David Stockman: "This Won't End Well" As Private & Public Sectors Increasingly Compete For Capital

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**David Stockman** (0:46)
I think we're in a different ballgame. We're in the post-Central Bank absorption era, and we're now going to be in an environment where private investment will be competing head-on with government borrowing, and it's not going to work out nearly as well as a lot of people might think.

**Adam Taggart** (1:19)
Welcome to Thoughtful Money. I'm Thoughtful Money founder and your host, Adam Taggart. We're fortunate to speak today with a man who's really been everywhere. Talking, of course, about David Stockman, who was, if I recall correctly, David, I'm doing this all this from memory, you were the youngest presidential cabinet member of the 20th century where you served as the head of the Office for Management & Budget under President Reagan. You were also a US. House of Representative. I believe it was from the state of Michigan.

**David Stockman** (1:53)
That's correct. Correct. Your memory is as good as mine. That was a long time ago.

**Adam Taggart** (1:57)
Well, let's see if I can go three for three. You were also a very early member of Blackstone, correct?

**David Stockman** (2:04)
All right. That's correct. Actually, I started on Capitol Hill in 1970 as a aide to a congressman from Illinois. He became chairman of the Republican caucus. His name was John Anderson. So I had a pretty good, as a very young man, view of what was going on during the Nixon administration, the Ford administration. Then I ran for Congress in 1976 and lucked out in some way and won. I was 29 at the time. I was a Michigan congressman during the Carter era. Then I joined up with Reagan in the 1980 campaign. By some fluke-ish thing, I was chosen to be his sparring partner in the debate rehearsals for his debate with both John Anderson, who ran as an independent, and Jimmy Carter, who obviously was the incumbent president. He practiced all his lines on me. He won the debate with Carter. He became president. He asked me to join the cabinet as energy secretary because I was into that issue at the time. I said, no, I'd like to be OMB director. He said, I'm not sure what that job is, but it sounds like you would be the right man.
That put me in really the catbird seat because obviously, we were trying to quite drastically shift the direction of policy to smaller government, lower taxes, less spending, more private sector, less state or government sector. Some of it was accomplished and a lot of roadblocks came up. But it was a pretty sort of defining experience for me. And then I went on to Wall Street first at, I was at Salomon Brothers, the big bond trading house. I guess they hired me because they figured I knew a lot about debt, federal debt, which by then was getting pretty big. And then I joined Blackstone and actually, you know, was part of their private equity leverage biobusiness. So I really got into debt. So, you know, that covers a lot of territory, both in Washington and on Wall Street. And so I think it gives me a kind of different perspective than you get either from politicians or from Wall Streeters. I'm kind of a hybrid in some way.

**Adam Taggart** (4:26)
Well, yeah, I mean, that's one of the reasons why I love talking to you, David, is you've sort of sat at every side of the table.
And you know how the people who sit on all the other sides, how they work and operate, because you've been in their worlds. And in fact, you still know some of the players themselves directly here. So to me, you've got one of the most informed insider perspectives because you've been in all these different worlds. You've been on the Congress side. You've been in the administration. You've been on Wall Street. You kind of know how all this works. It's funny, you mentioned that they wanted you at Solomon because you knew a lot about federal debt, which you said was getting pretty big at the time. If we look back at the federal debt, the Reagan era now, we almost need a microscope to see it. It's so sad that pretty big back then is pretty tiny. Now, what's also interesting is then you went on to do the LBO work as you talked about. So you've been in the debt world. I know a few people that are less concerned about the debt than you right now. I mean, you're one of the most concerned people I know about the debt overhang and the entitlements overhang and whatnot. So it's funny that while you've spent your world in debt, you are one of the people that think we've got one of the biggest existential crises ahead of us because of the debt, correct?