Deficit theater is coming to D.C. tomorrow, with a well-funded "fiscal summit." The plot summary is that we have Deficit Trouble -- Right Here In River City! so to fix it we need to cut Social Security and Medicare and the things democracy does for We, the People -- while cutting taxes on the rich and their corporations to make us more "business-friendly." (This musical is sometimes billed as "Simpson-Bowles" but it's the same old song.)
All of this deficit hysteria today -- when just over ten years ago we had such a large budget surplus that we were projected to pay off our entire debt in ... ten years! That's right, Ten Years Ago We Were Paying Off The Nation's Debt. But Then We Elected Obama.,
Just ten years ago this country was running huge surpluses and paying off its debt. But then we elected Obama and all hell broke loose. Oh, wait...Between the time ten years ago when we had big surpluses and were paying off the debt and now when we are told the "Obama spending and deficit" mean we have to cut back on the things We, the People do for each other, something happened. Something changed. The things that happened, the things that changed, are being ignored in the current D.C. discussion about what we need to do to fix things.
Something happened. We had a surplus, and it was replaced by massive deficits. The last Bush budget year had a deficit of $1.4 trillion!
Why We Have a Deficit
What happened under Bush? We cut taxes on the rich and doubled military spending. (And started wars.) And don't forget collapsing the economy, forcing people onto unemployment and food stamps. That is why we have a deficit. We have a deficit because of tax cuts for the rich, huge military budget increases and the consequences of deregulating corporations.
Here are some questions for tomorrow's deficit theater:
- How large was the country's yearly budget deficit and total debt in the "Eisenhower/Truman" decades when the top tax rate was 90 percent?
- Today we have an "infrastructure deficit" -- the amount needed to repair our country's roads, bridges, sewers, etc. -- of somewhere upwards of $1.6 trillion. Was our infrastructure kept in good repair before the top tax rates were cut?
- Concentration of wealth is long recognized as a threat to democracy, and now we are seeing a low-wage, everything-to-the-top economy with the greatest ever concentration of wealth going to a few at the top. Was the problem of wealth concentration increasing or decreasing before the top tax rates were cut?
- When top rates were high people couldn't take home vast fortunes in a single year. When it took several years to make a fortune did corporations depend on long-term or short-term thinking? Did the executives of corporations care if the infrastructure and communities their companies depended on were in good shape? Did large corporations fleece customers and exploit employees for quarterly returns as they do now?
How We Fix the Deficit
How do we fix this? Doesn't it make sense to look at what caused the deficits and fix that? There actually are budget plans that get rid of the deficit without cutting back on the things democracy does for We, the People. Here is a post about one of those budget plans: The People's Budget Balances The Budget -- Why Isn't It Part Of These "Deficit" Talks? Here is a post about another budget plan that fixes the deficit without cutting the thing democracy does for us, Every Progressive Should Know About The "Budget For All"
So we know why we have a deficit, and we have realistic budget plans that undo the damage, maintain the things that democracy does for We, the People and invest in growing our economy. So why aren't these plans part of the big D.C. deficit discussion? Maybe progressive plans that cut the deficit are not part of the D.C. deficit discussion because cutting the deficit isn't really the point. This Deficit Story Can't Be Repeated Often Enough!,
So we went from big surplus to huge, huge deficits. Bush said it was "incredibly positive news" when we went back into deficit spending. He said it was good news because it continued the plan to use debt to force the government to cut back. He said that. It was the plan. (Don't take my word for it, click the links.)The Reagan people said it too, back when they started the massive deficit spending. It was the plan: force the country into massive debt, "starve the beast," and use that to force the government out of business, or at least to be "small enough to drown in a bathtub." They forced the tax cuts and Reagan said this was "cutting the government's allowance." The point was to use revenue cutbacks to force government to shrink, to get out of the way of the 1 percent.
A Golden Oldie
From Dear Deficit Commission, It's Not Hard: (Click through to see bigger charts)
Dear Deficit Commission,It's not hard to figure out why we have a huge deficit. It's so easy I don't have to use words. Here are some pictures:
Bill Clinton raised taxes on the rich. Bush cut them.
Now, about that huge national debt...
The second chart kind of explains itself. The third chart can help you find a place to get some money:
(Note: There is no more Soviet Union.)
In case that isn't clear enough, try this:
Let me know if you still have any questions.
We had a budget surplus. We were paying off the debt. Then something changed. If you want to fix the deficits, change it back.
Don't fall for it. Deficits were the plan. Run up the borrowing, then come back with a scare campaign that stampedes people into accepting cuts in the things democracy does for We, the People. It was the plan.
If you happen to be in D.C. tomorrow: May 15: Stand Against Austerity:
May 15, 2012 at 1 p.m. (Program starts 1:30 p.m.)
In Front Of the Peter G. Peterson Foundation Fiscal Summit
1301 Constitution Avenue NW, Washington, D.C.
Here's one of those charts again, larger:
This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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Robert L. Borosage: The Austerity Trap and the Jobs Deficit
Charles Knight: Making Defense Sense With Budget Cuts
Oh yeah, but Paul is "out of the race". Still accumulating delegates, but "out of the race". Won Minnesota, but "out of the race". Nothing to worry about - he can't possibly catch Romney. He's just using those delegates to affect the platform. Still, just think - would it be worth a small contribution to get a huge tax break? Just think, you could be just like a big corporation, buying tax breaks...
The surplus was created primarily by the tech bubble. Create the exact same situation and you might have a chance to recreate it.
In order to spend less there has to be a budget and there has not been one for the last three years. On that particular issue, it shows some don't care how much is spent. Without a budget to guide spending, there is no control of it. I don't care who is to blame for the defiicit or not having a budget, blame will not get it fixed.
The major problem is right from the top on down. There needs to a broom about twenty feet wide and make a clean sweet of the president, the house, and the senate.
Overall Obama has to take the blame regardless. He is the CEO of the U.S. and the buck stops there.
We all need to quit the bickering and get down to business and correct "AMERICA'S" problem.
We have to pick the right people all the way down the line, instead of just voting party. Many times the person in the other party is a better person for the job.
Let's all try to do a better job of picking our representatives.
As evidenced by THESE charts, the government has trended towards taking more and more money out of the economy over the past 50 plus years. As a trend, we were well below 20% of GDP in government revenues until WWII hit us.
http://www.usgovernmentrevenue.com/debt_deficit_history
Notice on the first chart here, that we have NEVER paid down the debt in any appreciable fashion since WWII. The second chart clearly shows that as a percentage of GDP, debt has risen and fallen. But we have only increased our debt since WWII, not paid it off.
http://www.usgovernmentrevenue.com/income_tax_history
Notice that revenues from the INCOME tax have not fluctuated significantly. There are certainly peaks and valleys, but despite trends it’s stayed pretty constant. Corporate tax can be explained by more public ownership of companies, and more people paying capital gains than companies paying taxes on profits.
Meaning, we did not go into debt because of any particular tax break. We have never paid off our debts in any appreciable fashion since WWII. NEVER! And every positive change in the debt to GDP ratio has been the result of the economy growing. That is the national equivalent of an individual going deeper and deeper into debt every year, always betting/assuming/planning that you will make more money next year. Not a good way to live.
There's a Pollyanish fascination with the low taxes before 1930. All I can say is the 19th century was, for America, a time of great expansion onto Indian lands, of slavery, and eventually of Robber Baron's and the call for Anti-trust legislation. And, it created a bubble economy that crashed in 1929. It may seem to have been a wonderful time, but not to the folks who lived through it.
Second, debt to GDP is a measure of a countires ability to pay a debt back, its just as valid to look at the raw numbers. And we didn't pay it down appreciably. We just traded domestic debt (War bonds) for Foreign debt. It only looks like we were less in debt because we were richer. Either is a valid way to look at it.
Tthird, my point about axation is that our code is complicated. If people were actually paying 90% in the 1950s, then why, when the marginal rates dropped, did revenues not also declinie? Answer, because the code was changed to make it more or less revenue neutral. Hence, no single tax "cut", or even group of cuts, got us into the predicament we are in, revenues have been fairly consistent.
The post war "Golden years" were based on the fact that every other industrialized country had been destroyed, or were not able or interested in competing. Japan and Germany, physically destroyed. england and France, financially destroyed. Russia and China, Communist, not interested in competing economically. We were the only game in town, and it paid well.
The hand that feeds you and all that.
Back when military spending was 2 to 3 times higher as a pct of GDP? I thought military spending was to blame for our deficits.
http://www.usgovernmentspending.com/defense_spending
http://www.federalreserve.gov/Releases/g17/
By the way, Bush did spend recklessly. Unfortunately, it appears Obama is doing his best to beat him on that front.
http://www.usgovernmentspending.com/recent_spending
I'm more than willing to blame Bush for his part in our horrible crisis - but I'm not willing to blame his tax cuts, which were reasonable, when it was his spending and Obama's spending that have caused the problem.
So the first step would be the employment outlook and then look at savings that can be weened from government programs that are no longer necessary as well as other cost saving measures to eek out funds that could be better spent for a greater return. By jobs is the Trojan Horse to deficit reduction that should be the easiest to accomplish with the most revenues flowing from it.
Give us another tech boom and give it to us NOW.
Everything else in the article is too simplistic to be taken seriously.
This is of course false. Tax rates on the wealthy are at historic lows. By their reasoning (HA!) we should be swimming in jobs right now.
Don't fall for it America.
When the twin towers/pentagon attacks occured, everyone wanted retaliation. All demanded we strike the culprit and strike with vengance. We did and this was a good thing. However, this is where things start downhill. An unfunded war was started and taxes remained at a 50 year low. Then came the Iraq debacle. Now we have two unfunded wars and taxes stay at a 50 year low. In Bush's second term the tax cuts were extended, two unfunded wars still raging and the administration decides to pass a multi-billion plan D drug program which was unfunded. Money going out, no money coming in.
We were well on the way to self destruction when of all things the economy crashed and burned. Unemployment skyrocketed and tax revenues dropped like a rock, two unfunded wars still raged, plan D is still in effect and taxes are still at an all time low.
The US government does not really borrow US dollars from US banks to pay for its expenses when US government expenses exceed US taxes.
The US congress periodically passes laws that authorize Federal Reserve Board chairman Ben Bernanke to buy some paper and then print a bunch of new interest bearing paper currency instruments (mostly US Treasury Bonds) in varying amounts with the promise of US government repaying these loans in US dollars at the future dates specified (when they become due) and sell them at public auctions.
The FED then auctions off these freshly printed US T-Bills, US Treasury Bonds, and/or other Securities at US Federal Reserve Bank public auctions (at discounts less than face value and/or present worth, that mathematically converts to "Higher Than the Interest Rates Stated on the Bond Face") to mostly foreign manufacturers, foreign banks and foreign individuals in China, India, Brazil, Pakistan, and other industrialized countries in return for the US dollars that these foreigners earned by making consumer goods for US citizens.
The US government deposits these US dollars from bond sales, plus US dollars collected by taxation, into banks that redeem the government checks written to pay for various US government activities with US dollars.