger than what

eisenhower left on the table in one thousand and sixty when we face the soviet union sputnik and so forth and neither party is willing to take it on including the company in the white house so if we have bipartisan. basically capitulation so the military industrial complex. and tax cutting on one side and defending every dime of the welfare state on the other we're in bad shape and that's where we are and that's why this is going to end in a real disaster unfortunately because jude not to belabor the point jude also claimed that he invented the phrase flight supply side economics and the fact that it was art stalin was the president of cato back in the ninety's and he said i want to. run the. whole. i'm forgetting the names of the outlaw involved back then but anyhow he says when when these guys along with

newt gingrich discovered art laffer and you're going to ski they thought they died about heaven because it was side economics they had a rationalization for for driving up huge deficits and ford pushing basically the democrats into a corner and no longer having to be the party that said no like you said race with the possible. what's what are your thoughts reflecting back that you know given the whole famous you know your disagreement in the book that you wrote about. a few minutes ago you seem to speak well of supply side economics well i think the underlying idea of getting the marginal rates down was a good idea because you know i hear some people arguing for ninety percent tax rates today but that's really unproductive bad knees and pray you know really you can't tax or anybody ninety percent that's just wrong i mean that's what you might do for forty years i don't think it really work because nobody paid the ninety percent when you had a ninety percent rate people phone they brought municipal bonds and they found ways

to create actually holders this is what's created this mess of an income tax law we have today so i don't think you can possibly really extract back kind of income for many income large or small. but unfortunately that idea has been carried to the length it makes no sense whatsoever been in that service a cap on income i mean see it's a couple c.e.o.'s when reagan came into office but it took thirty times what their average employee takes now it's anywhere from five hundred to one wall street five thousand times having a large crowd had anything to do i think that's a real serious issue but i don't think it had anything to do with ninety percent rate or whether we have fifty percent today i think it had to do with the fact that since one thousand nine hundred eighty and especially since the one nine hundred ninety s. we've had a central bank a federal reserve that. prints of money like there's no tomorrow creates enormous ease for speculators to make huge returns on speculative capital on

property on derivatives and so forth and then that is coupled with the fifteen percent tax rate and pay no tax on so this is so this is the problem this is actual ization yes the financial ization of the economy is a function of a central bank that's out of control and has become a tool basically of wall street so i think we get back to some semblance of reality by putting capital gains at the same rate as everybody else second i agree under this circumstance with obama the top rate should go up and it will pay forty percent but really pay it on everything you know shield and shelter and so forth that that would be a start but third we need revenue from everybody including the middle class and that's fat tax or something like that i think we have to have

a valid yes and as long as the republicans keep denying that we need any revenue at all you're going to end up with this silly you know debate that's going on now as to class war and not class war we it's is unproductive we have just a minute left yes bad taxes are used by a lot of nations now as are sort of reverse tariffs by being able to back that taxes out we don't have tariffs and we don't have that taxes in the absence of at taxes should we be considering terraces trade policy what about the the return of the debt what about the trade well yes we have off shored a large share of our middle class economy and middle class jobs i look at you know there's one hundred thirty million jobs in the economy today the same number as two thousand we've had no job growth for a decade but worse of the share that's middle class and you can support. family that's dropped by ten percent since the year two thousand we're going backwards

because all our manufacturing has gone offshore more and more of our even white collar jobs so we have to address that but i would say a large part of that is again to the federal reserve because the basically have created so many dollars that have flowed around the world and the japanese and the chinese and the koreans and the others have bought a car dollars in exchange just nationalize the fed buy it back from those twelve. twelve bearings that are irrelevant the fed is an independent entity that operates on its own it is brought under the treasury i don't know whether it should be brought brought into the tracery or not but we ought to have a new mandate for the fed stay out of trying to manipulate the interest rates in the yield curve and to levitate stock prices and to take care of in wall street as long as the fed thinks those are its missions we are not going to have a stable in front of them and it seems that the this certainly the last few years

of certainly proving that out david stockman very serious for being greece that it's an honor to watch this conversation again as well as other conversations with great minds go to our website at conversations of great minds. coming up reverend jesse jackson joins the show to talk about the controversy brewing in georgia as the clock ticks down in the troy davis case. that drives the world the fear mongering used by politicians who makes decisions its competitors break through it through if you have made who can you trust no one who is your view with the global machinery see where we had a state controlled capitalism is called sasha's when nobody dares to ask we do our t. question morning. folks.