David Stockman and the Cult of Gloom

The American tradition of the jeremiad is older than the republic, itself. But that doesn't make it useful.
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Reuters

We think of spring as a time of cherry blossoms and renewed hope, as we slough off the depths of winter and ease into the warmer months. These bright days seem a strange time to encounter the by-now widely circulated warnings of impending doom by Ronald Reagan's budget director, and current gadfly, David Stockman.

In a long essay in the New York Times drawn from his lengthy and just-published book The Great Deformation, Stockman this week made an impassioned plea for Americans to wake up to the looming crisis just ahead. This crisis, he predicts, will be triggered by a stock market collapse that will remove any lingering illusion that we are OK: "When it bursts, there will be no new round of bailouts like the ones the banks got in 2008. Instead, America will descend into an era of zero-sum austerity and virulent political conflict, extinguishing even today's feeble remnants of economic growth."

Stockman has many proposed solutions ‑- abolish Medicare, means-test Social Security -‑ but little hope of any change. The system is broken, the die is cast, sell, sell, sell, sit with cash in your mattress and hope we can make it through the reckoning.

Usually, such crib notes of an argument do it injustice. But the above is not a caricature of what Stockman predicts. It's what he believes to be the imminent fate of America. He is an unusually erudite and eloquent voice, but his message is so stark that it's almost impossible to violate by reducing it to its bare minimum.

It's remarkable how much play these views get and how much traction they have. The tradition of jeremiads extends back to the dawn of recorded history; the biblical The prophet Jeremiah railed against the flaws and failings of the Israelites, and though he was ridiculed for delivering an unheeded message, in the fullness of time his words came back to haunt his people. American society is infused with that tradition. Just read the sermons of any number of 17th century New England pastors who decried the immorality and sloth of their congregations, or various Great Awakenings that called people to return to the right way or risk God's wrath and misery.

Today's jeremiads are decidedly more secular - though you can still hear religious ones in churches and temples scattered through the land. But the ones that grab the public's imagination are now economic rather than religious, warning of collapse unless we all wake from our stupor of greed and debt-infused denial. Stockman is the voice du jour, but he joins a chorus. The financial world hears frequently from Marc Faber, known affectionately as "Dr. Doom" for his frequent prognostications of bad times ahead. On CNBC yesterday, he pronounced that soon every country will be Cyprus, with insolvent banks and governments raiding deposits. "It will happen everywhere in the world, in Western democracies," Faber said. "You have more people that vote for a living than work for a living. I think you have to be prepared to lose 20 to 30 percent. I think you're lucky if you don't lose your life."

And there are others, of course. Ever since the financial implosion of 2008, Nouriel Roubini has been traversing the lecture and consulting circuit with his dour analysis of the global financial system and its multiple flaws. Jim Rogers, who once worked with George Soros and famously rode his motorcycle across the globe, sits in Singapore and rails against the foolishness of central bankers and lemming-like investors while predicting China's inevitable rise and global supremacy. Meanwhile, Stockman-like strains of end-of-days debt-laden pessimism infuse the Tea Party and work their way into the Washington mainstream.

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Zachary Karabell is Head of Global Strategy at Envestnet, a financial services firm, and author of The Leading Indicators: A Short History of the Numbers that Rule Our World. More

At River Twice Research, Karabell analyzes economic and political trends. He is also a senior advisor for Business for Social Responsibility. Previously, he was executive vice president, head of marketing and chief economist at Fred Alger Management, a New York-based investment firm, and president of Fred Alger and Company, as well as portfolio manager of the China-U.S. Growth Fund, which won a five-star designation from Morningstar. He was also executive vice president of Alger's Spectra Funds, which launched the $30 million Spectra Green Fund based on the idea that profit and sustainability are linked. Educated at Columbia, Oxford, and Harvard, where he received his Ph.D., he is the author of several books, including Superfusion: How China and America Became One Economy and Why the World's Prosperity Depends on It (2009), The Last Campaign: How Harry Truman Won the 1948 Election, which won the Chicago Tribune Heartland Award, and Peace Be Upon You: The Story of Muslim, Christian, and Jewish Coexistence (2007), which examined the forgotten legacy of peace among the three faiths. In 2003, the World Economic Forum designated Karabell a "Global Leader for Tomorrow." He sits on the board of the World Policy Institute and the New America Foundation and is a member of the Council on Foreign Relations. He is a regular commentator on national news programs, such as CNBC and CNN, and has written for The Wall Street Journal, Newsweek, Time, The Washington Post, The New Republic, The Los Angeles Times, The New York Times, and Foreign Affairs.

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