by Shannon D. Hanson
Fiscal Promises In The Dark
It will take place and it will go relatively quickly. … If you have the right people, like, in the agencies and the various people that do the balancing
One of the most common fray-edged canards that get dusted off and bandied about every election season is the idea of a balanced budget. Unfortunately, like the old joke about the weather, everybody bitches, but no one is actually interested in doing anything about it.
To be fair there are a few congress critters who continue to pound the budget pulpit after campaign season, but In truth, these faux fiscal evangelicals don’t want to balance anything they only want to cut.
Of course, the programs targeted for cuts – or reforms as they are called – are only those that help our seniors and the poorest among us or to protect the planet. These smiling sham stewards of the public treasury pose for the camera and bad mouth sacred pubic kine before they head off for a vote to increase spending on their own tribe’s favorite gold-dipped sacrosanct cows.
Almost without fail somewhere in the first twenty-five words of any press engagement these self-professed financial wizards will claim the government needs to be run like a business and, with starry eyes, they will extol the virtues of decrepit and disproved GOP fiscal policy theory from cultural vacuum of the eighties when Tears for Fears and Ric Springfield topped the pop charts.
Government and business are two vastly different things and any person who doesn’t know that is not to be trusted with your vote or your business. Either these people have never run a business or they have never run it right. The people highest on the horse about fiscal balance will ignore the revenue side of the ledger altogether. No decent business anywhere would do that.
As for the eighties, while both Shout and Jessie’s Girl are still worth an occasional nostalgic listen, The fiscal policies of the Reagan era should have gone the way of Ric Ocaseks’s Emotion in Motion. Sadly though, like the turd of a song by Rick Astley, the GOP policy of fiscal malfeasance just keeps showing up everywhere.
We don’t have a trillion-dollar debt because we haven’t taxed enough; we have a trillion-dollar debt because we spend too much.
Those words were spoken by debt detractor, former California Governor and C grade actor Ronald Reagan who was handed the front runner flag by the Republicans in the 1980 Presidential Election. At the time of Reagan’s decisive victory over Jimmy Carter, the debt load of the United States was nearly a trillion dollars.
At the time that Reagan was inaugurated, British trio The Police had a big hit with De Do Do Do, De Da Da Da. Until that point, our debt as a percentage of Gross Domestic Product (GDP) was on a downward trend as we worked to pay off our bills from World War II. We still owed a little under 31 percent of the GDP.
Several months later Beechwood 4-5789 had thankfully left the charts but was still getting wide airplay on the radio when the downward trend stopped. As much as I would like to give credit to The Carpenters for doing to our fiscal responsibility what they did to music, there was something else at play. The real culprit turned out to be the fiscal policies of the GOP.
The GOP chose Reagan because he embraced an economic theory which claims in part that lower taxes = more revenue. So, in 1981 he signed a tax-cut package that was among the largest in our history.
Of course, in keeping with the magic GOP theory called Supply-side economics, most of the benefits went to the upper-income earners, the idle rich and corporations.
The Economic Recovery Tax Act (ERTA) had all the ingredients of a proper trickle-down
tort torte. Surely an economic explosion was just around the corner the GOP said, one that would kick a flagging economy into high gear and send revenues through the proverbial roof. Problem was, it wasn’t and it didn’t. Instead, revenues fell from 18.6 percent of GDP in 1981 to 16.5 percent in 1983 and 1984. Deficit spending was cranked to eleven.
In 1983 The Police hit it big again with Every Breath You Take The GOP had a hit as well when deficit spending hit almost 6 percent of GDP, a record unmet until 2009 when George Bush Junior left a parting gift in the form of a nearly 10 percent of GDP deficit thanks to his own tax cuts, the great recession, and the TARP boondoggle.
Since quarter three of 1982, the debt as a percentage of GDP has only seen one retreat, that coming during Bill Clinton’s second term when it fell from a little over 65 percent of GDP to around 54 percent. Today we owe more money in public debt than the country produces in a year.
It would be hard to deny the US has a debt problem or that
The Carpenters had a hand in it the policies of the GOP during the Reagan era are to blame.
When George HW Bush took over as the head of the Republican Party and the country, Poison topped the charts with Every Rose Has A Thorn. Music had changed drastically (some would say for the better) but the fiscal policy jocks were still spinning the same tired tune. U.S. debt was now more than 49 percent of GDP and heading up the charts quickly.
In real dollars, we owed more than 2.7 trillion dollars. That seems minor when compared to today’s more than 23 trillion-dollar credit card balance, but it was the GOP policies from the age of greed, spandex, and big hair that took us from a creditor nation to the world’s largest debtor nation. It has been largely been
Hillary’s emails the same failed policies that are responsible for today’s bleak debt picture.
Reagan called the 184% increase in debt that was added during his two terms, “the greatest disappointment of my presidency”. No president yet has added this much debt.
Just a little bit of the magic
Who’s being true
I got a hold on you
Ric Ocasek – The Cars
Ask any three armchair economists what caused our debt and all four of them will tell you it is all a spending problem. But is it really?
Of course, there have been bumps and dips, but net federal outlays (spending) -again as a percentage of GDP for consistency – have stayed pretty close to 20 percent for decades (20.6 percent average from 1970 to 2009). The low point came in 2000 at 17.4 percent. The high mark was 2009 at 24.3 percent. In other words, on the whole, overall spending has increased roughly at the same rate as GDP growth.
Reasonable people can and do argue all day about what percentage of the GDP outlays should be, but balancing a budget requires that – whatever our outlays are, we generate enough receipts (taxes) to match spending. Our receipts almost never match our spending and that’s the problem.
Let’s put it in simple terms that anyone who has ever balanced a checkbook can grasp. If your paycheck is less than your bills, you either borrow a few bucks from a friend, tap into savings or use a credit card.
Of course, that is a bit simplistic compared to the budget of a country but the smell is the same.
If your bills are continually greater than your paycheck, the IOU notes due to your friend continue to pile up or your credit card bill increases.
Our federal debt is in effect the accumulated deficits year over year and the accumulated off-budget spending.
In other words, it is the difference between our bills and our paycheck, it is the IOUs. Many of these IOU notes for the country are held by China.
“See there,” all of the experts are shouting from their wingbacks, “it is a spending problem.”
No, actually it’s a deficit spending problem.
Having an extra expense one month because the dog ate the couch is one thing but continually having more bills than a paycheck is unsustainable. Unless you have very generous and forgiving friends, you have two means of attack, reduce your bills and increase your paycheck.
Of course, we should reduce our bills as much as possible but some cuts can cause more harm than good and we can only cut so far before we end up unable to buy gas to get to work and eventually have to ask that same friend if you can sleep on his couch. Which means we might need to screw up our courage and go to the boss to get a raise.
Before you do that though you might want to consider the voodoo economics theory of trickle-down.
According to the GOP, Instead of asking for an increase, you would ask for less money. Yes, less. The idea being that your boss will do something with the money he is not paying you and eventually – in a process involving sleight of hand, a kewpie doll, and string theory – you will get more dollars. A win-win, right?
As wonderful as all that sounds, I doubt very much that I have you convinced you to march in and ask for a pay decrease. Sadly though this, less is more magic economic theory has been the de facto M.O. for all political parties on the right-wing since the days when Spandau Ballet was on the charts. This despite the fact that it has never worked.
Worse yet a substantial percentage of voters fall for the same bait and switch over and over again. in fact studies have shown that the real reason politicians tout tax cuts is because they win elections.
The snake-oil recipe that the Republicans hawked to the nation says that cutting taxes will spur revenues because all those bosses would take all that money and put it into new plants and increased capacity to produce more widgets.
The benefits are supposedly two-fold, first making more widgets requires more workers, and second, even if those workers don’t make more money the widget will be cheaper so you can afford more. It was called Supply-side Economics, Paul Harvey is credited with coining the term Reaganomics, the senior Bush dubbed it voodoo economics.
Call it whatever you want, a steaming load of crap is what it is and it doesn’t work. What really happened is the bosses used the money they saved to purchase big machines to replace workers, buy back stock, pay themselves huge bonuses and put the rest in offshore accounts. Because that is what smart businesses do.
Yes, Reagan did makes cuts. He slashed Social Security, Medicaid, and food stamps. He made huge cuts to the EPA, cut the federal share of total education dollars in half, and sliced and eliminated other programs.
The problem is he also dumped money into the drug war and the behest of wife Nancy Reagan who urged us to just say no. He increased defense spending, spent billions developing his Star Wars Missile Defense System (which never worked and was eventually scrapped by Bill Clinton), and his deregulation led to the 125 Billion savings and loan industry bailout.
The net result is that spending during Reagan’s terms averaged 21.8 percent of GDP.
When deficits increased The House and Senate convinced Reagan to increase revenues and so he raised payroll and other taxes which affected mostly the chattel., leaving the magic GOP tax cuts in place for the wealthy.
Both the monetary and the trade deficits, as well as the debt, exploded. The economy sustained the second worse postwar economic downturn (outdone by Bush junior). Homelessness rose greatly, Income for the bottom two quintiles fell. Of course, that of the wealthy folks who the GOP keep on speed dial rose precipitously. The trickle-down con job increased the divide between the have’s and the have-nones.
But job creation skyrocketed and the government shrunk right?
Not so fast. Job growth was 2 percent annually while under Jimmy Carter it had been 3.1 percent. Bill Clinton’s job growth was 2.4 percent annually. Although the number of federal employees increased at a smaller rate than it had under the previous administration, it still increased by more than 4 percent and the government’s share of GDP grew by two-tenths of a percent.
The eighties had some bright spots as well. These include the lyrical riffs in Guns and Roses marvelous Sweet Child o’ Mine, the bass line in Billy Idol’s catchy White Wedding and just about everything Great White and Metallica did.
There were also some highs in GOP’s economic experiment, but largely it was a mixed bushel of apples, most of them rotten or full of worm-holes and bruises. That didn’t stop the GOP from using them in a pie that we are still choking down to this day.
Balancing to the Oldies
Read my lips: No New Taxes
-George H.W Bush
That quote is credited with having likely won Bush the presidency in 1988 and then lost it for him in 1992 because he was seen as not being trustworthy after breaking that pledge. Bill Clinton also implemented a tax increase, primarily aimed at upper incomes.
Finally, in 1998 the US balanced the budget for the first time in almost thirty years. In fact, we over-balanced it and for four years we ran a surplus. Whether you credit Bill Clinton or Newt Gingrich is immaterial to the fact that the budget was balanced without the GOP’s voodoo formula. It was balanced through a combination of tax increases and cuts to the military as well as to welfare programs. In other words, it was done the way a business would do it.
Had we continued on that sound footing, some estimates say we would have paid the debt off by now.
Unfortunately, George Bush Junior dug the voodoo economics formula out of the archives added his own hot air and used it to blow up the deficit.
Spending as a percentage during the early part of the Bush years stayed on par with what it was in Clinton’s surplus years (primarily because he kept his wars off-budget).
Nevertheless, his tax cuts increased the deficit by about 1.5 percent of GDP. In total Bush added 93 Percent to the debt. That is not as bad as Reagan but it is worse than both Obama and Clinton.
So how has Donald Trumps‘ foray into balance fared? That depends on whether you believe Trump or the actual figures. Truth is the economy is doing worse on several measures than it did under Obama but none so stark as the deficit. So far with two Trump budgets completed the deficit is averaging about 3.75 percent of GDP annually.
During Obama’s eight years, approx 9 Trillion dollars landed on the credit card. Less than three years into Trump’s tenure more than 3 Trillion dollars have been added. Even the White House predicts it will only get worse.
Keep in mind that Obama took office during dire economic times while Trump brags that the economy is doing the best ever. If only we had the right people in the right places I guess. When Barack Obama left office, the debt sat at 19.85 trillion, at this writing the Debt clock is over $23 Trillion, an increase of more than 3 trillion dollars. Supercharged economy indeed.
The music from the eighties might be the songs you sing in the shower or it might be the stupid crap your parents (grandparents?) listen to. Either way, If you, want to hear tunes by The Beastie Boys or Depeche Mode or hundreds of other big names of the time, you can tune the radio dial or tap the iPod to the golden oldies stations even if only to remember how bad a lot of it was.
The failed GOP fiscal policies of the eighties should be relegated to the oldies bin as well. If we want to remember how bad it was we can dig through the dustbin of history. Instead, each new generation of Republicans remix these off-key lullabies and market them as new original anthems.
The questions is why do we keep buying the same old record?