The United States became a net debtor under Reagan and these
debts have grown rapidly under Bush 41 and Bush 43. Only under Clinton was the debt rolled back.
New government estimates released mid-September 2008 forecast that the federal government will be in
a deeper a $546 billion deficit hole in 2009. (October 7, 2008 update - With the cost of the Wall Street Bailout added to the deficit, the new 2009 deficit projection approaches $950 billion)
In January 2001, the month President Bush took control of America from President Clinton, the Congressional Budget Office released budget estimates for each of the next ten years (2002-2011).
As Clinton left office the CBO predicted that the 2009 budget would show a $710 billion surplus. So the $546 billion deficit now predicted for 2009 is actually $1.3 trillion worse than CBO predicted nearly eight years ago. $1 trillion worth of the deficit deteriation is directly due to actions by the White House and Congress since 2001 -- specifically, the tax cuts and spending increases they enacted. The new $500 billion-plus deficit numbers represent about 3.5 percent of the economy, which is the deficit measure seen as most relevant by economists.
The two main reasons why the 2009 budget will be so much worse than CBO had predicted in 2001 are Republican tax cuts and increases in military and other security-related spending.
Tax cuts alone account for 42 percent of the budgetary deterioration for 2009 that stems from policymakers' actions since 2001. Increases in military and other security programs account for another 39 percent. Combined, these two factors account for 82 percent of the budget decline that is due to policy actions.
The tax cuts -- the largest of which by far was the giant 2001 Bush tax cut -- will cost $295 billion in 2009 alone. While nearly all taxpayers will receive some tax cut, the distribution of the tax cut benefits is highly skewed. In 2009, a typical household in the $40,000-to-$50,000 income range will receive a "Bush" tax cut of about $950; households with incomes over $1 million will receive tax cuts averaging $135,000.
The Bush administration has mis-managed the federal budget situation to an alarming degree. Although they inherited a budget surplus, they have continually spent more then they have taken in. As a result, the US is issuing debt like its going out of style. Total debt outstanding has increased from $5.8 trillion in 2001 to the current total of $9.5 trillion.
As a result of this problem, the currency markets have sent the (
Trade Weighted Exchange Indexed) dollar lower for six years straight. If you were wondering why commodities in general and oil specifically have bee rallying for some time, you can thank the cheap dollar as a primary cause. The dollar has gone from peak to trough from nearly $130 to its current level of $72.75 -- or a drop of 44%. As the dollar has dropped in price, the dollar cost of commodities like crude oil and gasoline have have spiked in price for American consumers . One of the primary reason traders are bidding up commodities like oil and gasoline is as an inflation hedge.
The Republican controlled congress --
increased discretionary spending from
649 billion in 2001 to 1.041 trillion in 2007.
In short, the Republicans went on a spending spree while at the same time cutting taxes. That is a recipe for disaster.
But there is another, deeper problem at work here. The figure that is being reported is a dishonest figure because it counts the social security surplus. Remember in 2000 when Al Gore was talking about a "social security lock box"? What he was saying is we should take all of the surplus money paid into social security and not spend it now. However, that is exactly what we are doing and have been doing for a very long time. As a result, the "unified" budget deficit -- the figure reported in the press -- is, well a lie. The correct way to look at the budget deficit is to see how much debt we are issuing. And that figure is far worse than what is being reported.
Here are the yearly amounts of
total debt outstanding.
09/30/2007 $9,007,653,372,262.48
09/30/2006 $8,506,973,899,215.23
09/30/2005 $7,932,709,661,723.50
09/30/2004 $7,379,052,696,330.32
09/30/2003 $6,783,231,062,743.62
09/30/2002 $6,228,235,965,597.16
09/30/2001 $5,807,463,412,200.06
09/30/2000 $5,674,178,209,886.86
The current total is
$9,668,844,788,980.66. (October 7, 2008 update - With the cost of the Wall Street Bailout added to the deficit, the new total deficit projection exceeds $13 trillion - with all the zeros that's $13,500,000,000,000)
The point of all this is clear: the US' budget is structurally running a deficit to the tune of $500 billion dollars a year for the last five years. This is far worse than is being reported in the press.
Sen. John McCain promises that, as president, he would "cut taxes," mostly for corporations and wealthy individuals. But McCain's economic plan could create deficits as deep as 5.7% of GDP by the end of a two term presidency -- the highest federal budget deficit in 25 years -- and would accumulate the biggest debt since the second World War, according to a new analysis by the Center for American Progress Action Fund. McCain's current fiscal plan would recklessly exacerbate the fiscal irresponsibility of the Bush Administration further by gutting revenues far below the average level of the past 25 years.
For the past 25 years, deficits have never been more severe than 5% of GDP, with surpluses as high as 2.4% of GDP in the year 2000. Under McCain, yearly deficits would increase sharply, beginning with $505 billion in FY2009 (3.4% of GDP) and skyrocket to $1.2 trillion (5.7% of GDP) by FY2017. In 2018 these deficits would reach 6% of GDP, tied with the largest deficits since WWII. McCain's "tax cut" plan would further weaken the the (
Trade Weighted Exchange Indexed) dollar value causing the cost that Americans pay for gasoline to further to climb to $5, $6, $7 or more per gallon at the pump.
Obama's economic plan would at least reduce the budget deficit growth and possibly even begin to again reduce the budget deficit. This in turn could begin to strengthen the (
Trade Weighted Exchange Indexed) dollar value which would in turn begin to reduce the $4 per gallon price of gasoline back to something under $3 per gallon.
Which is more important to you - McCain's lower taxes for corporations and the wealthy creating a weaker dollar, which leads to higher gasoline prices at the pump? OR, Obama's lower taxes for everyone who earns under $250,000 per year and higher taxes on the wealthy, which will create a stronger dollar and lower gasoline prices at the pump for everyone? It's up to you, the voter, to decide!
