Stemerman insists capitalism is America's source of strength

By Scott Benjamin

STAMFORD –“Capitalism is under assault,” says David Stemerman.

He owned a hedge fund that was valued at $1.6 billion, according to The Wall Street Journal, in 2017 when he launched his campaign for governor.

In fact, capitalism is so much under assault that Pulitzer Prize-winner Steven Pearlstein wrote a book last fall called, “Can American Capitalism Survive?”

He contends that corporations have put too much emphasis on supply side economics, maximizing shareholder value and market justice at the expense of reasonable regulations.

Pearlstein, a graduate of Trinity College in Hartford, stated that CEOs who get excessive compensation today would have been laughed at 30 years ago at their country clubs.

Stemerman declared that the system is not broken.

“I am surprised and disappointed that decades after the United States defeated Communism in the Cold War and supposedly put an end to the question of which economy was superior – capitalism or socialism – we now have people advocating for the superiority of socialism,” said Stemerman of Greenwich, who placed third in last year’s Republican gubernatorial primary.

“I understand the reasons for that challenge,” he said in an interview in an apparent reference to Medicare and green energy policies being advocated by the most progressive part of the Democratic Party.

“I think the bigger issue is social mobility,” said Stemerman, who is now a senior advisor at Emerson Point Financial in Stamford.

He insisted that an improved American education system can address that gap by having the public money follow the child to his or her school of choice.

“The closest thing that we have to socialism in our country are the public school systems,” Stemerman said. “The government provides the service and we’re told what school we must attend based on your residence.”

“There are no consequences for teachers or administrators for delivering a better or worse education,” he said.

“I believe the best way to improve the quality of education is to bring the same market forces that are there in almost any sphere of activity,” said Stemerman.

“What I would like to see is that every child has a choice,” he said. “Every family should be able to choose the school that is best for their child.”

Regarding the national economy, Stemerman said Republican President Donald Trump’s tax cut and regulatory reforms have produced continued low inflation and even lower unemployment. The April unemployment report had the jobless rate at 3.6 percent, its lowest level since 1969. In June the nation would reach the longest economic expansion in its 243-year history.

The expansion, which began during former Democratic President Barack Obama’s first year in office, would exceed the surge from the latter stages of former Republican President George H.W. Bush’s administration through the tenure of former Democratic President Bill Clinton.

New York Times economics columnist Paul Krugman has stated that the unemployment rate under Obama went under five percent, lower than it ever was under former Republican President Ronald Reagan.

Stemerman insisted the success of the Trump economic package has come despite questionable decisions by the Federal Reserve Board since Trump appointed Jerome Powell as its chairman last year.

He declared that the Fed “repeatedly overestimated the level of inflation and as a result has been quick to raise interest rates.”

CNBC has reported that the Federal Reserve board increased its benchmark interest rate four times in 2018. The Los Angeles Times has stated that was an effort to “normalize” rates after they were historically low under Janet Yellen, Powell’s immediate predecessor, who was reportedly cautious about raising them as the economy continued to slowly recover from the 2008 recession.

Stemerman said he is pleased that the Fed has kept interest rates stable over the recent months.

On a related topic, he said he is “concerned” about the increase in the federal budget deficit, which, according to New York Times columnist Steven Rattner, who served in the Obama Administration, could be over $900 billion by the end of the current fiscal year. It was just $439 billion at the end of fiscal year 2015, about 15 years before Obama left office.

Stemerman said the best remedy would be to curtail entitlement spending.

“The challenges we face at the federal level are similar to what we face at the state level,” he explained, making an apparent reference to Connecticut’s fixed benefits costs.

CT Mirror has reported that after taking up 10 percent of the budget 20 years ago those cost now consume 30 percent of state spending, largely because state employee and municipal teacher pensions were under-funded for generations.

“We made promises to our retirees that are greater than the money that we’ve put aside for them and it’s straining our federal budget,” said Stemerman of the costs associated with Social Security and Medicare.

The Associated Press reported that the overseers of the programs reported in April that unless Congress acts, Medicare could be insolvent by 2026 and Social Security by 2035.

Stemerman said former Republican President Ronald Reagan reformed Social Security in 1983 by reducing benefits and increasing taxes when there was a pending shortfall of funding, according to Phil Light of the Brookings Institute.

Stemerman said that three subsequent, two-term presidents have failed to take similar steps.

Former Democratic President Bill Clinton held a series of town hall meetings on Social Security reform in 1998. He vetoed a Republican-backed $792-billion across-the-board tax cut in 1999 saying that the country should instead first focus on saving Social Security and Medicare. He indicated that some of the projected federal budget surplus could be used to accomplish that, but never took that step.

In 2005, former Republican President George W. Bush got scant support for his proposed package of partial privatization of Social Security, personal Social Security accounts and diverting a portion of the Social Security tax into secured investments.

During his 2008 campaign, Obama called for increasing the cap on income subject to Social Security taxes to $250,000. Currently it is at $128,400. He never accomplished that goal.

In 2010 Obama established the Alan Simpson-Erskine Bowles Commission on Fiscal Responsibility and Reform, which, among other things, sought to raise the Social Security retirement age to 68 by 2050 and 69 by 2075. The vote on the 18-member commission lacked the 14 supporters needed to approve the overall package.

In 2012, a plan modeled after Simpson-Bowles was defeated in the U .S. House of Representatives 382 to 38 votes. U.S. Rep. Jim Himes (D-4) of Greenwich was one of the 22 Democrats that supported it.

Regarding state issues, the Hartford Courant recently reported that Stemerman has been seen several times coming out of the governor’s office.

He said that he has spoken with Lamont, but declined to disclose the topics.

Stemerman said, “I have been engaged with this administration behind closed doors.”