As President Obama and Congressional leaders negotiate in Washington, the American people need to keep a couple of things in mind about the looming "fiscal cliff." For starters, the issue is not that the national debt will go up (which roughly half of those in one poll believe to be the case), but that it will be cut much too quickly. If you need any more proof that economic growth and job creation should be Job Number One for U.S. policymakers, look no further than the UK, where the 2010 austerity program of draconian spending cuts and tax hikes pushed the country into a double-dip recession.
But for all the misplaced focus on the U.S. national debt, a second point can't be emphasized enough: the Republicans built that.
It's not just that Ronald Reagan presided over a tripling of the national debt (and raised the debt limit 17 times) during his eight years in the White House or that President George W. Bush nearly doubled it again. The end-of-decade $5.6 trillion surplus forecast by the Congressional Budget Office in 2000 was more than eviscerated by two unfunded wars, two rounds of Bush tax cuts, the unpaid for Medicare prescription drug benefit and the TARP bank bailout. To accommodate those "spend and not tax" policies, Bush and his GOP allies in Congress voted seven times to raise the U.S. debt ceiling. And as it turns out, Senate Minority Leader Mitch McConnell (R-KY), House Speaker John Boehner (R-OH) and House Majority Leader Eric Cantor (R-VA) voted for all of it.
(Continue reading below the fold.)
As the Washington Post explained in January, President Bush added $5.1 trillion in red ink to the national ledger. But while the debt has grown by over $5 trillion during Obama's first term, less than $1 trillion can be attributed to new programs he put in place. The rest is the result of the tax revenue loss from the deep recession which began in December 2007 and the continuation of policies inherited from George W. Bush. As Ezra Klein explained:
What's also important, but not evident, on this chart is that Obama's major expenses were temporary -- the stimulus is over now -- while Bush's were, effectively, recurring. The Bush tax cuts didn't just lower revenue for 10 years. It's clear now that they lowered it indefinitely, which means this chart is understating their true cost. Similarly, the Medicare drug benefit is costing money on perpetuity, not just for two or three years. And Boehner, Ryan and others voted for these laws and, in some cases, helped to craft and pass them.That started with the Bush tax cuts of 2001. Despite losing the popular vote and facing a 50-50 Senate, President Bush and Vice President Cheney claimed a mandate for their $1.3 trillion tax cut package. As Bush put it to Congressional leaders on December 18, 2000, "I think all four standing here understand that I campaigned on a clear view of tax relief, and that's what I'm going to bring to the floor of the House and the Senate." Cheney, as usual, was blunter:
"There is no reason in the world, and I simply don't buy the notion, that somehow we come to office now as a, quote, 'weakened president.' [...] We've got a good program, and we're going to pursue it."Which is pretty much what transpired. By the summer of 2001, President Bush and Vice President Cheney had their $1.3 trillion tax cut, courtesy of precisely the strategy Gloria Borger ridiculed as "cherry pick[ing] one or two Democrats here and there and get them to sign on to whatever tax bill you have." (They had to use the budget reconciliation process to do it, which is one of the reasons the Bush tax cuts were not permanent.) Unlike Bill Clinton's upper-income tax hikes of 1993 (which received zero GOP votes in either house of Congress) and Barack Obama's 2009 stimulus bill (which garnered three Republican votes in the Senate and none in the House), 12 Democratic Senators and 28 Representatives provided President Bush's margin of victory.
Bush got his victory, despite warnings from Democrats that his tax cuts would produce oceans of red ink while the benefits would flow primarily to very rich. (That's why John McCain opposed the 2001 measure, arguing "I cannot in good conscience support a tax cut in which so many of the benefits go to the most fortunate among us at the expense of middle-class Americans who need tax relief.") That is, of course, exactly what happened. The Bush income tax cuts of 2001 and the capital gains and dividend tax reductions of 2003 didn't drive economic growth. But they have resulted in the lowest federal tax bite since 1950, record income inequality and a ballooning of the national debt.
In his version of the Republican myth that "tax cuts pay for themselves," President Bush confidently proclaimed, "You cut taxes and the tax revenues increase." As it turned out, not so much.
The mythmaking of Republican supply-side snake oil salesmen to the contrary, tax cuts don't generate enough economic growth to offset the loss of revenue the previously higher rates would have produced. The chart below shows just how dire the tax revenue drought has become. As a share of American GDP (see chart above), tax revenues peaked in 2000; that is, before the Bush tax cuts of 2001 and 2003. Federal tax revenue did not return to its pre-Bush tax cut level until 2006. (While this graph shows current dollars, the dynamic is unchanged measured in inflation-adjusted, constant 2005 dollars.)
All told, the Bush tax cuts drained about $2 trillion from the U.S. Treasury during his presidency and , if continued, would produce another $4 trillion hole over the next decade. So much for Mitch McConnell's law-dropping claim that:
"There's no evidence whatsoever that the Bush tax cuts actually diminished revenue. They increased revenue because of the vibrancy of these tax cuts in the economy. So I think what Senator Kyl was expressing [that "you should never have to offset the cost of a deliberate decision to reduce tax rates on Americans"] was the view of virtually every Republican on that subject."As the Center on Budget and Policy Priorities concluded (see chart at top), the Bush tax cuts accounted for half of the deficits during his tenure, and if made permanent, over the next decade would cost the U.S. Treasury more than Iraq, Afghanistan, the recession, TARP and the stimulus--combined.
That's not to say the conflicts in Afghanistan and Iraq haven't had a dramatic impact. They have--and will for years to come.
By 2020, the direct cost of America's wars to U.S. taxpayers could reach $3 trillion. In March 2011, the Congressional Research Service put the total cost of the wars at $1.28 trillion, including $444 billion for Afghanistan and $806 billion for Iraq. (Only World War II cost the United States more in real dollars.) In addition, baseline defense spending has almost doubled since the 9/11 attacks, jumping from $297 billion in fiscal year 2001 to $531 billion in FY 2012:
But in addition to the roughly $1.5 trillion tally for both conflicts through the theoretical 2014 American draw down date in Afghanistan, the U.S. faces staggering bills for veterans' health care and disability benefits. Last May, an analysis by the Center for American Progress estimated the total projected total cost of Iraq and Afghanistan veterans' health care and disability could reach between $422 billion to $717 billion. Reconstruction aid and other development assistance represent tens of billions more, as does the additional interest on the national debt. And none of the above counts the expanded funding for the new Department of Homeland Security.
All told, the tab for the "global war on terror" could hit $3 trillion by the end of this decade. But thus far, American taxpayers haven't been asked to pay one cent more to fund it. Noting that "'the federal budget will have the second largest surplus in history," President Bush moved forward with the massive tax cuts of 2001. But even as the World Trade Center site was still smoldering, Bush in the wake of the September 11 attacks told the American people not to sacrifice but to go shopping and "get down to Disney World." And in 2003, George W. Bush became the first modern president to cut taxes during wartime. (It should be noted that Barack Obama became the second.)
But America's overseas conflicts weren't the only items Republicans charged to Uncle Sam's credit card. The 2003 Medicare prescription drug plan got added to his tab as well.
As you may recall the sordid tale, the Bush White House flip-flopped on adding a prescription benefit within the Medicare program in order to win over elderly voters as the 2004 campaign neared. But with Democrats opposed to a bill that forbade the federal government from negotiating prices directly with pharmaceutical firms, the GOP needed every vote it could get. With 204 Republicans (including John Boehner and Eric Cantor) voting yes, President Bush and Tom Delay got their bill passed. But not without first bending the rules and breaking the law.
Arguing "we must forget about ideological absolutes," then Majority Leader Delay resorted to unprecedented machinations on the House floor to round up the needed votes. As the New York Times recalled:
Under heavy pressure from President Bush and Republican Congressional leaders, lawmakers backed the legislation by a vote of 220 to 215, sending it to the Senate, which is expected to act in the next few days. The vote, which ordinarily takes fifteen minutes to record, was kept open for an extraordinary three hours as Republicans struggled to switch votes and obtain a majority.And what happened during those three hours was a new low, even for Tom Delay. As the Washington Post later reported, long before Ben Nelson's "Cash for Cloture" imbroglio, the House Ethics Committee reprimanded Delay for trying to buy votes for the Medicare bill:
After a six-month investigation, the committee concluded that DeLay had told Rep. Nick Smith (R-Mich.) he would endorse the congressional bid of Smith's son if the congressman gave GOP leaders a much-needed vote in a contentious pre-dawn roll call on Nov. 22.Then there's the matter of the Medicare bill's price tag:
A White House desperate for an election year win on Medicare deliberately misrepresented the program's costs in order to ensure passage. On December 8, 2003, President Bush rolled out a program he claimed would cost $400 billion over 10 years. Within two months, however, the White House notified Congress that the real price tag would approach $550 billion. When Medicare actuary Richard Foster sought to present the true price tag to Congress in late 2003, then agency chief Thomas Scully threatened to fire him. Fast forward two years and the estimated 10 year price tag for the Medicare prescription plan now exceeds $720 billion for its 43 million beneficiaries.Ultimately, the $720 billion nightmare scenario forecast in 2005 did not come to pass. But it was lower enrollment and the rapid adoption of generic drugs, rather than "competitive mechanisms" which largely explain the lower Medicare Part D bill for taxpayers. Still, the Medicare drug plan may cost as much as $1 trillion over the next 10 years (higher than the $900 billion overall price tag for the fully-funded Affordable Care Act) making it, as Bruce Bartlett noted, an "unfunded drug benefit" which adds "to our nation's indebtedness." In 2009, Utah Senator Orrin Hatch admitted as much of the Medicare Rx episode and the Bush years in general:
"It was standard practice not to pay for things."As for Mitch McConnell, John Boehner and the GOP's willing executioners of health care reform in Congress,Ezra Klein may have put it best that same year:
"The health-care reform bills currently under consideration in both the Senate and the House actually cut money from the deficit, but they are being criticized as fiscally irresponsible by many of the people who voted for Medicare Part D. It's like watching arsonists calling the fire department reckless."That's an apt description for the Republicans now dead set against including any tax increases in a fiscal cliff compromise. (It should be noted that there isn't really a cliff at all; while not ideal, the triple whammy of expiring Bush tax cuts, end of the payroll tax holiday and the budget cuts from the 2011 sequestration agreement can be addressed any time before or after the January 1st witching hour.) As recent stories from the AP and new polling suggests, the press and the public is increasingly in agreement about the budget arsonists behind the nation's prairie fire of debt.
That would be the Republicans. After all, they built that.