Popular Economics Weekly
It is now becoming evident just how much damage the GW Bush budget deficit has done to the U.S. In part from the tax cuts of 2001 and 2003, which sharply reduced taxes on income, capital gains, and corporations, two wars, and the Great Recession that began halfway through Bush’s second term, the deficit now threatens not only our fiscal soundness, but status as the world’s economic powerhouse.
It was VP Cheney who maintained that Reagan had said deficits don’t matter, but President Reagan raised taxes 11 times during his tenure to save the budget, and economy, as his Budget Director David Stockman described so well in The Triumph of Politics. In other words, President Reagan didn’t dare go as far as Dubya and VP Cheney in creating a deficit that siphoned off revenues to the wealthiest 1 percent and raised corporate profits to the highest in history as a percentage of GDP, while almost causing the disappearance of our middle class and endangering Medicare and social security.
So it shouldn’t be a surprise that Republican Paul Ryan’s 2013 budget proposal passed by the Republican House follows in GW Bush’s footsteps. President Obama assailed it as “…a Trojan horse, disguised as deficit-reduction plans,” said the president at an Associated Press luncheon in Washington on April 3. “It is thinly veiled social Darwinism.”
Obama was referring to the fact that Ryan’s plan doesn’t really reduce deficits. Because it calls for $trillions in spending cuts without raising revenues, 62 percent of which would come from low-income programs, just as the Bush II budgets did. And both revenue increases and spending reductions are necessary to pay down the budget deficit. In fact, the new tax cuts at the top would dwarf those for middle-and lower-income families, says The Center for Budget and Policy Priorities, a non-partisan think tank. After-tax incomes would rise by 12.5 percent among millionaires, but just 1.9 percent for middle-income households. It’s Bushonomics all over again.
What was most unconscionable about the Bush tax cuts was that they occurred during his first recession — from March to November 2001, caused mostly by the dot-com bubble bust. In fact, he was starving the government of revenues at the same time that he was planning two wars, as has been revealed in several books by Ron Susskind, including The Price of Loyalty: George W. Bush, the White House, and the Education of Paul O’Neil.
Now we have a yawning federal deficit that continues to grow past $15 Trillion. Bush Treasury Secretary Paul O’Neill, who was fired by VP Cheney for advocating that the four Clinton years of budget surpluses be used to put social security and Medicare on a more secure footing, described the result of the debate that led to such a disastrous decision in The Price of Loyalty. It was return government to its 1900 size, the era of William McKinley and the Robber Barons, by reducing government spending enough “to shrink it down to the size where we can drown it in the bathtub”, said Grover Norquist once famously, architect of the no tax increase pledge signed by more than 200 Republican legislators.
So we now know what makes up the current $15 trillion federal debt. Most of the deficit was created by the Bush tax cuts, war spending, and the second Great Recession that occurred under the Bush presidency — from December 2007 to June 2009– says the CBPP. It resulted in the most anemic recovery since WWII, with just 5 million jobs created, not even recovering from the 8 million jobs lost since 2000, and the median household income decline from $56,000 in 2000 to $52,000 in 2011 dollars, where it was in 1997, according to the New York Times and Moody’s Analytics.
Graph: CBPP
That cost of the Bush II deficit is just now becoming evident, because of its growing size and the fact that budget matters are so arcane and hard to understand by the public and politicos alike. But all of the Bush tax cuts contributed to the deficit, because they weren’t paid for. GW Bush wouldn’t cut back spending to match the loss in revenues because he wanted to pay for his wars, so he borrowed the monies. Whereas during the Clinton era, legislators had agreed to pay-as-you-go rules, where spending cuts had to match tax cuts.
And the Great Recession has continued to grow the deficit. In fact, if just the Bush tax cuts were extended it would increase that deficit by $4.6 trillion over the next 10 years, says Andrew Fieldhouse and Ethan Pollock of the Economic Policy Institute, a labor think tank. That means we are now facing its terrible cost. Republicans have proven their ideology of starving the beast of government ends up starving the economy of growth, except for the 1 percent who are their supporters.
Harlan Green © 2012
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The National Debt grew by $5 trillion in eight years of Bush II’s tenure. The National Debt has grown by $5 trillion in less than three years of Obama’s tenure. Seems to me “Barry” incurs debt faster than “W.”
You are not really reading my columns…Most of the deficit is not Obama’s, but from Bush’s Great Recession (began June 2006, ended Dec.) 2007, as I said, 2 wars, and the tax cuts. Obama’s programs added $1Trillion at most…Editor
YO! I have just returned from San Diego where I attended a birthday party for some rich and powerful Mexicans. Many of those in attendence have worked in real estate and development for decades all over the Mexican republic. At one point, I asked how Mexico was funding the construction of highways nationwide. They explained that the national budget was based upon the sale of oil at $75 per barril while the actual price has been significantly higher. Oil export accounts for 40% of the national budget and each year, the surplus is shared equally by states. All agreed that the PAN is not skimming like the PRI did. This brought back memories of the Mexican near economic melt-down in December, 1987. The United States bought their national debt and forced upon them an austerity program. They paid it all off and are now doing very well. Something’s wrong here when our southern cousins can do it better.
Harlan. I do read your columns. But the fact remains, the National Debt grew by $5 trillion over the 8 years of “W” while it has grown by $5 trillion in 3 years under “Barry.”
I was stationed in Mexico from 1988 to 1990 and had a ring side seat to the debt crisis which was basically Mexican debt to US banks. I wrote much about the suggestion that the banks should “voluntarily” forgive much of that debt. Of course nothing like this was done but the debt was restructured to allow an orderly repayment.
The crisis weighed heavily on Bank of America which saw its stock value drop to $5 a share at which point I loaded up on the stock and sold it at $15. I should have held on since it kept rising to over $50 a share.
We should also remember that Mexico’s foreign debt, then to French banks, was the rationale for Napoleon III’invading the country and placing Archduke Maximillian of Austria as Mexico’s “emperor.”
Yes, how did Mexico do it? Well, their austerity programs to balance their budget did cost them–i.e., extreme poverty of lower and even middle income workers–which is one reason for the drug wars. Much of their rural populace is/was close to starvation…
Leo; Then please understand that the $5 trillion under Obama is mostly cost of 2 wars, tax cuts, and Recession that are ongoing. Obama’s contribution has been a little over $1 trillion, as I said. The other costs from Bush era don’t end, just because Presidents change, in other words, because the deficits still have to be paid for.
Harlan. Obama did not help by sending 30,000 additional troops to Afghanistan. Or did Bush force him to do this too?