From the Washington Post:
By Lori Montgomery, Published: April 30
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.
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.“In the end, the floodgates opened,” said former senator Pete Domenici (R-N.M.), who chaired the Senate Budget Committee when the first tax-cut bill hit Capitol Hill in early 2001.
In January 2001, with the budget balanced and clear sailing ahead, the Congressional Budget Office forecast ever-larger annual surpluses indefinitely. 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.
The nation’s unnerving descent into debt began a decade ago with a choice, not a crisis.
Polls show that a large majority of Americans blame wasteful or unnecessary federal programs for the nation’s budget problems. But routine increases in defense and domestic spending account for only about 15 percent of the financial deterioration, according to a new analysis of CBO data.
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 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 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 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.
This account seems to be what I remember in a more informal way. So all of the debt mess is the fault of Nancy Pelosi, Harry Reid, and President Obama? Absolutely not. the good times had begun to roll long before they assumed leadership. Perhaps critics should look at the party in power during those years. (see link) It is difficult to juggle the math and the party in power and come up with one blame fits all Democrats.
Its time for the American people to suck it up and be thankful that the 2 wars didn’t take their sons, husbands, brothers, and fathers. They should be pleased with their tax cuts while the real estate climbed towards the sky at an exponential growth rate. However, the party is over.
This absurd, tea party blame game has gone on long enough. They are holding our country hostage. The economy is fragile and cannot withstand a default or a downgrade in bond rating without some fairly serious and unpleasant consequences of long lasting endurance. Let’s just do what we need to do to set back on target. That starts with raising the debt ceiling so we can conduct the business of the country. We probably need to increase revenue also, since decreased revenues seem to be one of the culprits.
Finally, its not any one group or one person’s fault. We all shared the ride to the top in one way or the other. The descent can’t be hung on any one person (like the President).
Further reading: Running in the red: (pt 2) Among GOP, Anti-tax orthodoxy runs deep (WaPo)
Don’t forget the problems created by essentially returning to the unregulated financial system of the 1920s. Starting primarily with Clinton and later Bush II, the government dismantled many of the financial market protections that were enacted in the 1930s. This came about because of the massive influence of big campaign money and lobbying in the system. I know liberals like to take this all the way back to Reagan, but the financial deregulation Reagan pursued laid very little, if any, of the groundwork for this mess.
The long and short of it was a financial system that allowed the big-money players to get away with murder, throw us into a chaotic situation, and slither away richer than they were when the catastrophe began.
Add up the costs. Unemployment means lost wages and taxes, and additional demands on the social safety net. We spent hundreds of billions on bailouts for the very people who created the mess. We spent billions on “stimulus” programs trying to climb out of the hole.
This whole economic catastrophe, brought on over two decades by politicians responding to their big contributors instead of the voters, cost us far more than the unfunded wars and many of the other ways politicians wasted our money.
I’m a free-market conservative, but free-market economics does not have room for special interests to buy what they want from elected officials at the expense of the rest of us. That’s big-government corporatism; not free-market capitalism. It’s true whether we’re talking about Sandy Weill of Citibank paying politicians to get rid of Glass-Steagall in the 90s so he could create one of the behemoths that helped cause the collapse of the economy, or the developers and their attorneys buying five of the eight members of the PWC Board of County Supervisors to get what they want.
NTK makes some critical points regarding politicians responding to big contributors rather than the voters. His point can be seen locally, statewide and nationally. Basically, the voters have to drink the kool aid to buy in to the wishes of the large donors. Thats what all the money is needed for…to fool us.
Many people have slithered away richer. The huge growth in wealth isn’t from the middle class where salaries have been fairly stagnant for several decades. The exponential growth in wealth has been the within the ranks of the wealthy to start with.