New Congress Will Be 'Totally Stalemated': Stockman
Today's election will bring gridlock to Washington and a roadblock to President Obama's agenda, a former federal budget director told CNBC Tuesday.
"The debt is growing at twice the rate of GDP [gross domestic product] and we're going into a new Congress that'll be totally stalemated. It'll be rancorous. It'll be partisan and it'll be all oriented to the 2012 elections," said David Stockman, former Office of Management and Budget director under President Reagan.
Whether Democrats or Republicans get voted into office, Stockman thinks this midterm election has no winner.
"Tomorrow's problem is we're in a recovery, the rebound is over—its 1 to 2 percent at best. And we're going forward with $100 billion a month of new debt being issued by the Treasury and it won't stop for next year or the year after, when the GDP is only growing at $40 or $50 billion," he said.
Stockman believes we are in a distorted market where "there is not a global bond market anymore. The $9 trillion dollars of federal debt that floats around the world is entirely a manipulated, medicated market driven by this central bank, the Fed, and all the central banks around the world. So therefore, this is basically a market that’s a casino trading off the Fed. It is not trading off of fundamentals."
The big change coming, according to Stockman, is a stop in additional spending or a new stimulus.
"It'll stop the Obama agenda cold," he said.
But that's not to say that if the Republicans take control of Congress, things will go differently.
"The record has been written. Republicans can't cut any material spending, and given a trillion dollar-plus deficit that continues to grow year after year, we're gonna have to have to raise revenues—you have to pay your bills sooner or later," Stockman said.
"We've gone through a 30-year tax referendum now on what we want out of government, what we want to spend, what we don't want to spend. We started out in 1981 with Reagan," he said, adding, "there is only a tiny portion of the budget that they [Republican] even want to cut. And during the Bush administration, discretionary spending went up by 60 percent too," he said.
"That's why I think we have to let the tax cuts expire. We'd like to have them for both the middle class, we'd like to have them for rich too for that matter, but we can't afford them," Stockman concluded.