Stop making bad policy choices

Posted by AzBlueMeanie:

On Sunday, the Arizona Republic published this excellent report from Lori Montgomery of the Washington Post. On road to surplus, U.S. detoured into debt:

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 for the foreseeable future. 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.

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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.

* * *

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 Barack 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.

Big-ticket spending initiated by the Bush administration accounts for another 12 percent of the shift. The Iraq and Afghanistan wars have added $1.3 trillion in new borrowing. A new prescription drug benefit for Medicare [Medicare Part D] recipients contributed another $272 billion. The Troubled Assets Relief Program bank bailout, which infuriated voters and led to the defeat of several legislators in 2010, added just $16 billion – and TARP may eventually cost nothing as financial institutions repay the Treasury.

Obama's 2009 economic stimulus, a favorite target of Republicans who blame Democrats for the mounting debt, has added $719 billion – 6 percent of the total shift, according to the new analysis of CBO data by the nonprofit Pew Fiscal Analysis Initiative. All told, Obama-era choices account for about $1.7 trillion in new debt, according to a separate Washington Post analysis of CBO data over the past decade. Bush-era policies, meanwhile, account for more than $7 trillion and are a major contributor to the trillion-dollar annual budget deficits that are dominating the political debate.

As Congress prepares this week to launch a high-stakes battle over whether to raise the legal limit on borrowing, the analyses offer a clearer view of the drivers of the debt – and of the difficulty of re-balancing the budget without new tax revenue.

The Tea-Publican mantra is that "we do not have a revenue problem, we have a spending problem." Anyone who says this is an ideologue and a fool, and is unfit to serve in public office. Period. We have a revenue problem — if you are not willing to recognize this fact and to increase tax revenues you are not a serious person in this debate about debt and taxes.

Ezra Klein of the Washington Post has added some pie charts and graphs to Lori Montgomery's report. How America went from surpluses to deficits – Ezra Klein:

[T]his excellent Lori Montgomery piece pivoting off of this excellent Pew report that breaks down, in clearer language, graphs and numbers than I’ve seen anywhere else, how America went from surpluses in the ’90s to mountainous deficits in the Aughts.

As Lori writes, “The nation’s unnerving descent into debt began a decade ago with a choice, not a crisis.” A series of choices, actually. No policy contributed more to the deficit than the two rounds of tax cuts passed in 2001 and 2003. The wars were also major contributors. The Medicare Prescription Drug Benefit, though its costs will build over time, was not a particularly large part of the story over the last decade.

But then our unfortunate choices were compounded by an unexpected crisis. The financial crisis crushed our economic outlook. Revenues plummeted and spending grew. Then there was the stimulus package, which though smaller and much shorter-lived than either the tax cuts or the wars, was nevertheless significant. And as all this debt begins to mount, our interest payments begin to expand, until they’re actually significant as well. You can see a great chart breaking down the changes that drove the CBO’s outlook from surpluses by 2011 to deficits as far as the eye can see:

There are two major takeaways from this report. The first is that the current deficit is primarily, though not exclusively, the result of policy decisions made during the Bush years. Insofar as Obama deserves blame for current deficits, it’s mainly because he hasn’t shut down Bush-era policies like the tax cuts. All the stimulus spending combined accounts for a relatively small portion of the deficit. Conversely, the financial crisis began before Obama was in office, but is unquestionably the single largest contributor to the deficit while he’s been in office.

The second is that economic projections are uncertain at best. Without the financial crisis, our current deficits, though significant, would be much more modest… What we control are our choices. And with the exception of the health-care reform law, few of our post-Clinton choices have been good for the deficit.

One of the great mysteries of all time is why Americans continue to put their trust in politicians who believe in "voodoo economics" nonsense that has destroyed the economy of this country. The proof is before their very eyes and yet they keep falling for this economic fraud, time and again. Even the most gullible must eventually realize they are a victim of fraud. Stop making bad policy choices.