Common Sense
Just joking, we know that Reagan and Bush did not balance the budget, unlike every president since WW II until Reagan, every other president, Democrat and Republican, reduced the deficit as a percent of Gross Domestic Product (GDP).So, why did the deficit go down under Carter,explode under Reagan and Bush, fall under Clinton, and explode under George W. Bush?
The answer is simple; every time you cut taxes for someone, you increase the deficit or you increase the burden on someone else, higher taxes or cut their benefits. Working families have not got raise in salary, except for a promotion or cost of living increase since 1975. While they failed to get a real raise (keeping up with the effect of inflation on the cost of living is not a raise), they did get benefits, like grants so they could send their children to college, and a variety of services we called the safety net. So long as Reagan, and then Bush, and after that, Bush again, were cutting taxes, nobody complained, and even Alan Greenspan said that paying off the deficit might not be a good idea. So the deficit kept climbing, nobody suggested taking benefits away, the middle class did not get a raise, but women stopped staying home raising the children so family income went up, and everyone was pretty happy with the ballooning deficit. It was not a problem.
And taxes keep coming down for the super rich, cut from 70% for income over (today's) $1.2 million in the Eisenhower years, down to under 20% by Reagan, Bush, Clinton, and then Bush again. The story told by Reagan and never doubted by Bush or Clinton, was the cutting taxes on the rich created jobs, and everyone got richer.
The problem was that the Reagan economic policy was what George H. W. Bush called, "Voodoo" economics. It did not work. Wages were not going up, and during the George W. Bush years, 2001 to 2009, the stock market went from 10,000 up to 10,000. That is not a typo, it did go up from time to time and then it went down, when Bush left office, it was where it was when he came in. Unless you were a banker, almost a decade wasted. Middle class wages went down and to keep up, people had to use their homes as an ATM. While the population was growing at a rate of 1.2 million new workers a year, the workforce grew, on average, under Bush by an average of less than half the growth of the workforce.
Nothing about the Reagan and Bush years was good for the middle class and working families. Time and again Reagan and Bush cut taxes without cutting spending, each time creating more of a burden to paid off later, after the reasons for the burden, tax cuts,were forgotten. Even Clinton got into the act, protecting the IT industry that would reward him so so handsomely after he left office, in what has long been seen as message to future presidents, by cutting the capital gains tax rates, the taxes on the sales of stock options that fuels so many IT CEO incomes:
"Even more interesting results arise from comparing the effects of the Bush tax cuts with the changes for investors that President Clinton signed into law in 1997. During Clinton's two terms, the effective tax rate for the top 400 (U.S. incomes) fell from almost 30 percent to 22.2 percent. Applying the Bush tax cuts yields a rate of 17.2 percent for income taxes only. That means that Clinton gave the richest of the superrich a much bigger tax cut than Bush." - David Cay Johnson, "Free Lunch".
Like Reagan, and like "W" Bush would do later, Clinton did not cut spending, he did not reduce benefits to the middle class, paid for by those taxes, he decided to just add to the deficit and let the debt be paid long after the reason it was incurred had been forgotten. After all, a grateful nation will not pay $50,000 a night in speaker fees after you leave office; grateful CEOs not only will, they will fly your wife around the country so she can campaign.
And then the banks made the bet that even though there were many more homes being built each month than there were qualified buyers to move into, the price of homes would never go down or even level off, so loans to people with no income and no assets would always be made good by the always rising home prices. The problem was, that was the dream, the reality is, since the first mortgage was ever made, that home prices go up sometimes, and then they go down. When they went down, all bets that lenders made that prices could not go down, were lost, and the bankers turned to people who always have bailed them out, the public.
The problem now, is that with no real raise in 40 years, no raise while the cost of health care and education climbed faster than inflation, there just enough money to bail out the banks and no more.So now there were only three things that could be done; increase taxes back to where they were when everyone was doing well, give the middle and working classes the raise they wer cheated out of, or cut the benefits working families got in lieu of raises that kept up with the increases in productivity of U.S. workers, and the long hours they put in. It is going to be a feeding frenzy for lobbyists. The deficit is going to be taken care, and the burden is going to be up one someone who does not have a lobbyist writing checks to congress. You can "man up" and pay off your (and the bank's) share of this disaster or pay just seven cents a day to get a congressional representative that works for you , not the lobbyists. Think if this way: letting the banks gamble on the housing market has added $25,000 to your share of the debt, and the recession will end up costing you another $25,000 in lost or lower future wages. Figure the two now cost you %150 a a month, and if interest rates on U.S. debt go up, it can cost more. $25 a year for publicly funded elections, or $2,000 in waste and abuse? Seven cents a day to pay for a better system that ends bribes, or $5 a day keep the system that abuses you? Which sounds better?
