Running in the red: How the U.S., on the road to surplus, detoured to massive debt

[Lasher]

The nation’s unnerving descent into debt began a decade ago with a choice, not a crisis.

In January 2001, with the budget balanced and clear sailing ahead, the Congressional Budget Office forecast ever-larger annual surpluses indefinitely. The outlook was so rosy, the CBO said, that Washington would have enough money by the end of the decade to pay off everything it owed.

Voices of caution were swept aside in the rush to take advantage of the apparent bounty. Political leaders chose to cut taxes, jack up spending and, for the first time in U.S. history, wage two wars solely with borrowed funds. “In the end, the floodgates opened,” said former senator Pete Domenici (R-N.M.), who chaired the Senate Budget Committee when the first tax-cut bill hit Capitol Hill in early 2001.

Now, instead of tending a nest egg of more than $2 trillion, the federal government expects to owe more than $10 trillion to outside investors by the end of this year. The national debt is larger, as a percentage of the economy, than at any time in U.S. history except for the period shortly after World War II.

<snip>

The biggest culprit, by far, has been an erosion of tax revenue triggered largely by two recessions and multiple rounds of tax cuts. Together, the economy and the tax bills enacted under former president George W. Bush, and to a lesser extent by President Obama, wiped out $6.3 trillion in anticipated revenue. That’s nearly half of the $12.7 trillion swing from projected surpluses to real debt. Federal tax collections now stand at their lowest level as a percentage of the economy in 60 years.

http://www.washingtonpost.com/business/economy/running-in-the-red-how-the-us-on-the-road-to-surplus-detoured-to-massive-debt/2011/04/28/AFFU7rNF_story.html?hpid=z2

To get out of this mess, we need to stop doing the things that got us into it. But we lack the resolve, mainly because most Congressional Republicans have sold their souls to Grover Norquist.

[Mimosa]

1. Well, our humanitarian interventions abroad are very expensive...

http://costofwar.com/en/

[Lasher]

3. Yes, the Bush wars are major contributors to our deficits, as is Medicare Part D.

But by far the biggest cause of our deficits is the Bush tax cuts. We just extended them in December, and they are clearly going to stay extended for at least two more years, so we're really not serious about reducing deficits. What's going on is an ideological purge in a class warfare being waged by the rich against the rest of us.

[pscot]

14. Killing brown people with remote controlled drones

drones doesn't seem all that humanitarian to me.

[bluestateguy]

2. The people just couldn't resist the folksy populist rhetoric

I'm talking about George W. Bush's simplistic drivel in 2000 about tax cuts.

The people saw that big fat surplus and they demanded that it be all given away in tax cuts--which mostly went to the rich instead.

[Lasher]

4. The people didn't demand it as much as Junior and his GOP lapdog Congress did.

Based on demands by their actual owners, of course.

Reflecting on that time a decade ago, it seems foolish to even try to regain the fiscal discipline we had a before then. If we do manage to get back to surpluses, and if we start paying down the national debt, Republicans would ruin it with more tax cuts and more wars just like they did back then.

[enid602]

5. GWB

Iraq, Afghanistan, Medicare Part D and the tax cut for the rich. In only four strokes of the pen, GWB destroyed the biggest economy on Earth.

As an aside, the US debt is 94% of GDP. While serious, the Japanese debt is 240% of GDP, and that's PRE-tsunami. They really don't spend on defense, and it appears that most of their spending went to boost manufacturing, infrastructure and education. So it was really an investment. Ours was just waste.

[dkf]

6. They will automatically lapse in a couple of years as long as we don't fight to keep any cuts.

[Lasher]

8. I thought they would at least partially expire in December.

I was wrong. I wish I knew some reason to believe it will work out any differently a year and a half from now.

[Citizen Worker]

7. How well I remember the first Bush tax cut. I worked late and went to a local pub for a to-go order

As I waited for the order I struck up a conversation with a man wearing bib overalls. It didn't take long before the conversation swerved toward the proposed tax cut. This working man was quick to say that the $300.00 he would receive was better in his pocket than the government's. I asked him to consider that at some point in the future the tax cut would drive up the deficit and would have to be repaid and how did he feel about that. He was fixated on the $300 and refused to consider the long term implications and instead kept repeating, "better in my pocket than the government's." I then asked what he would do with a measly $300 and that at best it might buy a few sacks of groceries and pay his utility bill and it would be gone. In its place would be an enormous IOU. He was unmoved. I wonder what he thinks today or if he can even make the connection to what happened ten years ago?

[Lasher]

9. Soon afterward Congress let PAYGO expire.

Then they passed the 2003 tax cuts and Medicare Part D. Included in the Part D legislation was a provision to pay Medicare Advantage companies a per capita subsidy that is 14% higher than the cost of traditional Medicare. That wasn't enough damage, so Cheney invaded Iraq that same year.

Edit: No, Mr Overalls would never make the connection.

[Historic NY]

11. I had people laugh when I told them that those checks ...

were going to bite us in the ass. You don't spend the rainy day money when the roof is leaking. All those $300 & $600 dollar checks used to buy us off sure would have went a long way in keeping our fiscal stability.

[Lasher]

13. The very same scenario played out in December.

Right here at DU. We just had to extend all the Bush tax cuts so that the middle class could get their $500 apiece, some argued. Now we're finding out where that $500 came from. The hungry, the disabled, our children.

[no_hypocrisy]

10. "It's YOUR money . . . "

I knew there was a future trainwreck when I heard those words.

[Historic NY]

12. + 12 trillion