New Rule #12: if you're going to throw around terms like Debt and Deficit and Debt Ceiling you must actually know what they mean, how they are different, what causes them and who creates them and why.
Deficit: The amount by which the government's total budget outlays exceeds its total receipts for a fiscal year.—US Senate Budget Committee
Debt: The U.S. national debt is the sum of all outstanding debt owed by the Federal Government, and is now more than $16 trillion. Nearly two-thirds is the public debt, which is owed to the people, businesses and foreign governments who bought Treasury bills, notes and bonds.
I know, I know, you're thinking "What the hey, Mike, we all know that and know the difference, you silly pudding!" Would that it were true. Recently I saw a Facebook post excoriating the president for supporting (along with much of both parties in Congress) an increase on the "debt ceiling." In truth, as long as there is ANY federal deficit in a given year (and there has been some amount of deficit in 58 of the last 60 years!) the federal debt will increase. With the economy as it has been, even if the President cut the deficit by 90%, which would be miraculous indeed, there would still be an increase in the national debt, therefore, the possibility of needing to increase the amount of debt allowed by law (the Debt Ceiling). while the deficit has been high, it is decreasing, and more needs to be done. I am encouraged by efforts to back up Social Security and Medicare eligibility ages, which is valid, since we live longer than when both programs were incepted. Oddly, some of those who are the most violent "haters" will use any attempt to do this as evidence of the Presidents villainy. The real villainy here, is blaming any one person for the current economy or the deficit. I also hope Republicans in the House will accept higher upper marginal income tax rates . I know it's hard to let go of the idea of the trickle down theory, so loved by Reagan and Bush and others. Unfortunately, it's also hard for Conservative legislators to let go of the campaign contributions and "other" cash flows from the Kochs and their ilk.
Our Government's debt is an accumulation of Federal budget deficits. Therefore, the best way to look at how the debt got so large is to compare the budget deficits by President. The largest contributor has been President Obama, thanks to the economic stimulus package, the Obama tax cutsand the roughly $800 billion a year military spending. Next on the list is President Bush. His deficits were a result of the bank bailout, the tax cuts on the wealthy and the War on Terror. The third largest contributor is President Reagan, who also cut taxes, increased defense spending and expanded Medicare. All of these Presidents also suffered from lower tax receipts resulting from recessions, with President Obama facing the worst economy and more significantly, highest unemployment since the Great Depression.
The largest difference between the three is that President Obama's tax cuts were enacted by Congress in the midst of the worst depression since 1929. Some of these measures were aimed at unemployment, and reducing payroll taxes on small business. They were primarily extension of unemployment benefits, a $350 Billion extension of the Bush tax cuts, $140 Billion in business capital investment tax cuts to create jobs. The resulting deficit was fueled by pre-existing (Social Security, Medicare, disability) expenditure obligations with fewer employees contributing.
Let's take a look at a curious phenomenon. Let's compare how Income tax rates on the wealthiest Americans really affect the economy, as seen in the yearly budget deficits. If the "trickle down" theory holds water (lol) then the deficit should be smallest in years with the lowest upper end marginal tax rates, since as predicted, the wealthy, realizing their good fortune will invest their extra income and create jobs. More jobs = more tax revenue= less deficit, right?
It is useful to look back at previous deficits and the marginal tax rates paid by our wealthiest earners. One reason this is useful is the repeated claim (from the wealthy) that tax cuts on top earners are good for the economy. This has been called the "Trickle Down Theory" of economics. Others, Australia's Labor party leader for one, call it "Pissing on The Poor!" From 1994 to 2001, the highest rate was 39.6%. Wow, you say, that's really high! Really? During the entire Eisenhower administration it was almost 3 times as high, at 91%. Guess what the result of this tax "burden" was? Almost no dor low deficits from 1947-1961. Remember, this was the heart of the cold war and defense spending went back up in Ike's second term (Space race, missile gap!) Even so, there was a surplus in 1956 and 1957, even while we were starting to build a nuclear fleet at great cost. Jump ahead to 1980, Reagan in the White House, cutting taxes down to 50% by 1982, Deficits on the rise - a distinct correlation. Reagan leaves in 1988, saddling Bush Sr. with a 28% marginal tax rate. Deficits soar between 1990 and 1993, even though the cold war is over and the military is being downsized.
Bill Clinton becomes President and pushes for a modest increase in marginal upper bracket tax rates. He gets it and the deficit begins to decrease, projected to show a surplus by fiscal year 2001. This cycle of reasonable taxation of the upper brackets and lesser deficits is mathematical, not partisan. It happened. Period. So, George W. Bush takes office in 2000, and pushes for a tax reduction for those who need it least. Again, contradicting the "trickle downers" and abetted by a war in the wrong place for the wrong reasons, the deficit soared. In summary, time and time again, the wealthy have pushed the concept that if they were taxed less, we would all benefit. Time and the numbers prove them wrong every time where it matters - federal revenue and debt. I don't want you to take my word for this, it's too important, and there are already enough liars and distorters out there who know just enough to sound reasonable when they're really full of shit. So look here http://home.adelphi.edu/sbloch/deficits.htmland see for yourself.
I really don't have a snappy closer for this one, so stay thirsty , my friends.
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