Americans are clearly unhappy with the current state of the country, but there is nothing new about American dissatisfaction with the status quo. We are an upwardly mobile society imbued with a belief that the future will always be better than the past. However, in recent years, rather than rolling up our sleeves and addressing our problems directly, we have developed an obsession with assigning blame, making excuses, and evading responsibility.
During the post-World War II period, we dealt with huge social changes in matters of race, gender, and sexual preference. We transitioned from an industrial to service-based economy, from a large unionized private work force to a small one, and from an absence of public service unions to a preponderance of them. We fought and paid for wars in Korea and Vietnam as we have more recently in the Gulf. We experienced military buildups and contractions, dealt with violent civil unrest as well as non violent protest. We carried on through two impeachment proceedings, numerous assassinations, and much acrimonious partisanship. We experienced both conservative and liberal government, fought wars on poverty and reformed welfare. We dealt with inflation and deflation, stock market bubbles and busts, and financial crisis foreign and domestic. Our tax structures fluctuated wildly -- high marginal rates, low marginal rates, progressive brackets, flatter brackets, favorable and less favorable investment income treatments. And we changed the composition of government spending as political fashion dictated.
Much of our current political conflict seems to stem from our perceptions about fiscal policy -- how much we raise in revenues and how much we spend. We tend to look at the myriad different circumstances and personalities of the past and based on our politics draw cause and effect conclusions about our current situation. But what exactly did we do in the past?
John Adams famously said, "Facts are stubborn things. And whatever may be our wishes, our inclinations, or the dictates of our passions, they cannot alter the state of facts and evidence." If we look at the economic facts without prejudice, we must conclude that despite all the changes in our circumstances, booms and busts, activist and conservative government, war and peace, there has been a remarkable constancy and consensus in the actual conduct of our fiscal policy -- until recently.
| RECEIPTS | OUTLAYS | DEFICIT | |
|---|---|---|---|
| 50's | 17.2 | 17.7 | <0.5> |
| 60's | 17.6 | 18.6 | <1.0> |
| 70's | 17.9 | 20.0 | <2.1> |
| 80's | 18.3 | 22.2 | <3.9> |
| 90's | 18.5 | 20.6 | <2.1> |
| 2000-08 | 17.9 | 19.4 | <1.5> |
| * | * | * | |
| Average | 17.9 | 19.7 | <1.8> |
| * | * | * | |
| 2009-12 | 15.4 | 24.4 | <9.0> |
Despite all the unplanned events, all the changes that we have undergone, and the different ways we chose to get there, our economic policies have had a remarkable consistency of result -- raising revenues of about 18 percent of GDP, holding spending to about 20 percent of GDP, and financing manageable deficits of roundly 2 percent annually. However, without finger pointing or assigning blame, it is evident that what we are doing now not only differs materially but is unsustainable. We have been operating without budgets and apparently without any attempt to manage toward any financial targets or limits. The result is that we are collecting less revenue and making significantly greater expenditures as a percentage of GDP that yield far greater deficits to burden future generations.
The necessary path for our future is straightforward: restore the consensus fiscal policies that served us so well in the past -- raise taxes and spend less. There is nothing unique about our present circumstances. The laws of economics have not been repealed. Every challenge we face now, we have faced in one form or another over the past sixty years. We have to get back to basics, summons the will and self-discipline to make responsible revenue and spending choices, and stop playing the blame game.
Al Checchi is chairman of Join Together America, the former chairman of Northwest Airlines, and a former candidate for Governor of California. His new book is The Change Maker.
Follow Al Checchi on Twitter: www.twitter.com/Al_Checchi
http://www.whitehouse.gov/sites/default/files/omb/budget/fy2012/assets/hist01z2.xls
2. The data ignores 2 important other variables, global economic growth (which has slowed) and energy prices (which are still high despite a decline in global production).
I'm afraid that Mr. Checchi suffers from the same ailment that he chastises in his first paragraph: "cherry-picking" data.
I didn't include the date on the 1930's in my article because the government did not assume its present role until after World War II. It was a much smaller operation before the war so the numbers weren't very relevant. Government was smaller; revenues were smaller; deficits were about the same.
However, I did note in the article that our tax rates were all over the map during the past sixty years (that was the point). In the 1950's, they were as you say and they yielded 17.2% of GDP. In the 1980's when they were dramatically reduced, they yielded 18.3% of GDP. In the 1990's, the Clinton years, they averaged 18.5%, and from 2000-2008 under Bush, they were 17.9%, exactly what they had averaged for sixty years. One would conclude that they all got to the same place albeit by different means. Likewise for spending. We fought major wars in Korea and Vietnam, each of which dwarfed the combined efforts in Afghanistan and Iraq, but still held overall spending to roundly 20% of GDP even during the 2000-2008 period when most of the costs of the two recent conflicts were incurred.
No they haven't.
So where does all that money that the federal government is spending go?
The interest paid on the federal debt will be 20% higher this year than last, and will continue to climb as the debt total does.
The Military is up by about 8% as the wars in the Middle East region continue to drag our economy down.
And veterans pensions spending us up about 10%.
Social Security, Medicare, and the Military account for 63% of the total federal budget.
Where are we going to cut?
I would agree that cuts will have to be made. but not if the reasoning for the cuts is to give tax cuts to the wealthy.
When capitalists who make millions a year pay a tax RATE less than 1/2 of that paid by an employee making $34,500 annually, it's not too hard to see where the problem really lies.
Until the affluent privileged few are required to pay their fair share on paying down the debt, it will go no where but up.
We listened to Reagan who wanted to shore up Social Security by raising revenues for it and raising the retirement age (33+years ago). Now the 'conservatives' tell us it's broke and needs to be reformed/slashed/done away with...AGAIN!
We listened to republicans who took us to war without paying for it and said deficits don't matter while running up the largest deficits in history and threw it in the laps of Democrats and blamed Dems for republicans wild spending sprees. Now, all of a sudden they decided deficits DO matter, just not when it's republiclowns running them up.
Republicans spend Americas young soldier's lives and massive amounts of taxpayer money to fight wars for so-called freedom, security and Democracy in other countries. Yet, America is less secure and less free after the republicans got thrown out of power in 2008. We know those wars are about controlling natural resources.
Republicans scream that we need to "drill baby drill" more more more because that will help bring down gas prices. Yet gas prices are so high now that many people can't afford to drive and it is driving up the price of everything we depend on for survival and all that money goes into the pockets of rich men.
One thing we know for sure is when "conservatives tell us we need to be conservative it will cost Americans "everything". The cost of conservatism is too high.
Oh, they were off budget Enron style so they do not count?
Yes, the statistics present a grim picture that either revenue needs to increase or outlays need to be reduced. However many of the root causes reflecting the rise in percentage between outlays and receipts were not initiated during the current administration.
'There are three types of lies-- Lies, damn lies and statistics'. -- Mark Twain
But Bush didn't drive the trillion dollar pork bill. Which itself is a significant portion of the deficit.
Fewer unemployed, more education too, perhaps?