Chad Deal 9:26 p.m., June 19
The United States has a Massive, Crippling Spending Addiction…Or Not
Government spending is at historical low levels despite hysterical insistence to the contrary
Last week Congress struck a deal on the fiscal cliff deal that staved off tax increases to the still-struggling middle class. It wasn’t exactly the deal most Democrats expected, but it did at least temporarily solve a self-inflicted crisis. But the fight over the fiscal cliff tax rates was only the beginning of the battle for America’s fiscal soul, and the lines are already being drawn via Republican puffery on the debt ceiling and the sequestration cuts that were put off for two months. The arguments on the Republican side are getting more and more ridiculous, and sounding more and more desperate.
Except that the average news consumer in the U.S. is likely to buy into their nonsense. Repeat something often enough and it begins to ring true, even if it’s a bald faced lie. But hey, let’s not a little thing like the facts get in the way of good ‘ol GOP flamethrowin’ rhetoric.
According to Republican Senate Minority Leader Mitch McConnell, America has a “crippling addiction to spending,” and that spending is the crux of all of our deficit and debt problems. And it’s true: Spending relative to revenues has been a problem for most of the first decade of the 21st Century.
As much as McConnell and Congressional Republicans desperately want to blame President Obama and the Democrats for the debt and deficit problem, and as much as the informationally challenged want to believe them, the truth is that Obama’s not at fault, and that the Democrats have actually been the responsible ones, not Republicans.
Deficit DriversThe facts are these, and they’re incredibly difficult for the Republican side of the aisle to swallow—impossible even: The biggest drivers of our debt and deficits are the 2001 and 2003 Bush tax cuts, the wars in Iraq and Afghanistan, and the unfunded Medicare prescription drug act. Without these factors, the Congressional Budget Office reported back in 1999 that “the long-term predictions indicate that the debt held by the public, driven by continued budget surpluses, will fall below zero by 2012.” A 2001 estimate by Pew Research projected that the national debt would be paid off by 2006, a full six years sooner. The U.S. was running unprecedented surpluses in the final years of the Clinton Administration and into the very beginning of the Bush Administration.
Let that sink in for a minute: If Al Gore had become president, even accounting for events on 9/11, America would be close to having paid off its entire national debt.
One would think that this would have been cause to celebrate for Republicans. Going by conservative rhetoric, the debt and deficit has always been a cause célèbre for them. In reality it’s only recently become a concern. And even now it’s only theater.
“Ronald Reagan proved that deficits don’t matter,” was the infamous utterance by then Vice President Dick Cheney. That was the excuse for the way he and his “boss” presided over the biggest explosion of the deficit in history and a more than doubling of the national debt. It wasn’t until a Democratic president—a black Democratic president—took office that this sudden dire concern on the part of Republicans materialized.
Because none of the fiscal problems started on Obama’s watch.
Government spending under Barack Obama’s administration is at historic lows. Mitch McConnell and House Speaker John Boehner accuse Obama of not being serious about reducing spending, but he’s already done it, and to levels unimaginable by a Republican president. Non-defense discretionary spending as called for in budget projections for fiscal years 2013-2022 are at their lowest since 1962, with an overall $1.5 trillion reduction of spending over the next 10 years. That’s under the stewardship of a Democratic president and a Senate driven by a Democratic majority.
Government spending since Obama took office in January, 2009, is at its lowest since Dwight Eisenhower’s administration. “Obamacare,” Obama’s signature health care reform act, even cuts $716 billion worth of overspending out of Medicare—for which he was excoriated by Republicans—while actually increasing Medicare benefits. That’s called taking on entitlements. But for some reason, apparently, that doesn’t count.
Spending Growth by PresThere have been genuine, concerted efforts on the part of the White House and Congressional Democrats to curb government spending, with solid success. The problem we have now is not one of over-spending, it’s one of revenue, as in not enough of it.
Republicans can dispute it all they want, but the 2001 and 2003 Bush tax cuts and the unfunded wars in Iraq and Afghanistan are what has put the country into its current fiscal position. Spending was the problem, but it was spending by a Republican president, a Republican Senate, and a Republican House of Representatives. It was economic policies put in place by Republicans from 2001-2008 that caused the 2008 economic collapse.
The truth is that Republicans are really not at all interested in reducing the debt or deficit. Start with the way they eliminated the budget surpluses in 2001 and completely derailed the country from eliminating its debt. (Little publicized fact: When Ronald Reagan took office, the United States went from being the biggest creditor nation in the world to the largest debtor nation in the world.) Eliminating the debt was not a concern for Republicans back then.
In fact, eliminating the debt and deficit was viewed as detrimental to the national economy in some circles, which ultimately led to the Bush tax cuts. The theory goes that if we eliminate the national debt, then the Fed would not have any control over monetary policy, and the federal government would stop issuing Treasury Bonds, which is essentially what makes the world go ‘round these days. U.S. Treasury Bonds are considered the most secure and reliable investment in the world (unless Congress refuses to raise the debt ceiling….then all hell will break loose). No debt, no need to sell Treasury Bonds.
(Which leads to a tangential question: Even without any national debt, why couldn’t the United States continue to be the world’s bank, continuing to loan out money and earn interest? Instead of Treasury notes, the U.S. would simply function like a bank for other countries, the way China does today and the way the U.S. used to prior to the Reagan deficits?)
So now, apparently, being out of debt is a bad thing. Source: Bruce Bartlett/NY Times
Source: Bruce Bartlett/NY Times
Last June, Republicans rejected their own deal that would have reduced the deficit by a projected $2.4 trillion, with $2 trillion in spending cuts and $400 billion in revenue increases. Economists—even conservative economists–almost unanimously acknowledge that any legitimate deficit reduction deal will by necessity have to include some tax/revenue increases. But Republicans demanded 100% spending cuts and absolutely zero tax increases, and thus rejected a deal put together by their own members of the Joint Economic Committee.
Then, during the 2012 presidential campaign, Republicans decided that they would be open to new revenues, but only through the closing of tax loopholes. Dems would have to agree to lower the marginal tax rates in exchange. That’ll take care of the problem, they said. But a closer look found that there simply were not enough loopholes to close to make up the difference. The math didn’t add up. Worse, it would amount to an enormous increase in the tax burden on the middle class.
The United States already has the lowest effective tax rates in the developed world, and it isn’t helping economic growth. The average tax revenue as a percentage of GDP since World War II is 18.5%. In 2009 and 2010, revenues amounted to 14.9% of GDP. During the Reagan administration, the lowest tax revenues to GDP ratio measured in at 17.3%.
Republicans demand more spending cuts, but refuse to specify where those cuts will come from. Obama and Congressional Democrats have already acted to cut trillions from non-defense discretionary spending, and are even willing to go just a little bit further. But there’s very little fat left on that bone, and cutting much deeper into non-discretionary spending will do real harm to people and to the economy. Cutting any deeper would mean the end of unemployment insurance; cutting access to food stamps that serve as a lifeline to many; crippling Medicaid, leaving millions more without any access to healthcare; fewer food and drug safety inspectors, putting millions of consumers at risk; the end to clean air and clean water.
Non-Def Discretionary SpendingSo why won’t John Boehner and Mitch McConnell propose more specific cuts? Because the only serious meat left to cut from are from Medicare and Social Security benefits, and while that’s their ultimate goal, saying so would be absolutely toxic to voters they are trying to woo. There’s also plenty of room to cut from defense spending, and the Pentagon is well prepared to make those cuts. But defense spending is off the table as far as Republicans are concerned. They favor more military spending, not less, despite the fact that military leaders have already highlighted areas of unnecessary and wasteful spending.
The other problem is the media’s unwillingness to place the blame for our economic problems where it belongs. It is Republicans that are deliberately and systematically impeding progress. It is not possible to negotiate in order to solve problems when one side refuses to participate in good faith; when one side insists on a “my way or the highway” approach, and then lies about the other side’s willingness to compromise.
The Democrats have compromised. Too much, some would say. If there is any hope for a return to economic prosperity, then it’s the Republicans who will have to meet the Democrats more than half way.
At some point the nation as a whole has to come to the realization that maybe it’s not government that’s the problem, it’s Republicans that are the problem.