Our national debt is a very serious problem, as Rep. Tipton reminded us in his recent Journal column. It is useful to look back and see how and when this debt accumulated.
Understandably, World War II required a dramatic increase in our country’s debt. Following the war, the debt, in inflation-adjusted dollars, gradually declined from the mid 1940s through the beginning of the 1980s.
When Ronald Reagan became president in 1981, he persuaded the country to try an experiment with an idea called “supply side economics.” The idea was that if we reduce taxes on the wealthy, they will invest the extra money in our economy. The economy will then grow in response to this influx of cash, and the resulting economic expansion will produce an increase in tax revenues to more than offset the effects of the lowered tax rates.
It didn’t work.
National debt grew at an alarming rate through the 1980s and well into the 1990s. In inflation-adjusted 2010 dollars, the debt went from under $3 trillion to almost $7 trillion. In other words, our country took on more debt while running the “supply side” experiment than while winning WWII.
Taxes were increased early in the Clinton administration, and by the end of the 1990s, the country had a couple of years with a budget surplus and we had started to pay down the debt a little.
President George W. Bush used these budget surpluses at the beginning of his administration as part of his argument to once again reduce taxes on the wealthy. The other part of his argument was essentially the same one offered by President Reagan 20 years earlier — that tax cuts would spur economic growth.
Wrong again.
The national debt mushroomed again during the Bush administration, going from around $7 trillion to nearly $11 trillion. Toward the end of the Bush tenure, the country was falling into severe recession. To make matters worse, the major financial institutions of the country, having created and put their money into an array of incestuous “financial instruments,” were all on the verge of collapse. The Congress, at the insistence of the Bush White House and Treasury Secretary Paulson, gave these financial giants nearly three quarters of a trillion dollars to keep them — and our whole economy — from a total meltdown.
Now, under the Obama Administration, both the low tax rates and the unbridled spending have continued. Tax revenues are especially low because of the recession, and $800 billion has been spent to stimulate the economy. How much difference the “stimulus” has made is speculation on everyone’s part since no one knows where we would be without it.
So the debt continues to soar, now approaching the “debt ceiling” of $14.3 trillion. However, if politicians try to tell us that what we need is to lower taxes on the rich to boost the economy and thereby get our debt under control, we know better. We know, from three decades of massive debt accumulation, what a bad idea that is. We know that if low tax rates on the wealthy produced prosperity, we would be wonderfully prosperous right now — but unfortunately we’re not. We know that it is time for our country to stop borrowing in order to make the rich ever richer, and at long last, require some sacrifice from those who have been on the receiving end of these misguided policies.
Bob Waggoner is a Cortez resident.