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Just Sayin'

Paul Adair is a 21-year Germantown resident, retired scientist, writer, and lecturer.

Worried About the Deficit?

I attended Ron Johnson's town hall session last Friday in West Bend. In a Power Point presentation, Sen. Johnson stressed the critical importance of getting our national debt under control. That is one of the few topics on which Sen. Johnson and I agree. Very few people believe that running a deficit year-in and year-out is good for the country. However, there are large differences in how the two major political parties face this issue. And there are huge differences in their results.

Democrats believe that the budget can be brought into balance through a policy of economic growth, trimming the bloated military budget, cutting billions in corporate welfare, getting control of healthcare costs, maintaining a progressive revenue system, and investing in research, education, and infrastucture.

Republicans, on the other hand, think that the budget can be balanced by cutting revenue, spending more on the military, and maintaining corporate welfare pay-outs. In their collective minds, our budget should be balanced primarily by axing your earned retirement benefits (Social Security and Medicare), through draconian cuts to student assistance, and by slashing aid to our poorest citizens.

How do these two opposing approaches work out? Let's compare Federal spending since 1981, using official figures from the Office of Management and Budget. During that time, we have had three Republican Presidents and two Democratic ones. Let's look at the actual deficit in constant, 2009 dollars, for each Commander-in-Chief. Because a larger economy can handle correspondingly more debt, we will also look at the deficit as a percentage of the total US economy (GDP).

Ronald Reagan inherited a reasonably sane budget. Carter's last budget (1981) had a deficit of $180 billion (2009 dollars), which was 2.5 % of the total US economy. Because of large tax cuts and drastically increased defense spending, Reagan ballooned our deficits. He added an average of $329.6 billion/year to our debt. The deficits during his two terms averaged 4.15% of GDP, substantially more than his Democratic predecessor.

Then Republican George H.W. Bush took office. With many of the same advisers and policies as Reagan, Bush, Sr. had very similar budgets. His average deficit was $391 billion/year, about 4.1% of GDP.

With Democratic President Bill Clinton came an era of fiscal responsibility. Enhanced revenue, high economic growth, and rationalization of our military allowed us to enter a short period of budget surpluses. Our deficit decreased each year from the first Clinton budget in 1994 until we reached a surplus in 1998. During the eight Clinton years, our average annual deficit surplus was $7.9 billion (2009 dollars).

However, Republican George W. Bush changed those nasty surpluses back into deficits. With a huge and unwise tax break, two unfunded wars, and an expensive giveaway to the drug companies (Medicare Part D), W quickly turned those plusses back into minuses. During his eight budgets, Bush averaged a $469 billion deficit. His deficits averaged 3.3% of the GDP. However, that doesn't tell the whole story. Bush's last deficit was a monstrous $1.413 trillion dollars, a whopping 9.8% of GDP.

Once again, we have a Democratic President. Year by year, Barack Obama has shrunk the deficit he inherited by an amazing 65%, going from $1.413 trillion to an estimated 2014 deficit of $492 billion. The 2014 deficit is only 2.8% of GDP. This was accomplished by sun-setting the Bush tax cuts on income greater than $400k, ending the war in Iraq, winding down the war in Afghanistan, and enacting policies which promote economic growth. Once again, we are on a path to fiscal sanity.

The Republican approach doesn't seem to work any better on the state level. Since taking office in 2010, New Jersey Governor Chis Christie approved a record $2.3 billion in state tax breaks for corporations. He recently toyed with the idea of a 10% state income tax cut. In response to his economic irresponsibility, New Jersey has had six credit downgrades since Christie took office.

And Sam Brownback's crimson red Kansas is not faring much better. Kansas' credit rating was lowered this month due to "mounting financial pressure" on the state budget. This downgrade came after the state legislature passed huge and imprudent tax cuts in 2012 and 2013. In state after state, it has been made abundantly clear that cutting revenue when you can't afford it equals fiscal malpractice.

And Scott Walker does not seem to learn anything from his beleagured fellow governors. Our last budget increased state borrowing by $2 billion dollars, to an all-time high of $14.7 billion. We will have a 2017 structural deficit of $725 million. Yet, in an election year gimmick, Walker signed a $504 million tax cut into law. The cut is estimated to add another $100 million dollars to the structural deficit, putting Wisconsin's long term financial health in jeopardy.

If you are worried about deficit spending, don't buy the snake oil that Republicans are pitching. You cannot cut deficits by reducing income. The approach that has been shown to work- the approach that has proven results- has been adopted by Democrats. If you are genuinely worried about long term state and federal debt, if you truly want to cut the deficit- vote Democratic. Your children and grand-kids will thank you.

 

 

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