Debt and taxes, Part I
By Raymond Freeman 01/09/2014
Your new year’s resolution is to learn about national debt and deficits.
The “deficit” is Uncle Sam’s annual credit card bill. He’s been paying it with IOUs since 1836. “National debt” is the total of all Sam’s IOUs. National debt’s also called “public debt.” It’s in two parts.
The first part is, confusingly, “debt held by the public.” These are impressive bonds with stars, eagles, etc. Anyone can buy them. The second part is held by government departments, called “intragovernmental debt.” For example, Social Security invests only in Sam’s bonds (in passing, not very bright). The two together are called “gross public debt” or “gross debt.” That’s what you see on those national debt “clocks.”
Gross debt is often stated as a percentage of economic output, i.e., gross domestic product (GDP), to make it meaningful. It’s varied a lot: there’s a graph at: http://zfacts.com/p/318.html.
World War II cost America $4 trillion in today’s money. In 1945 gross debt was around 120 percent of GDP. This percentage fell as GDP grew. It was around 30 percent under President Carter in 1980. America was then the world’s greatest creditor. Presidents Reagan and Bush Senior doubled it to 65 percent. They made America the world’s biggest debtor. Nobody cared.
President Clinton wrestled this debt down to 56 percent. He left office with a budget surplus of $236 billion and a projected 10-year surplus of $5.6 trillion. Nobody cared.
President Bush Junior took over debt at $5.7 TN. So it almost vanished to $0.1 trillion, right? No, wrong. Bush almost doubled it to $10.6 trillion (adding $4.9 trillion). That was around 84 percent of GDP. By then, a phenomenal 70 percent of gross debt since 1836 had been racked up by three Republican presidents in 20 years. Yes; 70 percent; all debt; 20 years. Nobody cared.
So Bush Junior cost America more than WWII ($4.9 trillion vs. $4 trillion). Nobody cared. And there’s another $5 trillion still to come, courtesy of Iraq and Afghanistan (Stiglitz). Angry yet?
This will blow through the debt ceiling quite nicely. This “debt ceiling” is artificial. The Mad Hatter’s Tea Party uses it to manufacture a crisis. No other country on earth allows its lunatics to put a gun to its head.
Gross debt’s now $17 trillion, around 100 percent of today’s GDP, with $12 trillion held publicly. Wait, wait, you say, President Obama’s caused debt to increase by $17 trillion - $10.6 trillion; that’s $6.4 trillion! Not really. Almost all of this comes from fixing Bush’s mess: tax cuts, wars, economic crash. The next Sharper Focus will be on this topic alone. Obama’s stimulus saved the economy from collapse, per the Financial Times and The Economist. Both blame Republican policies for causing the 2008 crash.
Republicans couldn’t care less. The media couldn’t care less. That’s because voters couldn’t care less. Elections run on spin, sound bites, fairy stories and lies. Americans don’t demand the truth. They don’t get it.
It’s a Big Lie that Obama has caused annual deficits to really take off. Almost all Americans, 94 percent, believe this. It’s entirely misleading, as we’ve just seen. The Congressional Budget Office’s projections show a surplus for 2014 and after.
It’s a Big Lie that national debt is our biggest problem. It’s not. It’s the sluggish economy. If it were growing faster, the debt/GDP ratio would fall automatically. Economists have stated repeatedly that further stimulus measures should be taken. Yes, that increases debt. So? Pay it back later, from increased revenues. What’s the hurry? We still have debt from 1836.
It’s a Big Lie that Democrats are responsible for today’s national debt. For 12 of those 20 years, the GOP controlled Congress. And under Democratic presidents, Congress passed smaller budgets. See “Who Increased the Debt?” at snopes.com/politics/politicians/nationaldebt.asp.
It’s a Big Fat Lie that Social Security increases national debt. It doesn’t. Its accounting is separate. Bush and his poodles in Congress robbed its income stream to fund tax cuts for the super-rich. The Republican noise machine now says we’ll all die in our beds if we don’t cut it. What about reversing that robbery and taxing the super-rich?
It’s a Big Fat Lie that we’re taxed enough already. Taxes are the lowest in 50 years and miniscule by international standards. To reduce debt, we must either pay higher taxes now, or greatly higher taxes later. Fine, but who’s “we?” It can’t be the middle class. It’s tapped out. So, that leaves the super-rich and hugely profitable corporations. Higher taxes on them didn’t hurt America’s golden years. Taxes didn’t kill these “job creators,” because they’re not … job creators. Consumers are.
Fairies in the night won’t pay national debt down to 30 percent again. Americans in the day will. And those with the strongest backs should be given the biggest oars to get Uncle Sam’s boat off the rocks. It’s the patriotic thing, right, conservatives?