Being a history nut I like the old saying “those who don’t know history are doomed to repeat it”. The premise behind this statement is that we should know what got us into past problems so we don’t end up making the same mistakes again. I think this is especially true when it come to our country’s debt problems. So, that is what this post will be about.
First, let’s look at a graph showing the history of our debt. It is shown above. We were going along with only somewhat marginal increases in debt until the early 1990′s at that time President Bush (papa bush that is) raised taxes on some of us. Doing that caused him to fall out of favor with the stalwarts of his own party and therefore made him a one-term president. But it did slow the increase of debt. Then came President Clinton who tweaked the tax code in order to make them fairer. As a result of his actions the federal budgets were balance for several years and some of the national debt was actually paid off.
Then came President Bush (baby bush that is). The first thing he did when he came into office was to give massive tax cuts to the upper 10% of the country. At the same time he took us to war on two fronts. That would not have been too harmful from a monetary standpoint but he chose to take the wars “off the books” which resulted in directly adding them to the national debt. During his years as president the national debt soared. He also did his best to eliminate as much regulations as he could find. As a result of that action Wall Street and the banking community became very creative in generating false profits. These actions came crashing down during the last year of his presidency.
So in come the dreamer President Obama who had to take over all these problems from a failed president. He like almost all of his predecessors had to increase government spending in order to try to stabilize a failing economy. Doing this and not being allowed to restore the tax codes to where they were during our budget surplus years cause the debt limit to continue to increase as they had during the 2001 to 2008 years.
I could have gone back even further to the 1980s when President Reagan invented “trickle down economics” some called it “voodoo economics” that went something like this. The way to decrease the debt is to cut taxes in order to increase taxes. Only the most conservative of us bought into this mentality. Most believe that this policy was the beginning of the runaway deficit problems.
Ok, so this is my history lesson for today. I’m sure my conservative friend would have a few revisions to my version but that is how I see it. What can we learn from history about how our debt got to the point where it is. In my mind there are two basic lessons here. One is that if you want to increase spending you have to have a good reason and can’t say the spending doesn’t count (off the books). One good reason would be to prevent a total collapse of our economy. The other is that you must levy taxes/income in proportion to the amount you need to spend. Some seem to think that like Mr. Reagan you can increase spending (primarily on our war machinery in his case) and decrease taxes at the same time and somehow our debt would not be affected. I’m a pretty simple guy but even this didn’t make any sense to my back then.
But what do I know….