The Real Deal: How We Came To The Budget Crossroads

This is the first of a multi-part posting. I will continue to post on other topics between sections. 

Since the recent failure of Congress’s debt reduction supercommittee to come to a cross-isle agreement to cut $1.2 trillion off of the national debt, there has been more rhetoric coming out of the Republican camp blaming Democrats for failing to compromise. It’s true that they stood their ground, but it was the Republicans who wouldn’t budge on one of the most heated topics in today’s political scene: taxes.

The Republican party of the 21^st century has become the bully in the classroom and the personal bodyguard of the rich kids. They have insisted on continually increasing the amount that multi-millionaire and billionaires take from the government by spending invisible money to fund tax cuts for the wealthy and large corporations and then cry wolf when they are blamed for the increases in the national debt and deficit.

Ronald Reagan’s large across-the-board tax cut that brought the top tax rate down to 50% was the beginning of the Republican party’s tax crusade. Believing the word of supply-side economists that the wealthy would use the cut to invest more, and in turn boost the economy, the GOP continued on their quest to give more to the wealthy. But instead of boosting the economy, the new cuts brought the deficit to a new high because the country was still reeling from the recession of the 1970’s. And with the passing of another tax reform in 1986, the top tax rate was brought down even further to 28%.

When George H. W. Bush came into office he realized that things needed to be fixed to fight off the increasing deficit. Once in office he pushed the top rate back up to 31% and included surtaxes on yachts, jets and luxury sedans. The increase in the tax rate and the inclusion of the new surtaxes helped bring the economy back up from its knees. Despite his efforts to fix the quickly sinking economy, he broke off from the rest of his party’s belief system, which ended up costing him the election to Bill Clinton.

During his time in office, Clinton took the bull by the horns and worked to reduce the deficit in major ways. Instead of relying on the failed supply-side economic theory and pushing more of the weight onto the middle and lower classes, he worked to balance the government’s budget and started to pay off the national debt. In 1993 he pushed the top tax rate up to 40% and increased the corporate tax rate to 35%, which in turn brought the economy to a new high. Wages increase, over 11 million jobs were created and the federal budget was headed to a controllable level.

But in 1997 the GOP tax crusaders returned with a vengeance. Almost all of these anti-tax politicians had signed the now infamous anti-tax pledge created by Republican strategist Grover Norquist. They effectively brought taxes so low that the wealthiest 400 Americans now make a yearly average of over $345 million and they only pay less than 17% of their income in taxes. That number is not only 40% lower than it was over a decade ago, it is lower than a bus driver who makes $26,000 a year. These tax-rate cuts have not only widened the inequality gap between classes they have done nothing to help the economy, as was suggested by the creators.

                                          (Tim Dickinson, Rolling Stone Magazine)