David Stockman
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David Alan Stockman (born November 10, 1946) is a former U.S. politician and businessman, serving as a Republican U.S. Representative from the state of Michigan (1977–1981) and as the Director of the Office of Management and Budget (1981–1985).
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[edit] Education
Stockman was born in Fort Hood, Texas, and educated in the public schools of Stevensville, Michigan. He graduated from Lakeshore High School in 1964 and received a B.A. from Michigan State University, East Lansing in 1968. He pursued graduate studies at Harvard University, 1968–1970 and 1974–1975. He was in Harvard's Divinity school.[citation needed]
[edit] Career
He served as special assistant to United States Representative and 1980 Presidential candidate John Bayard Anderson of Illinois, 1970–1972 and was executive director, United States House of Representatives Republican Conference, 1972–1975.
[edit] Congress
Stockman was elected to the United States House of Representatives for the 95th Congress and was reelected in two subsequent elections, serving from January 3, 1977, until his resignation January 27, 1981 to accept appointment as Director of the Office of Management and Budget under U.S. President Ronald Reagan.
[edit] Office of Management and Budget
Stockman emerged as one of the most powerful and controversial OMB directors ever during a tenure that lasted until his resignation in August 1985. Committed to the doctrine of supply-side economics, Stockman took the lead in directing passage of the "Reagan Budget" (the Gramm-Latta Budget), which Stockman hoped to be a serious curtailment of the "welfare state", gaining a reputation as a tough negotiator with House Speaker Tip O'Neill's Democratic-controlled House of Representatives and Majority Leader Howard Baker's Republican-controlled Senate. During this period, although only in his early 30s, Stockman played a central and highly visible role as the ultimate "budget guru" in the fierce debate and contentious political wrangling over the future direction of the role of the federal government in American society.
Stockman's power within the Reagan Administration waned after the Atlantic Monthly magazine published the famous 18,246 word article, "The Education of David Stockman",[1] in its December 1981 issue, based on lengthy interviews Stockman gave to reporter William Greider. It led to Stockman being "taken to the woodshed by Reagan" as the White House's PR team tried to deal with the article's damage to Reagan's perceived fiscal leadership skills. Stockman was quoted as referring to the Reagan Revolution's legacy tax act as: "I mean, Kemp-Roth [Reagan's 1981 tax cut] was always a Trojan horse to bring down the top rate.... It's kind of hard to sell 'trickle down.' So the supply-side formula was the only way to get a tax policy that was really 'trickle down.' Supply-side is 'trickle-down' theory." Of the budget process in his first year on the job, Mr. Stockman is quoted as saying: "None of us really understands what's going on with all these numbers," which was used as the subtitle of the article.
The fiscal misunderstandings had ramifications. With the National Debt benchmarking at $1.0 Trillion in October of 1981, not counting Trillions in accumulating net interest carrying costs, the National Debt was put on a political trajectory via the legacy of the Reagan Revolution budgets, towards the $9.1 Trillion it reached by the end of 2007. Vice President Dick Cheney is famously quoted as saying: "Reagan proved that deficits don't matter". Regardless, the legacy of sizable budget deficits added up in the National Debt and interest costs alone on the debt clicked in at $1.17 Billion dollars per day for fiscal year ending 2007; $430 Billion for the year.
After Stockman's first year at OMB and on the heels of 'being taken to the woodshed by the president' over his candor with Atlantic's William Greider, Stockman became disillusioned with the projected trend of increasingly large federal deficits and the rapidly expanding national debt, which he blamed on the Reagan tax cut. On 1 August 1985, he left OMB and later wrote a memoir of his experience in the Reagan Administration titled The Triumph of Politics: Why the Reagan Revolution Failed that, in part, specifically criticized the failure of Congressional Republicans to support a reduction in government spending as necessary offsets to the large tax cuts, in order to avoid the creation of large deficits and an exploding national debt. Others have argued that while spending cuts were indeed necessary, one cannot blame the deficits solely on the tax cuts themselves,[citation needed] as tax revenue actually increased following the enactment of the Reagan tax cuts due to greater economic activity in the expansion that followed -- which many contributed not to the Reagan tax cuts, but to Milton Friedman's revolutionary economic theories gaining a high priest "monetarist" practitioner in Federal Reserve Chairman Paul A. Volcker and Volcker's own revolution at the Federal Reserve with its freshly won war against inflation, where the federal funds rate had been driven to an historic peak of 20% in January 1981, slowly crushing inflation in the process, and making Wall Street's financial investment assets and instruments of stocks and bonds flourish in a "safe harbor" market, free from the ravaging net eroding effects of inflation. Paul Volcker was appointed to the Federal Reserve by Jimmy Carter in July of 1979, confirmed in the Senate in August, and a new era of Monetarism shifted into gear in October of 1979 at the Federal Reserve. Monetarism's rising interest rates, on the road to crushing inflation and slowing the economy in 1980 persuaded voters to usher out the Carter administration and usher in a new era, with Reagan into the Oval Office and David Stockman slotting into the OMB.
[edit] Fiscal Legacy
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President Jimmy Carter's last signed and executed fiscal year budget results ended with a $79.0 Billion budget deficit, ending within the period of David Stockman's and Ronald Reagan's first year in office, on October 1, 1981, and provided the benchmark of where the National Debt stood when Reagan and Stockman began to unleash their revolutionary fiscal legacy. The Gross Federal National Debt had just climbed to the $1.0 Trillion level in October 1981 ($998 Billion on 9/30/81), which was the cumulative fiscal budget results of 205 years as a nation (1776-1981), 96 Congresses, and 39 Presidents; not to mention two World Wars and one Great Depression. Just four and a half years into the Reagan Revolution, upon Stockman's resignation at the OMB in the summer -- August of 1981 -- the gross federal debt level had nearly doubled with the National Debt standing at $1.8 Trillion on 9/30/1985. Stockman's OMB work within the administration in 1981 up to August was dedicated to negotiating with the Senate and House on the next fiscal year's budget, executed later in the fall of 1985, which resulted in the National Debt officially doubling to $2.1 Trillion on fiscal year end 9/30/1986.
[edit] Private Equity
Having left government, Stockman joined the Wall St. investment bank Salomon Brothers and later became a founding partner at the now highly successful New York–based private equity firm, the Blackstone Group. He left Blackstone in 1999 to start his own private equity fund, Heartland Industrial Partners, L.P., based in Greenwich, Connecticut.[1].
On the strength of his investment track record at Blackstone, Stockman and his partners raised $1.3 billion of equity from institutional and other investors. Under Stockman's guidance, Heartland pursued a contrarian investment strategy, buying controlling interests in companies operating in sectors of the U.S. economy that were attracting the least amount of new equity: auto parts and textiles. With the help of about $9 billion in Wall Street debt financing, Heartland completed more than 20 transactions in less than 2 years to create four portfolio companies: Springs Industries, Metaldyne, Collins & Aikman, and TriMas.
[edit] Collins & Aikman Corp.
In August 2003, Stockman installed himself as CEO of Collins & Aikman Corp., a Detroit-based manufacturer of automotive interior components. He was ousted from that role days before a Chapter 11 filing on May 17, 2005.
[edit] Criminal and civil charges
On March 26, 2007, federal prosecutors in Manhattan indicted Stockman in "a scheme ... to defraud [Collins & Aikman]'s investors, banks and creditors by manipulating C&A's reported revenues and earnings." At the same time, the Securities and Exchange Commission brought civil charges against Stockman related to actions he took while CEO of Collins & Aikman.[2] Stockman faces up to 30 years in prison. Like other executives of companies that collapsed from alleged management corruption, Stockman suffered a personal financial loss, estimated at $13 million, along with losses suffered by Collins & Aikman employees.
[edit] Quote
Concerning President Ronald Reagan's 1981 tax cut, Stockman said this to William Greider of the Atlantic Monthly:[3]
| “ | Do you realize the greed that came to the forefront? The hogs were really feeding. The greed level, the level of opportunism, just got out of control. [The Administration's] basic strategy was to match or exceed the Democrats, and we did. | ” |
[edit] Personal
Stockman lives in Greenwich, Connecticut.[1] He is married to Jennifer Blei Stockman and is the father of two children, Rachel and Victoria. Jennifer Blei Stockman is the national co-chair of the Republican Majority for Choice, and the President of the Solomon R. Guggenheim Foundation Board of Directors.
[edit] Footnotes
- ^ a b "Collins & Aikman seeks to emerge from bankruptcy," Bloomberg News article by Jeff Bennett, appearing in The Advocate of Stamford and (identical version, perhaps with changes by the local editor in the common business section for both papers) in the Greenwich Time on September 5, 2006, page A7, The Advocate
- ^ "Stockman Outsmarts Self in Detroit by Doron Levin". Bloomberg, March 29, 2007
- ^ "What Stockman Said", Time Magazine, 23 Nov 1981.
[edit] External links
| Preceded by Edward Hutchinson |
Member of the U.S. House of Representatives from Michigan's 4th congressional district 1977–1981 |
Succeeded by Mark D. Siljander |
| Preceded by James T. McIntyre |
Director of the Office of Management and Budget 1981–1985 |
Succeeded by James C. Miller III |
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