A Short History on Debts and Deficits

After passing another budget busting tax cut, the Republicans will begin their assault on Social Security, Medicare, Medicaid and the overall American social safety net. They will disguise this assault as a responsible approach to address an uncontrollable deficit. This article contends that the Republicans, beginning with Ronald Reagan, are responsible for the current debt and deficit levels. It will also propose a SIMPLE solution to address the deficit, begin paying down the debt and fix the funding for Social Security permanently. 

The debt is no excuse to destroy the lives of the most vulnerable members of our society. 

A Short History on the Debt

The Founding

At the founding of the country, the individual states ran up debts during the revolution. After the revolution, the states negotiated to have the Federal government assume those debts. As a result, in 1791 the federal government had assumed $75 million in state debts. In the years following, the country ran more surpluses than deficits and fully paid off its debt by 1836.

Civil War

During the Civil War, the country ran large budget deficits to fund the war which created a debt of $2.7 billion. In the following 47 years, the country paid down 55% of that debt, by running surpluses.

WWI

During 1914-1918, World War I increased the debt to $25.5 billion. Following the war, the country ran surpluses for 11 straight years reducing the debt by 36%.

The Great Depression & WWII

On account of the Great Depression and WWII the Federal debt ran up to $260 billion by 1950. This was 112% of GDP, the highest debt to GDP percentage in the history of the country. 

1950 - 1980

Due to the post-war economic expansion, the debt to GDP percentage fell rapidly until it reached its lowest level since before the 'Great Depression' of 24.6% in 1974. It should also be noted that during this period of unprecedented economic expansion, the United States had the highest tax rates and lowest income inequality compared to any period before or after.

The Ronald Reagan Era

As much as Republicans like to hold up Ronald Reagan as the shining example of what a true fiscally responsible conservative is, Reagan exploded the national debt. Reagan’s economic policy slashed the top income tax rate from 70% to 28% and drastically increased military spending. As a result the debt to GDP ratio increased from 26.2% when he came into office, to 40.9% when he left. 

The George H. W. Bush Era

Unfortunately for George H. W. Bush, he was left holding the bag after Reagan’s spending and tax cutting spree. The debt reached a percentage of 49.5% at the end of his first and only term. Bush’s most memorable 1988 campaign slogan was “Read my lips, no new taxes”. George Bush’s pledge was based on the assumption that the high rate of economic growth experienced under Reagan in the 1980’s would continue during his time in office. H. W. Bush had been left with a $220 billion deficit which was 3 times the deficit Reagan came into office with. Bush, to his credit, was concerned about these deficits and began to negotiate with a Democratic controlled congress to do something about it. That negotiation led Bush to issue a proposal that would enact spending cuts and tax increases that would reduce the deficit by $500 billion over 5 years. Republicans in congress outraged by the proposed tax increase subverted this proposal. As a result, Bush had to work further with Democrats to get a majority. He signed a bill that increased the marginal tax rate, phased out exemptions for high income earners and also included additional spending. Bush’s standing within the Republican party never recovered even though one could argue he acted in the best interest of the country. The increase in spending was further justified by the fact that in the beginning of his term, America entered into a mild recession, which would require an increase spending. When unemployment went up, Bush also signed a bill providing benefits and relief for unemployed workers.

The Bill Clinton Era

When Clinton took office in 1992, the debt to GDP reached 49.5%. By the end of Clinton’s presidency it fell to 34.5% of GDP. This was due to 3 factors 1) Increased Taxes 2) Decreased Military Spending 3) Increased Revenues from internet boom.

The George W. Bush Era

George W. Bush doubled the national debt in his 8 years. This was caused by massive tax cuts to the wealthy, a pharmaceutical giveaway in Medicare part D, two unfunded wars and a financial crisis from the housing boom. Bush left office leaving the next president with a disaster.

The Barack Obama Era

Obama inherited a budget disaster. He walked into office and was handed a budget passed by George W. Bush with a deficit of $1.632 billion. This was the biggest budget deficit ever. On top of that, the state of the economy was in shambles, needing necessary stimulus and industry bailouts. Obama did indeed doubled the debt by the end of his 2nd term, but he cut the budget deficit that he received from George W. Bush by over $1 trillion. 

Donald Trump Error.... *ahem*.. Era

The Donald Trump era has only just begun, but we have already seen the direction at which he and his party are headed. Within the next few days he will sign a tax cut bill that will give billions of dollars to the wealthiest Americans, raise taxes on middle class Americans and INCREASE the debt $1.5 trillion over the next 10 years. After campaigning as deficit hawks for 8 years, Donald Trump and the Republicans could have continued to work on the progress made by Barack Obama in reducing the deficit by raising taxes on the wealthiest Americans, but instead he is cutting them a giant check.

Summation

A simple review of our recent history displays how utterly irresponsible and incompetent Republicans are when tasked with the responsibility of US Federal budgeting. In summation

• Ronald Reagan exploded the debt and the deficit. He tripled the debt and left George H.W. Bush with large budget deficits.
• Bush worked to reduce the deficit by raising taxes, but it cost him his presidency.
• Clinton cut military spending, increased taxes and benefited from the internet bubble. His work left the next president with a budget surplus which should have been used to pay down the deficit.
• Instead, George W. Bush took the surpluses and passed huge tax breaks for wealthy Americans. He cut taxes during two wars and ended his presidency in a financial crisis. He doubled the debt, when he should have ran surpluses and paid it down.
• Barack Obama received a recessed economy and a budget deficit of 1.6 trillion signed by George W Bush. During his tenure, Obama navigated the 'Great Recession' and reduced the deficit by 66% to $450 billion.

If you are someone who is concerned about debts and deficits (like Bob Corker pretended to be), you should vote Democrat. 

Simple Solution to fix the Debt and Deficit

Here is how you can fix the deficit and begin paying down the debt in 3 easy steps without destroying the lives of the most vulnerable members of our society. The current deficit is $440 billion. Where can we get an additional $440 billion?

Step 1 – Stop the GOP tax bill which will add $1.5 trillion to the Federal deficit.

Step 2 – Cut the military budget in half. The United States currently spends $618 billion on the military every year. If we cut that budget to $309 billion, we would still be out spending our (as Mitt Romney calls them) greatest geopolitical foe, Russia, by 360%.

Step 3 – Raise the taxes on the top 1% of Americans so that their average tax burden increases from about 33% to 40%.  This move would generate approximately $157 billion in new revenue.

And like that, we have gone from a budget deficit of $440 billion to a surplus of $26 billion and we no longer need to kick grandma out of the nursing home. 

Simple Social Security Solution

This is too easy.

Step 1 – Raise the Social Security payroll tax by 2 points over 10 years.

Step 2 – End the Cap. Currently incomes above $127,200 are exempt from paying social security tax. Make all incomes taxable.

And like that, we don’t have to talk about Social Security for the rest of the century and not only that. With responsible budgeting and taxation we can build a more equitable economy that works for all, a healthcare system that covers everyone and an education system that guarantees everyone can go to college. 

Thank you for reading. Share your thoughts below or contact me at ProgressOfAKind@gmail.com