canada. trying to come for a shelter all today. 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 and the brassica messing around with the two thousand and twelve elections won this in the second half hour but we begin tonight with a special edition of our conversations with great products.

the giants 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 who 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 budgeting through one thousand nine hundred five after leaving politics david stockman pursued a career in investment banking and joined blackstone group as one of its really its partners he's the author of the book triumph of politics how the reagan revolution failed and his new book tentatively titled the triumph of crony capitalism would s'pore out crony capitalism reached a peak during the recent financial meltdown and scheduled for release next spring as our nation deals with perilous financial problems and a weakening economy certainly his insights are worth hearing and i didn't stock and welcome thank you for you to be here have you with us here just to go to the

moments in time right now i do live when i want to wander back into history with you but i'm curious your thoughts thoughts on president obama's new job. 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 or you had no ford 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 at about eighty seven percent i think right now g.d.p. in terms of our debt and 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. the marshall act is it out well 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 at 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 federal debt we had virtually zero private debt so that from the beginning

to the end of the war believe this or not the total debt of our society for business has. and 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 there to cater 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 it healthy strong fiscally stable economy so there is a lot of mythology i don't know you are not easily and i think that's exploring because we are in that period of time i mean right now it could be corporate income tax share of federal incomes federal receipts dependent over the last ten years spending which you're looking at 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 pain a quarter of what they used to in terms of you know the overall and you have top marginal tax rates of ninety one percent throughout that period of time 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 choice of below which are the lower at the lower which the hot money starts appearing and bubble started appearing i mean doesn't how does that play into that and 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 free fifteen percent of g.d.p. that we've had in fifty years in fact you have to go back to the one nine hundred forty eight to the truman budget at the point at the end of demobilization so therefore the republican position i think is nonsensical you know it's indefensible

we can if we were able to you know have the size of government we had one thousand . fifty to be one thing but it's much bigger today defense is much prettier than 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 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 that 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 here 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 in something tax it 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 transaction it's called transactions it's called the tobin tax every stock

every bond that every derivative every commodity bought and sold the other thing. we seriously consider is getting rid of a 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 i'm sure you everybody remembers in the seventy's was eight nine ten percent so big gains were a real part it was inflation that is now obsolete and 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 have i doing away with capital gains tax you're not saying that the cap is actually reduced to zero but rather that somebody who runs their living using money rush should pay the same income tax rate as somebody who earns their living sweeping floors or for exactly i mean that's what i'm saying when i say get away with it i mean especially low rate right ok in other words i think all the income should be taxed the same and to the extent that we treat capital gains at a lower rate today we just encourage the tax 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 in helping to you know close this massive right here you have up with c.e.o.'s taking their pay and stock

options your salary because tax them it's crazy. is talking about how in the obama those. 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 o.m.b. 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 ballooned in i began to see we couldn't out 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 thousand nine hundred eighty three eighty four and 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 two zero eight it was totally unnecessary it was. unjustifiable policy and he has continued that theme bad 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 we're all paying the price well and your new book

is about crony capitalism i hope sarah palin isn't stealing your lines and the answer it's it's funny to hear her talking about that but. is this a piece 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. that dollar's value constant over time but in the last ten or twenty years it's become kind of the hand maiden of wall street it is been more focused on getting stock prices and more focused on keeping wall street happy then it is been 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 have 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 it's a cruel things that crony capitalism one thinks of. lobbyist's or some variation on there of saying to a politician hey you know pass this with their allies so you know put those highway buy in my office building my office building goes up in value. how does the fed become a colony of 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. direct them 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 count really are sounding like bernie sanders. you know you comment at 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 we didn't 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 made decisions could have been breakthrough had through the premade who can you trust no one who is your view with the global machinery 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 wineskin who was a writer not an economist for. a fairly influential want to republican circles

wrote a piece that later made its way through the ultra 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 body brought it well and the republicans were always the scourges they were always saying no can't do that you can't afford. 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 shut 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 spending and then as soon as a democrat comes into office start 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 have to cut back on their own social programs and shoot santa clause and it has been i mean ever since

nine hundred eighty that's exactly the strategy sure seems to me has been played out. do 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 it done 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 the danger of reading back in the 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 one one nine hundred eighty two and one nine hundred eighty three the people who helped formulate the original reagan program and i was one of them still believed 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 none of those things were all appropriate they were all justifiable but once we got into the meat 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 stopped at the potomac river 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 and 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 the some things around the edges certain programs great society programs they did but not very much it was less than five percent of the in here and budget so when you put all 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 clause theory it's simply happened in then the part of the white

house divided between i have what i would call the rational people who realized things were out of balance the numbers weren't working and the tax cut had been too big and we're going to have to take some of it back on the other hand the true ideologues who insisted let's just write it out. and continue to defend 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 fiscal 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 the bills of government just how some day you'll get enough

growth and 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's job in our american democracy is to be the party of restraint to be the party discipline to be the party that takes away the punchbowl if necessary if the party gets out of hand and you can 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 hear us 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 nine hundred sixty when we faced 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 it's not to belabor jude also claimed that he invented the phrase flies supply side economics and in fact it was art stalin was the president at cato back in the ninety's and he said when we're in the. hole. i'm forgetting the names of the cattle involved back then but anyhow this is when these guys along with newt gingrich discovered art laffer and unsure when

askew they thought they died to go to heaven because it was a lie 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 where the possible. what's what are your thoughts reflecting back that you know given the whole famous you know your disagreement in the work that you wrote about. a few minutes ago you seem to speak well of surprise 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 prayed well you know really you can't tax anybody ninety percent that's just wrong i mean that's what you might do work for forty years i don't think it really work because nobody paid ninety percent when you had a ninety percent rate people found municipal bonds and they found ways to create

actually elders 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 from any income large or small. but unfortunately that idea has been carried to this length it makes no sense whatsoever to in that serve as a cap on income i mean see it's epochal c.e.o.'s when reagan came into office took thirty times what their average employee takes now it's anywhere from five hundred to five thousand times having a larger 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 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 off of this is so this is the problem this is actual ization yes the financial ization of the common one is a function of a central bank that's out of control and has become a tool basically a 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 you would 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 i think we have to have

a vet 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. debate that's going on now as to class war not class war we have this unproductive we have just a minute left bad taxes are used by a lot of nations now as a sort of reverse tariff 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 be rejoined with the debt what about the trade well yes we've offshore and 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 is gone offshore more and more of or even white collar jobs so we have to address that but i would say a large part of that is again do 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 of bought up our dollars in exchange which is nationalize the fed buy it back from those twelve well into twelve banks 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 is long as the fed thinks those are its missions we are not going to have a stable economy and it seems that the this certainly the last few years of

certainly proving that out david stockman thanks us for being great is that it's an hour to watch this conversation again as well as other conversations with great minds go to our website conversations of great minds dot com. 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 completely break through get through it if you may who can you trust no one who is you in 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 more. for.