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May 31, 2023 - RFK Jr. The Defender
55:13
How To Fix the Economy with David Stockman

David Stockman, budget director for President Reagan, discusses how to fix our economy with Robert F. Kennedy Jr.

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Hey everybody, I'm really looking forward to today's podcast.
My guest is really a titan, somebody who I spent a lot of my youth regarding as the kind of Darth Vader of cutting social programs and Environmental programs for the Reagan White House, but I now regard him, the more and more that I see him recently, it's very strange.
I remember reading, I think it was C.S. Lewis, who talked about people of one generation who are great enemies actually find themselves very aligned in the face of subsequent generations.
I feel that we have reached this kind of weird alignment where every time I hear David Stockman I'm a voice on TV or read an article about him.
I find myself nodding my head and he's talking about the same kind of things I'm talking about.
This outrageous debt that is destroying the middle class, that is threatening American democracy, the decline of America into a warfare state abroad, an imperium abroad, a surveillance state at home.
These huge gaps in wealth between the middle class and the rich that I think Democracy makes democracy unsustainable.
By every kind of political science that's been done in history, you cannot have a democracy when there are these huge aggregations of wealth above and then widespread poverty below.
I really am looking forward to this talk.
Let me give a little biography.
David Stockton was elected.
As a Michigan congressman in 1976 and joined the Reagan White House in 1981, serving as budget director.
He was one of the key architects of the Reagan Revolution plan to reduce taxes, cut spending, and shrink the role of government.
He joined Solomon Brothers in 1985 and later became one of the early partners of the Blackstone Group.
During nearly two decades at Blackstone and at a firm he founded Heartland Industrial Partners, Stockman was a private equity investor.
He is the author of three bestselling books, The Triumph of Politics, Why the Reagan Revolution Failed.
And that's 1986, The Great Deformation, The Corruption of Capitalism in America in 2013.
Trump, A Nation on the Brink of Ruin and How to Bring It Back, 2016.
And Pete Trump, the undrainable swamp in the fantasy of MAGA, 2019.
He is currently the publisher of a daily blog, Contra Corner, the place where the mainstream delusions and can't about the warfare state, the bailout state, the bubble finance and the beltway banditry are ripped, refuted and rebuked.
Born in Fort Hood, Texas, graduated from Michigan State University and attended the Harvard Divinity School and then went on to Washington as a congressional aide in 1970.
David, I can't tell you how happy I am to have this conversation.
Let me begin by just asking you about the Harvard Divinity School.
What was your career track trajectory at that point?
I'm glad you asked that question because it goes right to your observations.
That a lot happens in 50 years.
And I was in Harvard Divinity School in 1968 because I didn't want to get drafted to go to McNamara's War.
And if you were a prospective clergy, you got a deferment.
So I went to Harvard, got a job as a lived-in house man, and the family happened to be the Daniel Patrick Moynihan family.
So the next thing I knew, I was sort of connected to a political system.
Pat Moynihan had been part of your family during the 1960s, during the John Kennedy administration.
He got me a job on Capitol Hill.
Next thing I knew, I was running for Congress from my own district.
But the key thing was, I was at Harvard because I was anti-war.
The Vietnam War was just an awful, terrible, you know, stain on our history.
We were all proven right.
And the first campaign, that's why this discussion is so interesting.
The first campaign I ever worked in, the doorbells I ever rang, were for your father when he declared his candidacy in 1968 because the war had to stop.
And as a matter of fact, Despite all the tragedy that followed, the war did stop.
You know, Johnson didn't run.
And for a while, we had a little peace in the world.
You know, the neocons got control of the government during the Reagan administration.
They infiltrated the Democratic Party as well as the Republicans.
I call it the Uniparty.
And, you know, we have been off to the races as a global hegemon with these forever wars, decade after decade, And we have accomplished nothing except to alienate a good part of the world.
Unfortunately, kill and name hundreds of thousands, if not millions of people.
And we really have to stop this.
And that's why I think the issue of 2024, and there are a lot of issues, But the issue of 2024 is we have to stop the war machine.
And that's so ironic because that was our slogan back in 1968.
And the war machine is still here.
In fact, it's bigger.
And more powerful than ever before.
I've made the point that if you add up everything that we spend on defense, and that's the defense budget proper, International Affairs and all of the AID and State Department National Endowment for Democracy and all of the broadcasting operations.
And you also add to that the cost of veterans, the VA, because that's a deferred cost of war.
We have millions of men in America that were injured, maimed, disabled for life that we have to support.
They shouldn't have been in any of those wars, obviously, but that's More than $300 billion just for veterans.
So when you add all that up, it's $1.3 trillion going into this vast war machine.
And we really have to stop it because if we don't get...
I just want to make it clear that's an annual cost.
Yep, absolutely.
That's the annual cost.
And it's bigger than Social Security.
It's two or three times interest payments at the present.
It dwarfs everything else.
But there's something worse than the pure size or number.
And that is that both parties have become addicted to what I call the warfare state.
To the forever wars.
And so we now have a bipartisan consensus in favor of every kind of really unbelievable mayhem that comes along as a result of the Washington deep state, if you want to call it that, finding another crusade, as John Quincy Adams said, Another monster to destroy abroad.
Ukraine is crazy.
What are we doing there?
Funding, promoting, instigating this slaughter when it's very clear there's a solution here.
Ukraine was never a country built to last.
It's divided down the middle.
It's far worse than red state, blue state between the Russian-speaking provinces in the east and south and the nationalists in the west and center.
So the solution would be a peace conference, partition the country, and move along and stop the mayhem.
The war machine wants a war.
The neocons have so demonized Putin that they can't see straight.
And so now we have a government in Washington that should be attending to our domestic affairs, that should be a little concerned about $32 trillion of debt, that should be concerned about this massive disproportion of wealth that has been created as a result of all this money printing.
And borrowing that's occurred in the last two or three decades.
And yet, the big thing they like to do, you know, is get in the planes and go on their junkets And pretend, you know, that there's some kind of latter-day tribunes taking care of the empire around the globe.
This is the big thing.
This is the hard matter.
Until we break the lock of the warfare state, all these other things that we might actually even disagree about will never be addressed in any productive or proper way.
I want to point out a couple of things before I move on to the next question, which is that the people of Donbass, who are predominantly ethnic Russians, actually voted to join Russia prior to the war.
And the Russians said, no, we don't want you.
We want Ukraine to maintain its integrity as a nation and just, you know, let's make that part of the Donbass region an autonomous region so they can maintain their language so they won't be murdered, killed by government policies.
But leave them part of Ukraine.
That was the Minsk Accords, and we could have settled it then with no bloodshed.
The Russians wanted to do it.
This was an agreement that was worked out by France, by Germany.
And actually, when Zelensky ran in 2019, he ran on a peace platform and he got 70% of the vote.
And his promise was that he would ratify, sign and ratify the Minsk Accords.
And something happened when he got in there.
He got surrounded by White House neocons and ultranationalists within Ukraine, and something made him change his mind.
Yes, I think on that, it's a very important point, and I think you can go right to the heart of it.
It was the Azov Battalion, the sort of neo-Nazi forces that became part of the government in 2014, and they basically said to Zelensky, Who was born and lived in the Russian-speaking part of Ukraine, the Donbass.
His language is Russian.
He's a Russian speaker.
And you know, he was famous because he had this great comedy show on Ukrainian TV, but do you know it was in Russian?
It had to be translated into Ukraine.
That's where he came from.
But he was told by the ultra-nationalists, the hardcore, that if you even think about making peace with Russia, you won't live to tell about it.
And that's truly what happened.
So we need to understand that this is a civil war.
You know what Ukraine means in Russian?
It means borderlands.
The whole territory has been the borderland of Russia for centuries and centuries.
Much of it was part of the Russian Empire or it was a vassal state.
What we're fighting for today, allegedly, according to Washington, is to protect borders that actually didn't exist until 1922 when they were created by Lenin.
Out of administrative convenience from the parts and pieces of Tsarist Russia that he had taken control of.
And a little more was added by Stalin during World War II from Poland and Romania.
And then finally, in 1954, when Khrushchev won the struggle for succession, he gave Crimea to the Ukrainians.
It was Russian-speaking.
It had been purchased by Catherine the Great in 1783, it was purely Russian, but as a reward to his colleagues for helping, you know, his Ukrainian colleagues for helping succeed Stalin, it was a bloody struggle he gave them Ukraine.
So we're today fighting a war, a devastating war with the other major Nuclear-armed power in the world.
We're destroying a country.
We're slaughtering a population so that we can ratify the work of bloody tyrants, Lenin, Stalin, and Khrushchev, that made the current borders of Ukraine, but they have nothing to do With the real history of population.
So if we could just see through that, and as you say, go back to 2014.
The coup in Kiev was funded by the United States Department of State, the National Endowment for Democracy.
The CIA, we overthrew the duly and appropriately elected government.
We didn't like the president because he was Russian friendly.
Well, it wasn't our business to decide who and how the Ukraine is going to be governed on the border By the way, let me just add to what you're saying.
We put $5 billion through the National Endowment for Democracy and through USAID and all these other CIA front groups into those overthrowing Yanukova.
So in 2014, it was, as you say, it was the democratically elected government.
We, you know, were supposed to represent democracy, actually paid to overthrow that government in 2014.
Yes, and you know, I think this goes to a really important point why this is such a tragedy and such a crime, really.
And that is, if you look at the last election, which Yakunovic was elected, you look at that electoral map and you would be astounded.
The East and South voted 90 to 10, For the Russian-speaking, pro-Russian-speaking candidate.
The center and west, you know, historic Ukraine, Voted 90 to 10 for the nationalist candidate.
The country was divided right down the middle in ways that you rarely see, and it wasn't an aberration.
The same thing happened in several earlier elections.
So what I say is the Ukrainian people have already voted for partition.
They have said time and time again, we don't necessarily all want to be part of the same state, of the same nation.
And why in the world we can't see that and stop the fighting, stop the slaughter, and begin a peace process that could resolve this very quickly is really very hard to understand, except to realize that Washington is so populated with people who think that we need to be running every square inch of the earth And if it doesn't,
you know, if it's not run according to Washington specifications, then we need to intervene.
And that is so wrong.
It is really the opposite of that famous statement that I just quoted from John Quincy Adams that we mean to have peace with all nations.
And not to travel the earth seeking monsters to destroy.
And unfortunately, that's what our foreign policy has become in modern times.
Well, you know, one of the ironies, and I'm taking just from what you said, is that when we were fighting the Kosovo War, we were actually on the side of partitioning.
Right, exactly.
Two populations that had been kind of artificially loaded into one country through arbitrary drawn borderlines who couldn't get along with each other, who were having trouble getting along.
And at that point, we took the position and we were militarily involved.
Actually, we bombed Serbia for, I think, 82 straight days.
It's part of a campaign to sever Kosovo from the Serbian Republic.
But the bigger issue is there have been a lot of partitions in the world, both in older times and more recent times, that proved beneficial to the populations involved.
It turned out that Czechoslovakia was an artificial state created by Wilson They eventually parted ways.
There are two states there now.
They worked just fine.
The people were happy.
Yugoslavia was composed of eight or nine peoples and nations historically that didn't necessarily want to be together.
They were put together by Tito through, you know, the Iron Fist.
That has all now been dissolved.
It was kind of rough and tumble getting there.
But it's a lot better off than it was under one bloody tyrant.
So what's wrong with partition?
If there is good and substantial reason and historic basis for it, there clearly is here.
The war was started by Kiev in 2014 when it decided that the breakaway republics in the east that didn't want to be part of the new government Part of the CIA-sponsored coup had to be punished for their attempts to break away.
That's when the war started.
And for seven or eight years prior to the current war, Kiev, you know, murdered something like 14,000 people in the Donbass area.
And in areas that we're trying to break away.
So besides that, and I'm not making any brief for Putin, but he said as early as 2007, do not bring NATO to my doorstep.
And this is so interesting.
We're talking to you about it.
Because to him, putting NATO in the Ukraine and U.S. missile bases within minutes of Moscow was really not much different than what your uncle faced in 1962 when Khrushchev put missiles in Cuba 90 miles away.
And we said, this shall not stand.
Eventually, it was resolved peacefully.
But the principle is the same.
And why we expanded NATO to all these former Warsaw Pact nations when we had promised Gorbachev at the time of things breaking up and 1991, that we wouldn't move an inch to the east in return for his acquiescence and the unification of Germany.
All of these things are so well known, and yet you have a population of elected officials and permanent government apparatchiks, as I call them in Washington, who are so committed to the global hegemony,
to these forever wars, to The neocon creed that here we are with this sheer madness that you have a democratic president and a democratic majority.
That insists must be carried out to the last Ukrainian, which is so ironic, because when I started back in 1968, the Democratic Party was the Peastic Party.
You know, that's where all the doves were that we looked to in the battle, the fight on Vietnam.
And somehow, over the last five decades, over the last half century, it's turned upside down and switched.
And frankly, I think there are more doves in the Republican Party today, not many, but, you know, Rand Paul types.
There are more today than in the Democrat Party.
And that's really part of what has to change and change in a big way.
Yeah, and I agree with you.
I think particularly in the rank and file Republicans and the independents, that kind of populist wing is very, very anti-war, the same way that, you know, we were in the 1960s.
It's really interesting.
But, you know, the rest of the population has succumbed to this kind of comic book narrative that the neocons are so adept at generalizing.
We've got to go in there and fix it, like they did in Iraq.
They hypnotize people with it, and nobody is looking at the facts.
I'll just mention this.
As you mentioned, my uncle, his most important speech as president, the 60th anniversary is coming up on June 10th of the American University speech, which was the speech where he turned our nation around on the nuclear test ban treaty and had the first atmospheric test You know, the nuclear age.
What he did in that speech is the exact thing that you're doing right now is it was a talk to the American people asking them to put themselves in the shoes of the Russians.
And he said, you cannot have peace if you're not able to put yourself in the shoes of your adversary.
And he reminded people of something that we never heard.
You know, I grew up watching Vic Morrow on combat and, you know, how Americans, we Americans didn't realize that the war was really won by the Russians.
And that the Russians made this incredible sacrifice to beat Hitler, including 23 million, you know, you hear numbers up to 70 million Russians were killed, but 23 million people kind of agree on.
But it's one out of every seven Russians, 13% of their population died.
A third of the country was reduced to rubble.
And this is when my uncle said, you have to put yourself in their position and see how they view the world.
He said, it's like if all of our country was reduced to rubble from the East Coast to Chicago.
And how would we feel about hostile forces lining up on our border then?
It developed this great friendship with Khrushchev and they We're corresponding with each other secretly through a Soviet spy, a KGB, GRU spy called Georgi Bolsheko, who used to come to our house and he would hand letters to try to unrun the CIA, unrun the State Department.
26 letters of my uncle and Khrushchev.
And they found themselves that they were both in the same position.
They were both men who had fought in World War II. Khrushchev had seen this incredible brutality at Stalingrad, probably the worst battle, arguably the worst battle in history.
And my uncle had been lost and declared dead and seen the brutality of war.
And both of them had an abhorrence for war.
But they were surrounded by intelligence apparatus and military brass who saw the war not only as inevitable, but, you know, desirable.
Right.
They knew they had to talk to each other or the whole place was going to be burned down the whole world.
And that's why my uncle and Grushchev privately agreed to install the hotlines because they didn't trust their own people because they were surrounded.
And one of the things I want to ask you about, because you had a front row of this, because a lot of those neocons and a lot of the philosophy came out of the Reagan White House.
And then, you know, they really blew up during George W. Bush's administration.
But there was that kind of Zbigniew Brzezinski and the Carter White House was probably the granddaddy of the neocons, arguably.
And he actually says in his book, Our strategy should be to draw the Russians into wars in Afghanistan and other places where we can get other people to fight the war and we'll supply them, and that's how we'll bring down Russia.
That's been their blueprint from the beginning, and they just rolled it out, the same people.
How did you watch that evolution?
I'm glad you brought this up, and I want to go back to where you started, because I truly think That John Kennedy's American University speech is one of the greatest speeches, most inspiring speeches by any president at any time, and that people can easily find it on the internet today.
They should Click on and listen to it because it was powerful and it was moving and potent.
Now, what's interesting about that is that the other great speech given right before that was by Eisenhower, his farewell address.
And just as John Kennedy tried to open the door to negotiations and reducing the tensions of the Cold War in the arms race, Eisenhower had also made enormous strides in befriending Khrushchev, and they had several summits which were productive.
And as you know, the last summit in the spring of 1960 was going to be the breakthrough.
It really would have ended the arms race And on the eve of that summit, Alan Dulles and the CIA sent the U-2 spy planes right over Russia, Gary Powers.
It's a very famous episode.
They shot down the spy plane, and that was the end of the summit.
You know, it was the CIA. So your uncle said after the Bay of Pigs he'd like to smash the CIA into a thousand pieces.
And ironically, he was right.
And the same thing actually happened to Eisenhower.
Now, the key reason I'm bringing this up Is that if you look at 1961, Eisenhower was the president.
He was the greatest general we ever had in the White House.
And he said, the defense budget we have today is more than enough and we should be alert to the danger that they'll try to make it bigger.
Now, I bring this up because in today's dollars, that defense budget that Eisenhower said was...
Adequate was $400 billion.
Our defense budget in the same purchasing power dollars today is $800 billion going on $900 billion.
In 1961, when Eisenhower said our defenses are adequate, the triad nuclear deterrent that we had You know, we were up against Russia at the peak of its industrial might.
You know, they had 2,000 warheads.
They had 7,000 aircraft.
They had 60,000 tanks and on and on.
Four million men under arms.
But Eisenhower said 400 billion is enough even then.
Well, where are we today?
The Soviet Union has disappeared from the pages of history.
There is no big industrial power that's even threatening our homeland security.
And safety, and certainly it's not China, because China is one great big Ponzi scheme that couldn't survive without the export markets, you know, without the 4000 Walmarts in America.
The Chinese Communists would be in a hard way to stay in power as well.
So why do we have double the defense budget today that Eisenhower said was adequate when we had a real enemy and when he was in the middle of trying to open the door?
Now, the last point on your question, what was going on in 1980, is really also highly relevant to where we are today.
The case that the neocons were making in 1980, and you probably remember it, is that we were in danger of the Soviet Union developing a nuclear first strike capability, and that it would only be a matter of time, and they would say, you know, game over, surrender.
Well, that was complete baloney.
There was never a Soviet first strike, either intention or capacity.
But here's the thing.
They were able to use that fear to take the defense budget that we got handed to us from Jimmy Carter at $140 billion and to take it to $350 billion over a four or five year period.
And in today's dollars, it's a lot more than that.
What did they buy?
Here's the key thing.
What did they buy with that doubling, almost tripling of the defense budget?
They didn't buy anything that had to do with the so-called first strike threat from Russia because of the Soviet Union.
There wasn't one.
What they did was create a vast Armada of conventional forces, the 600-ship Navy, thousands of new main battle tanks, thousands of new aircraft, fixed rotary, all kinds of sea lift, airlift capacity, all kinds of missile capability, cruise missile capability.
What was all this used for?
It was used for wars of invasion and occupation.
In the Middle East it's being used in the Ukraine today.
In other words, you know, these forever wars We're an accidental outcome of a massive conventional buildup that was unnecessary that happened during the 1980s.
Because I'm pretty sure of this, that had not that huge buildup happened under the false guise, threat of a Soviet first strike capacity, it would have been very hard to have the first Gulf War, the second Gulf War, to take...
Take the battle to Libya and to Yemen and to all the other places in the world.
If presidents had to go to the Congress and ask for huge appropriations, To buy the military capability.
They already had it.
This is another important part of history that I think is important to lay out because it's why we're in the mess we are today.
If we didn't have all these stockpiles of weapons that really came out of that conventional force buildup, we wouldn't be running a genocide, which is really what it is in the Ukraine today.
I think it's a key part of understanding what has to change in a very big way.
We don't need that conventional force.
We need a triad deterrent, nuclear deterrent.
We have it.
It's bought and paid for.
It's relatively cheap.
We could get by with a $200 billion to $300 billion defense budget, not an $800 billion one.
We would then not be...
We could defend the homeland.
No one's going to penetrate the Atlantic and the Pacific with a homeland defense.
All of that would be possible.
And yet, the military-industrial intelligence complex, the neocons, and all of the...
I don't want to belabor this, but there's so much loose change in this massive $900 billion defense budget that it's basically like what I call a self-licking ice cream cone.
It pays for itself.
There is so much money that goes to all these think tanks, all of these NGOs, all of these operations that spend their life coming up with reasons why we should be in the Ukraine or Why liberating Libya was a good idea or why Yemen makes a difference, when none of this is true, but it all comes out of this massive budget.
The most dangerous thing in the world is the $900 billion defense budget, to tell you the truth, because there's so much money, so many arms contracts built into that, that it's almost self-perpetuating, very difficult to stop.
And you have the media involvement, too.
And, you know, you go on CNN and the people you're seeing who are urging us to, you know, increase our commitment to Ukraine are all retired generals who they don't tell you, but they're working for those Lockheed and the military contractors and those think tanks.
And their whole function is to try to keep us at this constant state of war.
And, you know, you talked about the expenditures.
We now spend...
40% of the world's budget, the entire global budget for military is coming from the United States.
We spend more than the next 10 top nations, including Russia and China combined, Right.
I talk often about Paul Kennedy, who's a Yale professor, who wrote this book, this analysis of the last 500 years of how empires rise and fall.
And every single empire in that book, every single empire in the last 500 years of history, half a millennium, the death knell has come from overextending its military abroad, and we've just followed that formula.
I remember at the end of the Cold War, disentangling, Right.
That we were promised a peace dividend.
Right.
That peace dividend was supposed to cut our budget, I think it was something like $600 billion then.
Right.
And that they were going to cut it to $200 billion.
That's what people were talking about.
And instead, you know, it's doubled, essentially.
It's gone up to, as you say, you know, if you add in everything, it's 1.3.
Homeland Security is 1.3.
And we wouldn't need all this Homeland Security if we weren't stirring up trouble in the world.
The reason we have to go through x-ray machines at the airport is because, you know, the military is not protecting us.
It's actually making it more dangerous to live in this country.
I would just add that they almost had a peace dividend for a few years.
And then, unfortunately, the Clinton administration got taken in by this Republican drum beating about being soft on defense.
And they came up with this stupid idea, really bad, and this is important to get into the mix here, of expanding NATO to include the former Warsaw Pact nations and then even some of the republics.
That spun out of the Soviet Union itself.
And at the time, and this was quite clearly, even then, there was a public debate in the New York Times.
George Kennan, the father of the containment doctrine, the intellectual, really, who helped create the whole Cold War containment doctrine, and that led to NATO, and that led to the Marshall Plan and all the others.
So this is a folly.
This is a wrong thing to do.
You're simply going to stir up the bear and sooner or later, the Russians will react.
Now, going back to your point earlier, you know, Russia has a case.
I mean, they never should have invaded this country.
I agree with that.
But they have a case that in the last two centuries, they've been invaded by the West three times.
Napoleon came in.
They were invaded by the Germans in World War I, decimated.
They were invaded in World War II in a horrible way and they stopped the invasion.
At the Battle of Stalingrad.
But after that kind of history, they have a different mentality.
And when we said we're bringing NATO to their doorstep, Okay, to Lithuania, to Poland, that we were going to put missiles in NATO in the Ukraine and in Georgia, which is a former republic of the Soviet Union.
It became too much.
And since 2007 at these international security conferences, Putin had been saying over and over again, that's a red line.
You can't put missiles on my doorstep in the Ukraine or in other parts of my neighborhood.
And they didn't listen.
And finally, there was a negotiation in December 2021.
One, it could have led to a breakthrough and an agreement to keep NATO out of Ukraine and some kind of autonomy under Minsk for the eastern and southern provinces.
But it was all vetoed, shot down and totally kicked away by the neocons.
This happened in a Democrat administration.
This happened on Biden's watch.
This never should have happened.
It shouldn't have happened in any administration, but certainly it shouldn't have happened in the former Peace Party that is part of the War Party now.
So the war party is the problem.
That's where we started our conversation today.
And we've got to do something to break it up, to break it up.
Let me add a couple of points.
My uncle would have invaded Cuba if they wouldn't, if they didn't remove those missiles.
And he got them to remove those missiles in a secret deal with my father and Ambassador Tobren and Right.
Where we removed our Jupiter missiles from Turkey, because Khrushchev had gone into Cuba.
Yeah.
Said, well, you got them at my doorstep.
I need to have them at your doorstep.
Otherwise, you got the, you know, you got the first strike capability that will destroy us.
And so...
You know, but can I just throw something in there if I could, because I've sort of studied this too, and it's very interesting that we're into it.
When he was suddenly confronted with this crisis, And then was told that Khrushchev was making the point, you got Jupiter missiles in Turkey.
They weren't even supposed to be there.
He famously said, there's always some bastard that doesn't get the word.
And the point was, time and time again, at all these inflection points in history, when people were trying to do the right thing, President Kennedy, President Eisenhower, Jimmy Carter with the arms control agreements.
Time after time, you know, they're undermined.
I mean, I have no great beef for Donald Trump, but he was actually trying to roll back the empire a little bit, and he tried to get out of Syria.
They said, no way, Jose!
He tried to, you know, defuse the tensions in Korea and his own people shot him down.
So we're up against something that's pretty insidious, pretty powerful, pretty deeply entrenched.
That's why the deep state isn't a bad metaphor, even if it's exaggerated.
And somehow its lock on the two political parties has to be broken if we're ever going to move into a Yeah, and let me just finish that thought about, you know, putting yourself in the adversary's shoes.
In exchange for moving, for reunifying Germany and moving out 400,000 German troops, I mean, Russian troops who were there and moving in NATO, imagine that, you know, what a blow to the pride and to the national security of the Soviets.
They got us the promise we would move one inch to the east.
We then moved a thousand miles to the east.
We took in 14 of their countries.
George Kennan and said, why are you treating them like an enemy?
They lost the Cold War.
The people who are running it now are the people who are on our side during the Cold War.
We should be treating them like we treat the Marshall Plan.
You know, we should be helping them transition to democracy and making them part of the brotherhood and sisterhood of Europe.
Why are we treating them as enemies?
If you treat them as enemies, that's what Kenneth said, it's got to be a self-fulfilling prophecy.
They're going to turn eventually.
They're going to see this unyielding hostility.
They're going to be resentful because they did everything we asked them to do.
They dismantled the empire.
We put Aegis missile systems in Poland and in Romania, and those missiles can carry Tomahawk missiles, which are nuclear, and Ukraine is 400 miles from Moscow.
We have a rule in our hemisphere called the Monroe Doctrine that says nobody can put anything anywhere near us.
Including Patagonia.
Exactly.
Let me ask you this.
Assume I get into the White House, okay?
I hope you do.
I'm going to get your help if I do.
Okay.
What do I, you know, and I want to close as many as I can to the 800 bases abroad.
Bring people home and start unraveling the warfare state.
You know, what happens to our economy in this country?
Because those are a lot of jobs that are lost.
Those are people now who don't have jobs.
They're people who are armed, maybe, you know, who could be prone to violence or whatever.
And this is always the worry when you dismantle the military.
And then there's a, you know, you have a huge cohort of people who are deeply resentful because they want this to continue, the gravy train to continue.
Right.
And then how do you employ those people and what does it do to our economy?
I mean, is there, how do we spend that piece of it and just start reducing debt and start You know, rebuilding our industrial infrastructure at home.
Well, I think that's an important point, but we can exaggerate how crucial it is to the economy, because even though we have this monster defense budget of $900 billion, it's actually only about 4% of GDP today.
It's not nearly as a share of the economy, not nearly the 7% or 10%.
That we had during the 60s and 70s during the peak of the Cold War.
That's the first thing.
The second thing is we've had successful demobilizations after major wartime spending three or four times in the last century, and we made the adjustment quite rapidly When there was no reason to keep it going.
You know, there was a massive number of men under arms and the whole country was mobilized for war in 1917 and 18.
We did have a recession in 1920.
And by 22, we were booming.
It was the roaring 20s.
We had the big economy.
After 1945, everybody said, This was totally a war economy.
You couldn't buy a car.
You couldn't buy furniture.
Everything was refocused on war production and that when the war ended in 1945, there was going to be a long-lasting depression.
That's what some of the Keynesians were saying.
It didn't happen by 1947, 1948.
The economy was back on its feet as the civilian economy was doing well.
Same thing the lesser way after Korea, same thing after Vietnam.
So I think what we need to do is recognize that war spending is an economic negative in the long run.
It produces no goods or services that are of value to anybody.
It is ultimately a form of economic waste.
We don't get capital goods.
We don't get consumer goods.
We just get an arsenal, most of which we don't need.
And when you stop spending money on waste, on things that we don't need, either for defense and certainly for civilian life, the economy itself has great powers.
of adjustment and regeneration.
Maybe we have some kind of federal readjustment programs.
We've had those before.
I don't think you need much.
I think you have to basically say we're going to change the predicate.
We're going to have first an international push for new treaties, for arms control and arms reduction treaties.
We've mentioned that our $1.2 trillion defense budget is a high share of the world.
But there's $4 trillion being spent in the world today on arms that doesn't need to be spent.
And at least in 1920, our leaders tried to, you know, there was the famous naval agreement in 1922 that Attempted to reverse the naval arms race.
We tried to have agreements obviously in the 60s and 70s and did.
Your uncle led that process.
So what we need to do is basically let the American people know that we're in the process of making peace with the world and negotiating with the world, reducing the massive expenditures on both sides on arms.
And I think a lot of the rest of it will take care of itself if we can just change the fundamental direction.
Let me add to this, switching subjects.
We're going to reduce expenditures for the military, and that deals with some of this hugest momentous trillion-dollar budget deficits that we have.
$32 trillion is so massive compared to GDP. Between rich and poor, can that be remedied?
Can those two issues be remedied?
And how do you do it?
Well, there's big changes we have to make, and I'm glad you brought this up.
When I became budget director in 1981, the public debt was $980 billion.
It's now $32 trillion.
It was 30% of GDP. It's now 130%.
That has all happened within one lifetime, you know, in four decades.
So that's what we're up against and it has to change.
The second reason that we need to focus on is it happened because the Federal Reserve became perverted in its function and started to monetize all of this debt that was being created to fund both a burgeoning welfare state And a big bloated warfare state at the same time.
We didn't have enough money or taxpayer willingness to fund both.
And so we borrowed like crazy $30 trillion of new debt in a lifetime.
So what we need to do is basically recognize that Two trillion annual deaths are built in.
They're baked in the cake.
If we continue with the warfare state that we have today and all the domestic programs we have, and that if we can at least bring this defense budget down dramatically, we can begin to chip away at that and get back to some level of fiscal sanity.
But none of it can happen until we bring the Fed back under control.
They have printed so much money.
They have created such tremendous bubbles, such tremendous imbalances and exaggerations in our economy.
And it's not helped, you know, Main Street.
It's not helped the average guy.
This has all been, as I said in a thing I wrote recently, it wasn't like President John Kennedy said when he You know, introduced his new economics and he said the rising tide lifts all boats.
That was the idea.
We're going to cut taxes and get investment and the economy is going to perk up and everybody will benefit.
The kind that we have today is a rising tide that lifted all yachts.
It went to the 1%.
In the last 30 years, the net worth of the top 1% has gone from $4 trillion to $44 trillion.
If you can imagine that, a $40 trillion gain.
The bottom 50% went from 1% to 4%.
They've gained $3 trillion.
50% of the households in America The top 1% have gained 40.
Now, this isn't because of Wild West capitalism.
This is because of wild money printing, too much liquidity, too much monetary stimulus in the system.
We have a situation today where the top 1% average net worth is $38 million.
The bottom 50% average net worth is $56,700 to $1.
That's not free market capitalism.
That's not the natural order of- Just repeat that so people can hear it because what you're saying is the bottom 50% of the country Yep.
That the average net worth is 56,000.
56,000.
And the top 1% is 38 million, rough ratio 700 to 1, double what it was as recently as 1990.
So this is not the natural evolutionary outcome of market capitalism, even though some You know, leftists want to say that.
This is because we've had a central bank, both here and around the world, that has put so much liquidity into the markets, and that liquidity has never left the canyons of Wall Street.
You know, it didn't cause an acceleration of investment or job growth or living standards.
No.
Actually, in the 60s and 50s, 60s and 70s, median real family income It grew at 2.5% a year.
Since the year 2000, it's grown at 0.5%.
In other words, a half a percent, not 2.5%.
That's a huge difference if maintained year after year over time.
It's 5 to 1.
What has happened is that these bad money printing policies of the central banks Have created this massive windfall of financial prosperity to the top 1%, even as the real growth rate and investment rate of the economy has slowed to a crawl, which has left the middle class or main street, as we might want to call it, high and dry.
That's another whole part of this syndrome that we really need to correct in a big way.
You know, what happens when you try to fix that?
I mean, it's, you know, because if they just stop renting the money the way they're doing it, there's a bubble at that point, right?
And that breaks.
I'm just asking this.
The president who tries to mess around with that bubble is, you know, he or she is going to cause the collapse of the entire economy.
Anybody who tries to fix it, Yeah.
Well, you know, what I would say is the president should stop trying to take credit for an artificial fantasy land economy that can't be sustained and instead come into office telling the people that this is a fantasy.
It's not sustainable.
We have these massive bubbles.
They're unfair.
The benefit has gone to a very small fraction of people.
So we're going to have to go through a cleansing process.
But I think, frankly, a big impact is going to be to the 1% when the bubble is finally and fully punctured by a change at the Fed.
So I think anybody that really wants to get a grasp on this needs to go into office We're going to have a house cleaning at the Fed.
The stock market is likely to go down.
Get your money into something safe, not in these go-go stocks, not in the tech stocks.
Not in the NASDAQ 100.
Get prepared because we have got to get back to reality, into something that's sustainable and fair, and having our capital go into productive investment, not financial engineering.
That's where it's been going, into financial engineering.
We've had $25 trillion, a staggering number, of financial engineering, stock buybacks, big M&A deals.
Accomplished nothing over the last two decades instead of that money going in.
Real investment has been flat for two decades.
Real investment after you take the needs for a depreciation out of the equation.
And that just tells you this isn't working.
And I think someone has to tell the public it's not working.
We can change.
We used to know how to do it.
We had prosperity in the 50s and the 60s and into the 70s.
And we weren't printing money like crazy then.
We weren't running 3%, 4%, 5% of GDP deficits.
We weren't trying to even be the hegemon of the world.
And that was in the time of the Cold War.
So we go back to basics.
I think that's what the theme needs to be.
We've done it before.
We can do it again.
There might be some bumps and grinds between here and there, but we have to make a start and we have to recognize where we are.
David Stockman, thank you so much for joining me today.
I hope you'll come back.
I really, really want to finish this conversation and Thank you,
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