The Real Deal: How We Came To The Budget Crossroads Part 2

Contrary to popular opinion, creating a deficit is easier than many people think. A deficit is the difference between how much money has been spent and how much has been brought in as revenue. Deficits happen all the time and are not usually a big problem, as long as the government has enough money remaining. But when the government spends significantly more than it brings in on a regular basis, not only does the deficit increase exponentially, so does the national debt.

During the final years of the Clinton administration, the government spent less money than it brought in, which created an annual surplus and the projected surpluses for that the second Bush administration. Government projections issued in 2001 showed that if we continued along the path of spending that we were on during the Clinton administration we would have potentially had upwards of half a trillion dollars in surplus.

Despite having only a multi-billion dollar surplus at the beginning of his term in office, Bush decided to fund two simultaneous wars, a multi-billion dollar Medicare drug benefit plan at the same time he cut top rate taxes, corporate taxes, the estate tax and many others that were aimed at the very wealthy. The tax cuts alone cost over $1.8 trillion, while the Iraq and Afghan wars (along with other defense spending) cost nearly $1.5 trillion. Bush continued to spend more money while systematically reducing the government’s annual revenue with more tax cuts, drastically increasing the deficit and the national debt.

                                               (New York Times)

And where did the ever-flowing stream of money come from? While the government was handing out money to the rich, it had to borrow, increasingly from other countries, namely China and Japan, to be able to continue funding the spending spree. The reasoning behind the additional tax cuts was based on the “trickle-down” theory in economics, whereby if the rich spend more with their increased revenue, and the money they spend will in turn “trickle down” to the less wealthy. This same theory was used as the basis behind the Reagan cuts back in the 1980’s. And as with Reagan’s cuts, Bush’s new cuts did the exact opposite to the economy.

The continued spending of the Bush administration, along with all of the tax cuts, dug the country into such a deep hole that it will take decades to bring the debt out of the red. One of the surefire ways to increase the government’s annual revenue reduce the annual deficit and in turn the dept, is to increase the taxes on the rich. Along with closing tax loopholes for large corporations and the wealthy the government could consistently bring in billions if not trillions of dollars that would have been given to the rich as if it were pocket change. And with a solid line of revenue, the government could put more focus on refining Social Security, Medicare and Medicaid, and helping create jobs to return the economy back to level ground.