BILL MOYERS: Did trickle-down ever work?
DAVID STOCKMAN: Well I think it's an unfortunate metaphor because it has more of a untoward kind of implication than really exists. I think the idea that if you can mobilize a lot of entrepreneurial energy, if you can mobilize constructive risk-taking, and investment, and technology creation, and new enterprise formation, all of those will re-down to the benefit of the economy. And, and to the extent that we have a growing and dynamic economy, everybody will benefit. Now that doesn't mean it's a only thing you should do or that you should sacrifice everything else in order to encourage entrepreneurs and technological progress. So in and of itself trickle down can't be the governing philosophy.
BILL MOYERS: But it's being trotted out today to you know, because people say well, you can't raise taxes on the job creators?
DAVID STOCKMAN: Well, look. Everybody you know, as I think Oliver Wendell Holmes said, "Taxes are the price we pay for civilization." Okay, we it's not a question of taxes or no taxes on job creators or anyone else. It's a question of what are the least harmful ways to raise the revenue that we need to pay our bills once a democratic consensus is agreed on what government is doing. And therefore the wealthy have to pay their share or more of the taxes. And if that does, on the margin, discourage someone it's unavoidable. I mean, taxes will have a negative effect to some degree. But again they're the price of civilization. They're how could anyone believe you can fund the government on bonds alone, borrow your way to eternity. It's not possible. So if you think about it then this current Republican campaign that you don't dare to raise taxes on the job creator, it's just political rhetoric. In 1982 even Ronald Reagan saw that we needed to raise taxes when the deficit exploded. And the original tax cut at '81 was too big. So he raised taxes in 1982 by the equivalent of $150 billion a year in today's economy. He signed that bill. The, at that point there was 10 percent unemployment. The economy was just on the very edge of coming out of a very bad recession. We didn't say at the White House we can't do this because it's going to impact some job creator. We said we have to do it because on balance it's going to hurt the economy to continue to borrow at these rates. It's not responsible. It's not sustainable. And so therefore there's a tradeoff. But it's one that you have to accept. Now Ronald Reagan said this in 1982, and then again in '83, and then again in 1984. And where the Republicans come off today sort of reinventing a kind of a revisionist history of the 1980's is beyond me. What they're saying today is foolish. It's irresponsible. How can anyone believe, with the kind of deficit that we have, a trillion dollars year after year after year, that we can keep taxes as low as they are. It would be nice if we could. But they haven't been willing to cut spending.
BILL MOYERS: Now I think people today would be shocked to know that when you and I were young men in Washington that the richest Americans paid a marginal tax rate of 70 percent, right? And then it was cut to 50 percent?
DAVID STOCKMAN: Well, I think, you know, the more interesting issue is that the capital gains tax today is 15 percent. Now I say that is the problem, the differentially low rate. In other words if you're a wage worker if you're selling your labor, you're going to pay payroll tax and on that the full income tax rate. And even if you're right at the mean or median you're going to pay 35 percent all in on federal taxes. If you're speculating-- or investing-- millions or even billions of dollars and you are able to transform your income so it qualifies as a capital gain, you pay 15 percent. And that's part of the reason why our tax system has gotten so out of kilter. That's part of the reason why most of the gains from this bubble we've had in the last two or three decades have gone to the top. And it is the fundamental reason why the current tax code generates so little revenue and so much resentment on the part of the average taxpayer.
BILL MOYERS: Then why do we have it? In a democratic society where we're supposed to be able politically to address the broad concerns of the great middle, the middle class, why do we have such a discriminatory tax system?
DAVID STOCKMAN: Because of crony capitalism, the crony capitalist ethos dominates both parties. I haven't seen Obama really attack the low rate on capital gains which you would think a Democratic administration might do. He hasn't even been able to drive through eliminating the capital gains low rate, 15 percent, for the carried interest of a few thousand hedge fund managers and private equity-- fund-- operators. That is the worst abuse of all, a 15 percent rate if you're running, you know, a multi-billion dollar hedge fund and you're getting a 20 percent share of the carry. It's really pretty shameful. And yet the Congress as it's constituted today, the White House as even populist as it sounds, is unable to even get rid of that carried interest 15 percent rate for the top it's not even one percent. This is the top one-tenth of one percent.