Our Views: A debt crisis, post-elections

A distinguished group of Republican economists and former economic policymakers, led by George P. Shultz, recently wrote a significant warning to the American people: There is a limit to how much debt the U.S. government can take on.

In The Wall Street Journal, the group talked about the rising level of the debt, “an unprecedented string of federal budget deficits,” although they noted that the deficit is trending down a little bit — maybe $100 billion less than last year.

Small comfort, that, when the deficit is likely to be $1.2 trillion. And the significance of the burgeoning national debt, they said, is that it is financed by short-term borrowing by the Treasury. On the upside, that money is almost interest-free right now; in a slow global economy, people are in real terms paying the U.S. government to hold on to their money.

What happens when that situation changes?

In today’s tea party politics of the GOP, a name one does not often see evoked is that of Alexander Hamilton, the founder of the Treasury. Hamilton is seen as the Wall Street founder to many grass-roots party activists who idolize his political foe, Thomas Jefferson.

As the Shultz group noted, however, Hamilton saw that the issuance of debt is one of the fundamental powers of a nation-state and one that prudent financial management is necessary to preserve.

Hamilton bound the new union together with the national debt, and his successors borrowed to preserve the Union 150 years ago, and more recently to defeat Hitler and Stalin in the 20th century. “Today,”the Shultz group said, “government officials are issuing debt to finance pet projects and payoffs to interest groups, not some vital, let alone existential national purpose.”

This may not be entirely fair, since government expenditures also blossom to pay for millions to get vital assistance during times of high unemployment. That’s a big hangover in terms of the debt from the years of former President George W. Bush — who goes entirely unnamed in the long Journal article.

Still, the article very usefully notes that the idea that taxing upper-income taxpayers does not pay all the bills.

“Worse, the unfunded, long-run liabilities of Social Security, Medicare and Medicaid add tens of trillions of dollars to the debt, mostly due to rising real benefits per beneficiary,” the Shultz group argued.

As grim as is this prognosis, the authors completely ignore the impact of the Bush-era tax cuts in fueling today’s debt crisis. Nor is there a word — not a word — about the absurd contention of GOP nominee Mitt Romney that the government can now afford to slash tax rates for rich and poor by 20 percent.

All this does not add up. It’s as if the authors are horrified at the trillions in debt but cannot bring themselves to endorse a policy that is rejected by their party: Significant tax increases as well as significant budget cuts. Both will be needed to get such a huge deficit problem under control, much less start to pay off the debt.

The risks are certainly real: “We cannot count on problems elsewhere in the world to make Treasury securities a safe haven forever,” the Shultz group wrote. “We risk eventually losing the privilege and great benefit of lower interest rates from the dollar’s role as the global reserve currency. In short, we risk passing an economic, fiscal and financial point of no return.”

Very true, but one that requires leaders of both parties to ignore politics and put together a budget deal that raises revenue as well as cuts expenditures. Depending on the outcome of the elections, key Louisiana legislators — particularly U.S. Sen. Mary Landrieu, a Democratic moderate, and several House members on key committees, such as Appropriations and Ways and Means — will have to find the wisdom to make such a deal in the interests of heading off the crisis predicted by Shultz and his colleagues.

Are we yet at the point of no return?

Adam Smith, a contemporary of Alexander Hamilton, was a pretty good analyst of economics as well as human nature. A friend was frantic in the street in Edinburgh after news of the American victory at Saratoga. “It is the ruin the nation, the alarmed friend cried.

“There is,” Smith said dryly, “a great deal of ruin in a nation.” So there is, if the nation is willing to use its strengths to overcome its weaknesses.


Please log in to comment on this story

Comments (51)


1) Comment by InPVille - 24/09/2012

Events throughout the world now must be considered when attempting to project future U.S. economies. Two years ago no one knew the so called "Arab Spring" was going to happen. There are numerous other world events that have and will impact the U.S. economy and subsequent revenue and spending. To believe that the CBO or any other entity can make useful projections as to tax revenue and expenditures several years in the future seems naive to me. . . There are too many unknown and uncontrollable variables and too many possible unknowable future events. But belief in future deficits seems plausible regardless of revenue. There are too many unfunded future liabilities(The ever decreasing number of people paying in to SS to cover current recipient benefits is but one example as stated about in this OUR VIEWS).

2) Comment by Old Man Kensey - 24/09/2012

krl777-- I just got through reading your post. Thanks. I learned a lot. But mostly, thanks for sticking to the topic and not taking political sides-- refreshing to say the least.

3) Comment by Old Man Kensey - 24/09/2012

Nimby, How many "able bodies" is the government taking care of? Do you have a number? Can you cite me a source? >>>>>>>>> Do you know the number of working poor in this country? What about the severely injured/killed on the job? Military, police, firefighters, as in the BP fiasco-- oil rig workers? Should we not help those families? >>>>>>>>>>> It is easy to spew out ***** It is much harder to actually think and learn about what you are saying.

4) Comment by krl777 - 24/09/2012

I'm all ears to hear who does a better job of projecting debt that the CBO. A better and more relevant critique of CBO debt projections is given by http://research.stlouisfed.org/publications/review/12/01/21-40Kliesen.pdf. Their bottom line (literally): "our analysis suggests that projected future deficits will likely be larger than those currently projected." [end quote]

5) Comment by InPVille - 24/09/2012

What is the record of the CBO on such predictions? http://www.rollcall.com/news/-37284-1.html -[**]- "Put most simply, the CBO’s track record in predicting the effects of health legislation is abysmal. Over the last two decades, the CBO has routinely overestimated the costs of expanded government health care benefits and underestimated the savings from program changes designed to reduce expenditures. Most recently, it overestimated the five-year cost of Medicare Part D — the prescription drug benefit -— by more than 35%. Even more dramatically, the CBO’s estimates of the Medicare savings from the Balanced Budget Act of 1997 underestimated the impact, on average, by a full 100%. That’s right: In the BBA’s first three years, Medicare spending fell fully twice as fast as the CBO had projected." . . . "So, instead of treating CBO estimates like the Ten Commandments, we should treat them like the informed wild guesses they actually are. And the credibility of its director on the importance of an issue such as taxation of employee benefits — about which most economists, but few real people, agree — should be taken as no more than one person’s opinion, not as consensus or the product of any rigorous process." -[**]- Unless you can show the CBO an excellent track record for predicting the future . . . Well! Can you?

6) Comment by nimby? - 24/09/2012

the object of government is to serve , not take care of . so much to be done , yet paying able bodies people to not work , why ?

7) Comment by gman70726 - 24/09/2012

Someone please tell me why we can't freeze the spending for 2 to 4 years? whatever your department got last year it will get this year. However, you will grant a 2% per year cost of living increase for personnel as part of that frozen budget. I think all of us realize there have been no real cuts, just reductions in the increases. Families have had a freeze if not real reduction, why not freeze, not cut, the budget and make our government live inside that parameter for a few years.

8) Comment by phil - 24/09/2012

The debt has been discussed for several years now and what is actually happening? The national debt is getting larger every year with no end in sight. The President and Congress needs to wake up, quit just talking and really do something. We are getting deep into trouble and nobody is really addressing the issue.

9) Comment by Sandy - 24/09/2012

I fully realize that tax increases will probably be needed to eventually balance the budget, and am willing to make some sacrifices. BUT - the spending cuts (real, significant cuts) HAVE to come first! History has demonstrated again and again in our country that when politicians agree to make spending cuts in exchange for higher taxes, the taxes go up but the spending cuts never materialize. I want to see spending reduced first, with no strings attached. Then we can talk about raising taxes.

10) Comment by krl777 - 24/09/2012

The debt is a complex issue and demands that we think like an economist or a scientist, rather than throwing out the bromides of an ideologue. Again, go LOOK at a graph of US government debt for the past century. You will see two things. First, the debt continued to decline for the first 20 years of expanded social spending. (Still being at the top of the world helped us get away with that, certainly.) Second, the increase since 1982 is not uniform, as we would expect if it resulted merely from the steadily expanding burdens of increased social spending. It has two major bumps upward. One was in the years 1982-93, when social spending AND military spending were ramped up at the same time as tax cuts were enacted, and two recessions were experienced. (Thanks George Bush the elder -- your tax rise may have cost you the 1992 election, but it really did help produce the prosperity of the Clinton years.) The second is since 2008 after the financial crash. So yeah, spending is responsible for increasing the debt as much as declines in revenue. (How many times do I have to write it: deficit = spending minus revenue.) The idiotic thing to do it to combine the two, as in 1982-86. Second, recessions and near-depressions really hurt. Anyway, I haven't heard any reason why the analyses of the economists of the Congressional Budget Office ought to be ignored in favor of the armchair pontificating of any of us posting here.

11) Comment by InPVille - 24/09/2012

Here is THE CENTRAL TRUTH. . Keeping the Bush Tax cuts in place isn't what will result in an increase in the national debt(Look at the increase in revenue to the government after the Bush Tax Cuts were put in place in the figures I cited below.). It doesn't matter how much revenue the federal government receives, Congress spends more money than available revenue will allow. That is the lesson of history. -[**]- ". . .chart of US debt as a fraction of GDP. . ." And yet the cost of government as a percentage of GDP has increased in the past century from about 13.2% to about 40%. Rather than trying to minimize the effect of the level of U.S. debt, consider that the Credit Rating of the nation has been twice reduced in less than a year because of declining belief by ratings agencies that the nation will get it's debt under control. Consider also the lead in industrial and other economic capabilities over the rest of the world that once existed is no more and our population is aging. Hence, the number of those available to pay taxes is declining, and the number of those demanding services is increasing. Also green energy costs more than fossil fuel/nuclear based energy which will also effect economic growth and family budgets. So the ability to grow ourselves out of the current mess is much reduced. If reasons existed to believe government would get spending under control, paying more taxes to help reduce the debt might be a reasonable notion. But it is like believing in the "tooth fairy".

12) Comment by krl777 - 23/09/2012

So let's review. The article is about the national debt. If we look at a chart of US debt as a fraction of GDP over time, we see that US debt declined steadily from its WWII high until 1982, then nearly doubled between 1982 and 1994, then fell a bit until 2001, then blipped upward until the financial crash of 2008, then added in 4 years an increment equal to that of the 1982-93 jump. The latest rise is just beginning to taper off. From this point onward, the CBO gives two projections. In one, the Bush tax cuts expire, and the debt remains level until 2035. In the other, the tax cuts are extended indefinitely, and the debt resumes its steep climb, and nearly triples its current value by 2035. Arguments about spending which are being aired here pertain to the current level of debt which will remain standing until 2035 if we don’t do something about it. Something like Simpson-Bowles would help that, but as many here have noted, politicians of both parties are loathe to accept such an agreement. But however onerous it is, we could live with the current level of debt if the CBO projection based on repeal of the Bush tax cuts is right: the debt would gradually decrease in significance with even modest inflation. But we will not survive with any solvency as a nation of the other CBO projection is correct, where the tax buts remain in place and the debt triples in the coming decades.

13) Comment by krl777 - 23/09/2012

The factcheck assessment quoted by InPVille is a fair assessment. Only one problem -- like InPVille and others here, it conflates the financial crash with the bursting of the US housing bubble. Canada had (and has) what looks like a housing bubble, but they didn't have a financial crash because their banks are well regulated instead of being turned over to looters, as US banks have been. The conflation of the housing bubble with the financial crash is part of an attempt to blame US debt on programs that are designed to benefit the poor. I am happy to admit to the failure of many of these programs (a separate and complex issue). But blaming the national debt on these programs is just a way to avoid the central truth, which is that ALL government spending, whether defense or entitlements, contributes to deficits and debt if not offset by revenue, and all decreases in revenue, other than demonstrably stimulative ones (reducing top marginal rates when they are far above 50%, for example) contribute to deficits and debt.

14) Comment by krl777 - 23/09/2012

InPVille and agagent are frantically throwing everything but the kitchen sink into the argument. Let slow it down and sort things out. First, this isn’t 1980 – nobody is proposing pure Keynesian spending to get us out of the current mess. Contemporary economists advocate more limited, judicious government spending coupled with monetary policies, fully aware of the differences between the economy of the 1930’s and today. TARP and the Recovery Act did prevent the bottom from falling out of the economy, even though employment still lags. If you doubt that, wait until the next financial crash, and you’ll see what a real depression feels like.

15) Comment by agagent - 23/09/2012

Pass the stimulus if you want to keep unemployment below 8%, and shovel-ready was not so shovel ready.

16) Comment by The_Host - 23/09/2012

Budgets what budgets? There are kids about to go to Kindergarden that have never had a US National budget made in their lifetime so far. Even when we do have a budget what is the point if no one is forced to live by it? Again I say the problem is a lack of math skills by ignorant people that think government is their daddy. We don't have to little taxes being collected we have to many fools spending the money. That is the problem. If you give a crack head more money they are just going to buy more crack. How about an actual number of how much is enough? We never hear that do we? Real simple it has to be between 1 and 100 so why can't all these Harvard pinheads running the country come up with a number?

17) Comment by krl777 - 23/09/2012

I can't believe that agagent and InPVille are so short sighted. The only reason there existed a market for bad mortgage debt was because of lack of regulation of the banking industry. If it hadn't been possible to chop up bad mortgages in financial instruments whose value was opaque, the housing crisis could not have gotten off the ground. Go out sometime and try to sell an undisguised bad mortgage. The development of derivatives and CDOs without proper structure for their use, together with the repeal of Glass-Steagall was the primary cause of the crash -- the bad mortgage business was just the area which incidentially got exploited because the structure of the banking industry created an opening for absuse. We would have had a banking crisis anyway; if it hadn't been in mortgage backed securities, it would have been in something else. And it WILL be in something else again, within the coming decade, if we don't get banking under control. When that happens, the debt which InPVille pretends so piously to care about will undergo yet another 2008-2012 sized jump, and our ability to pay it off will be decimated even further through perpetuation of unemployment and low GDP. To overlook this is unbelievably short-sighted. *** I quote the CBO and ratings firms, those those analyses are least likely to be corrupted by political ideology, while agagent continues to quote partisan hacks. As for InPVille, " I've not seen anyone claim that Fannie and Freddie were solely responsible for the financial crisis. [end quote] You mean you haven't read Peter Wallison? Check him out -- WSJ October 15, 2009, among other places.

18) Comment by InPVille - 23/09/2012

http://factcheck.org/2008/10/who-caused-the-economic-crisis/ and I quote . . . " So who is to blame? There’s plenty of blame to go around, and it doesn’t fasten only on one party or even mainly on what Washington did or didn’t do. As The Economist magazine noted recently, the problem is one of "layered irresponsibility … with hard-working homeowners and billionaire villains each playing a role." Here’s a partial list of those alleged to be at fault: The Federal Reserve, which slashed interest rates after the dot-com bubble burst, making credit cheap. Home buyers, who took advantage of easy credit to bid up the prices of homes excessively. Congress, which continues to support a mortgage tax deduction that gives consumers a tax incentive to buy more expensive houses. Real estate agents, most of whom work for the sellers rather than the buyers and who earned higher commissions from selling more expensive homes. The Clinton administration, which pushed for less stringent credit and downpayment requirements for working- and middle-class families. Mortgage brokers, who offered less-credit-worthy home buyers subprime, adjustable rate loans with low initial payments, but exploding interest rates. Former Federal Reserve chairman Alan Greenspan, who in 2004, near the peak of the housing bubble, encouraged Americans to take out adjustable rate mortgages. Wall Street firms, who paid too little attention to the quality of the risky loans that they bundled into Mortgage Backed Securities (MBS), and issued bonds using those securities as collateral. The Bush administration, which failed to provide needed government oversight of the increasingly dicey mortgage-backed securities market. An obscure accounting rule called mark-to-market, which can have the paradoxical result of making assets be worth less on paper than they are in reality during times of panic. Collective delusion, or a belief on the part of all parties that home prices would keep rising forever, no matter how high or how fast they had already gone up. "

19) Comment by agagent - 23/09/2012

Both parties were guilty of using the power of the government to increase homeownership. If traditional mortgage standards had stayed in place, mortgage-backed investments would have continued to be secure investments and home prices would have been more stable.

20) Comment by agagent - 23/09/2012

"There's no evidence any bank, including Citibank, got into trouble because of a securities or insurance affiliate. The banks that suffered subprime losses were engaged in activities — namely, mortgage lending — that were always permitted by Glass-Steagall. And none of them was affiliated at the time with the investment banks that got into trouble — namely, Lehman, Bear Stearns and Merrill Lynch, which overinvested in subprime securities. And they did so after Fannie Mae and Freddie Mac made a huge market for such investments in response to political pressure from HUD to meet affordable housing goals. Finally, Glass-Steagall deregulation had nothing to do with the gutting of traditional mortgage underwriting standards — the core cause of the crisis."--Investors.com

21) Comment by agagent - 23/09/2012

We still hear the lies that it was “Bush’s budget” in 2009. Check the facts. We had continuing resolutions the year in 2008, leaving much of the spending decisions for 2009 for Obama. Democrats in Congress developed that budget anyway and Bush believed he should not veto what Congress passed.

22) Comment by InPVille - 23/09/2012

I've pointed out several times in past Letters To The Editor that removing Glass-Steagall(GS) was a bad idea. But we are talking about the national debt here and precisely how is restoring GS going to help pay off the U.S. Debt. I've not seen anyone claim that Fannie and Freddie were solely responsible for the financial crisis. But they certainly played their part. When I purchased my first home. It was necessary to come up with a significant down payment and they would not loan you more than about 2.5 times your annual gross income. By the time I purchased my last home 100% loans were available(taking out second mortgages to make a down payment on the first) and the mortgage broker told me I could obtain financing for a loan which was better than 6 times my annual gross income. The whole thing was so patently absurd that only an idiot would have made such a deal. The house note alone would have left nothing for food, a car and other necessities. But since the mortgages were being bundled and sold to someone else and the originator took his off the top and then washed his hands they didn't care. Many bought the pie in the sky and ended up with it in their face. -[**]- While the recession may be over, the average annual income of Americans is thousands of dollars less than before, the nation's credit rating has been reduced twice, the unemployment rate is over 8% and would be much higher if the government didn't use a magical system(used by both parties when in power). We are out of the recession and in much better shape. Sure!

23) Comment by krl777 - 23/09/2012

The CBO and Fitch Ratings independently conclude that Stimulus spending helped bring the US out of recession following the financial crisis of 2008. See http://articles.latimes.com/2012/may/03/business/la-fi-fitch-stimulus-20120503.

24) Comment by krl777 - 22/09/2012

InPVille and agagent are both binary thinkers, who think that if you don't solidly reject X with them, then you are a rabid proponent of X. They are both spending a lot of energy arguing against Keynesian spending, which figures only marginally in anything any of the rest of us are saying. I'm saying that they, and others who express concern about the debt and then go on to insist on nothing more than cutting spending are fools, because the biggest threat, by far, to explode the debt is another financial crisis, which is imminent, and which will be averted only with speedy re-implementation of the Glass-Steagall separation of commercial and investment banking, along with other measures to re-regulate banking. I'm not sure why they dismiss this threat, except that a certain segment of American public opinion has convinced itself that the financial crisis was the responsibility of Fannie and Freddie, and the machinations of Barney Frank. This is a delusion on the face of it -- Iceland, Ireland and other countries with inadequate banking regulations and outside the scope of American mortgage lending all had banking crises in 2008. And it's a dangerous delusion since it leads them to complacency-- we can ignore the banks and just cut government spending. During the last Gilded Age, banking crises were a frequent occurrence. We have returned to that age in this, among other, respects.

25) Comment by InPVille - 22/09/2012

When the Western World became enchanted with Keynesian Economic Theory Government spending as a % of GDP was far less in the 1930 than today13.2% in the U.S.). Since then such spending in the U.S. is about 40% of GDP. In addition, almost if not all such nations have managed to acquire tremendous debt. Recent articles I have read such as this one: http://www.economist.com/node/14505361 are leading me to believe that economists are no longer so sure fiscal stimulus really works in such a circumstance. The birth rate in no Western Nation is increasing. Those that don't have declining population are only treading water and that is due to immigration(Population is only increasing in the Third World). So with an aging population with demands for more services, there is a declining numbers of working age to pay taxes to meet that demand. Look at what happens when anyone talks about cutting back on a social benefit. Once you create one, talk about not being able to afford it any longer and it's the end of the world. We have gotten ourselves in one heck of a mess. I don't personally believe that politicians have the stomach for it. As far as the people are concerned, it is "cut someone else's money, not mine". So I don't think future decades are going to be pretty no matter which party and who from that part is in office.

26) Comment by agagent - 22/09/2012

It is laughable to say the stimulus pulled us out of the recession when 89% of it had not been spent when the recession ended. We cannot afford spending $500,000 a job anyway.

27) Comment by agagent - 22/09/2012

Tax cuts worked for JFK, Reagan, Clinton and Bush. Go to Chicago or California to see what raising taxes will do for you. The revenue won’t be there, and it will harm the economy. Even Obama said that but he wants to raise taxes for “social justice” not to increase revenue. It makes no sense to take more from the private sector, where the jobs are created, to continue the big government spending programs.

28) Comment by Loki - 22/09/2012

Distinguished group of Republicans? Surely you jest. You can cut spending and actually end up raising the deficit as a result if you lose growth that emerges from government spending. Convince a Republican of that during a Democratic administration, and I'll buy you a drink.

29) Comment by krl777 - 22/09/2012

@InPVille: Yes, we know standard Keynesian theory doesn't work to boost an economy in a liquidity trap. But it can keep the bottom from falling out of the economy, as stimulus spending did in 2008-2009, and it can restore the bottom to an economy as in the case which you cite but oversimplify and misinterpret -- the recovery from the Great Depression, which was, in fact, well underway by 1936 (look at all the major indicators -- GDP, private investment; only employment was significantly lagging) due in part to Keynesian policies of the early 1930s. Of course, that recovery stalled in 1937-8 due to (depending on your theory) the austerity measures the Roosevelt Admin began in 1936, or the mismanagement of monetary policy. So, no, Keynesianism by itself is no guarantee of recovery. But it can be efficacious when it isn't compromised by other factors, as in 1933-35, and most dramatically of all, during and immediately after WWII, which you mention with no apparent consciousness of its relevance to the pro-/anti-Keynesian debate. As for your "bet" that CBO projections were probably static scoring, they clearly took account of different possible rates of inflation, but I don't think they were encumbered by supply-side mythology, if that's what you mean. Anyway, all of this is a nice distraction from the main point of my comment, which came just after the part you extracted: "in times of recession and depression, deficits increase not just because [...the part you quoted]..., but also because revenue declines when the economy slows." [end quote] It has become such a fetish to blame deficits on government spending, that some people forget that deficit = spending minus revenue.

30) Comment by InPVille - 22/09/2012

@krl777: "Some people on these boards don't seem to realize that in times of recession and depression, deficits increase not just because government steps in with spending to prop up the economy," -[**]- Oh, we recognize the theory alright. However, that Keynesian theory doesn't seem to work quite as well in practice as it does in theory. Does it? It didn't work for the Japanese who are still trying to recover from their "Lost Decade". All the stimulus efforts of the Bush and Obama Administrations haven't come near to achieving what they strove for. FDR's efforts to prop up the economy met with little success either. It wasn't until after the end of WWII, when the intact U.S. industry had the world market cornered while the rest of the developed world was trying to recover from the destruction that had been brought to their countries, that the U.S. economy recovered. Also in 1930 government only required about 13.2% of the GDP. Today it requires about 40% of GDP. Toss into the mix the fact that before the economic downturn U.S. Debt was so high that the increased debt brought on by trying to prop up the economy by adding even greater sums to the U.S. Debt has so far resulted in the nation's credit rating being twice downgraded(which means interest payments go up on that $.40 of every dollar we are borrowing to make up for money we are spending that we don't have). -[**]- As for the projections as to what keeping the Bush Tax cuts in place will add to deficits in/by 2014, I'll bet the projections are based on static scoring that assumes every other public/private activity in the economy would remain unchanged with the taxes restored. But people's/business behavior changes when there is significant tax change. In the current economic environment; if the taxes removed by Bush are restored, it is just as likely or even more likely that the estimates of revenue to the government will prove too optimistic and by a large number. -[**]- This "Our Views" would have been more honest had it acknowledged that in large part the debt crisis has been brought about by profligate government spending since WWII. - - - “The American Republic will endure until the day Congress discovers that it can bribe the public with the public's money.” Alexis de Tocqueville, Democracy in America

31) Comment by InPVille - 22/09/2012

DMJ: "chirrens" refer to the same critters as "yutes" does as spoken by Joe Pesci's character in "My Cousin Vinnie". You know. We need to pass this law for the "chirrens".

32) Comment by DMJ - 22/09/2012

Attila, what are "chirrens"?

33) Comment by krl777 - 22/09/2012

The CBO data quoted in my previous message back up the graph given in the Ruffing-Horney report of the Center on Budget and Policy Priorities at http://www.cbpp.org/cms/?fa=view&id=3490. Look at their graph and see how much of projected deficits are attributed to the Bush tax cuts, especially after 2014. The CBPP and usgovernmentspending.com are both regarded as having ideological biases (liberal for CBPP, conservative for usgovspending), but both have honest figures and their analyses are considered sound by analysts of divergent political ideology.

34) Comment by krl777 - 22/09/2012

Consult CBO Current Budget Projections Table 1-7, "Budgetary Effects of Selected Policy Alternatives," for best projections of effects through 2021 of current policy alternatives. The total deficit projected is $6.97 trillion, for 2012-2021. Of this, continuing discretionary appropriations at the rate of projected GDP growth accounts for $1.8 trillion. Extending the Bush tax cuts will add $2.8 trillion, or indexed to expected rate of inflation, $3.8 trillion. Extending other tax cuts will add an additional $759 billion. So extending tax cuts will add at least $3.56 trillion, or indexed to expected rate of inflation, as much as $4.56 trillion. In percentage terms, extending tax cuts will account for 50%-65% of the estimated federal deficits from 2012-2021. Who says the Bush tax cuts are too insignificant to be a major factor in the debt crisis?

35) Comment by Attila - 22/09/2012

Why don't we just confiscate 100% of the wealth of the top 5% of earners in this country...sounds good to me...won't affect me...bad news is that the monies confiscated from these people would not run this government for 3 months. The only solution is to drastically cut spending. If that means a reduction in SS, SSI, Medicare, Medicaid, Aid to Dependent Chirrens, Head Start, or any other government social program let's do it. Since 47% of the people pay no income taxes at all maybe they should be required to kick in, oh say, 3-5%. If I am willing to do it, so should they...let the weeping and gnashing of teeth begin.

36) Comment by DMJ - 22/09/2012

If Obama is re-elected and the Democrats keep the Senate or take the House, I predict we'll see the Erskine-Bowles proposal again. Even though it relies much more heavily on spending cuts rather than tax increases, I think we should adopt it. It would be a win-win, politically for all involved. We should also remove the tax cap for social security and probably means test Medicare. Republicans won't like either, but it's the right thing to do, fiscally speaking.

37) Comment by tradewinns - 22/09/2012

politicians are more interested in "buying" votes with their programs than they are about the economy. we have a spending problem in the worse way. social security and medicare -with part D- are truly needed programs. it'll take just one illness (a serious one like cancer) to wipe out all a middle income person's assets (are was MI when working). with today's improved medical ability, diseases can be found early enough to save the patient's life. in the past you didn't go to the doctor until you had tried everything you knew to get better and it didn't work. the reasoning was two fold. first, you figured it was something minor and you were tough enough to gut it out till recovery. second, and not a little factor, you couldn't afford to go to the doctor for every ache and pain. this is a lot more important than the earned income tax credit. that's a bonus for low income people while medicare etc. are life sustaining programs.

38) Comment by agagent - 22/09/2012

I have refuted liberal lies about the wars and the prescription drug program causing trillion annual deficits but I’ll do it again since it keeps coming up. One estimate on the cost of the wars was about $225 billion a year and an estimate of the prescription drugs is about $72 billion a year. The tax cuts are not sending. In FY 2006 we paid for all those items, had tax cuts, and had an annual deficit of $161 billion. Some $300 billion of today’s annual deficits could be attributed to those items but that would not be fair because you cannot pin $300 billion in spending in a $3.6 trillion budget as the cause of a trillion dollar deficit. Also in play is a reduction in revenues because of the crisis, and Obama's policies hampering the recovery. Fault Bush for not vetoing any Democratic Congress spending during his last two years in office. Liberals want the spending on the wars and the prescription drugs back and I’d like take back the increased entitlement spending, the bailouts, and the stimulus spending. We could make that deal.

39) Comment by krl777 - 22/09/2012

Some people on these boards don't seem to realize that in times of recession and depression, deficits increase not just because government steps in with spending to prop up the economy, but also because revenue declines when the economy slows. Look at the massive jump deficits took in FY 2009 onward. These have nothing to do with one president versus another -- they were the direct result of the financial crash. The had a high baseline due to a long-term rise in entitlement spending, but the jump was entirely the doing of the financial crash. So if you are serious about the national debt, your FIRST concern should be to avoid another financial crash. You do that by regulating Wall Street, beginning with the re-introduction of a separation between banking and financial gambling. ACID TEST FOR SERIOUSNESS ABOUT THE DEBT: Are you for financial regulation? If not, you aren't serious about the national debt.

40) Comment by krl777 - 22/09/2012

Most of the recent increase in "entitlement" spending is social security, medicare, medicaid, and unemployment insurance. The first three are increasing because of the retirement of baby boomers, the spiraling of health care costs, and Bush's medicare Part D. These increases are rooted in demographics (retirement of the huge baby boom cohort) and the US economics of health care as a system of welfare for insurance companies. The last is due to unemployment caused by the financial crash and globalization. Obama and Bush can be "blamed" for TARP and the Recovery Act, but without them, the bottom would have fallen out of the economy and revenues would have plunged, producing even greater debt than we currently see, but leaving us with a devastated (rather than merely weak) economy, and therefore no way out. As I said, we must not fool ourselves. The last tax cut which economists think may have actually paid for itself was made by JFK in the early 1960's, when the top marginal rate was lowered from 91% to 65%. Maybe we should return to marginal rates to 65% from their current 35%, or at least return them to Reagan-era levels at 50%, if Reagan is your idea of political Nirvana.

41) Comment by InPVille - 22/09/2012

The Bush Tax Cuts came in two parts: The Economic Growth And Tax Relief Reconciliation Act of 2001 and the Job And Growth Tax Relief Reconciliation Act of 2003. There was a decrease in Federal Revenue after the first Bush Tax Cut. However, after the 2003 Act it can be seen that there was actually a rather significant increase in Federal Revenue. The fiscal problem resides not in the mere fact of the Bush Tax Cuts. It resides in the amount of FEDERAL SPENDING regardless of revenue. Military Spending for FY 2000 in millions of dollars was $283,093. The total Military Spending for 2001-2009 in millions of dollars was $4,198,153. The increases added $1,650,316 over what a stagnant $283,093 would have come to. $6,235,651 was added to the national debt during those years. Most of the deficit spending was the result of spending on the War on Poverty($2,080,416) and other Federal Spending.

42) Comment by InPVille - 22/09/2012

@Our Views: A debt crisis, post-elections: "...the authors completely ignore the impact of the Bush-era tax cuts in fueling today’s debt crisis." Perhaps this is because the authors live in a separate reality than yourselves. Here are official U.S. Government Treasury Fiscal Year receipts and outlay totals in millions of dollars for the years 2001 through 2009 available here: http://fms.treas.gov/mts - - - "R" receipts and "O" for outlays -[ 2001 R=$1,990,2003 * O=$1,863,039 ]- -[ 2002 R=$1,853,288 * O=$2,011,808 ]- -[ 2003 R=$1,782,317 * O=$2,156,536 ]- -[ 2004 R=$1,879,799 * O=$2,292,352 ]- -[ 2005 R=$2,154,305 * O=$2,472,920 ]- -[ 2006 R=$2,406,681 * O=$2,654,379 ]- -[ 2007 R=$2,567,671 * O=$2,730,505 ]- -[ 2008 R=$2,523,858 * O=$2,978,664 ]- -[ 2009 R-$2,104,613 * O=$3,521,734 ]- It should be noted that reported government receipts always include as income SSA and other retirement receipts government is responsible for. This is really borrowed money. The Clinton-Gingrich claims of having balanced the budget are gainsaid when you consider the previous sentence. -[[]]- Spending on Military Wars and War on Poverty - - - Military Outlays = "M" & HHS(Social & Health Services) Outlays = "H" in millions of dollars -[ 2001 M=$292,400 * H=$451,150 ]- -[ 2002 M=$333,911(+$41,511) * H=$493,407(+42,257) ]- -[ 2003 M=$390,110(+$56,199) * H=$535,234(+$42,827) ]- -[ 2004 M=$438,111(+$48,001) * H=$576,577(+$41,343) ]- -[ 2005 M=$476,101(+$37,990) * H=$623,610(+$47,033) ]- -[ 2006 M=$501,783($25,682) * H=$667,812(+$44,202) ]- -[ 2007 M=$531,008(+$29,225) * H=$738,772(+$70,960) ]- -[ 2008 M=$596,310(+$65,302) * H=$771,880(+$43,108) ]- -[ 2009 M=$638,419(+42,109) * H =$871,537(+$99,657) ]-

43) Comment by agagent - 22/09/2012

Since you mentioned Hitler, he financed his economic programs through borrowing, mostly from the US. I don’t think he planned to pay it back. His plans for after the borrowed money ran out was to pillage neighboring countries. The big spenders in Washington are not planning to pillage other countries but they are planning to increase taxes to pay for their reckless spending. Of course that will not increase revenues but will hurt a struggling economy. One reason that businesses shed so many jobs in the months leading to Obama’s inauguration is they were getting lean and preparing for Obama’s agenda, which was apparent for those who cared to learn it.

44) Comment by agagent - 22/09/2012

In FY 2011 the federal government spent a record amount and that increase was about 5% more than the previous year. Revenues were up slightly. The average family could not spend 5% more because the average household income has decreased by more than $4,000 under Obama. The biggest change in four years is that entitlement spending has increased by 42% or close to $900 billion. A standstill budget would have cured any deficit problem. The problem in Washington is that a “spending cut” is not a real cut but only a reduction in planned spending increases. That kind of cut still results in trillion dollar annual deficits. They are not serious about the problem, and we do not know exactly how much debt will cause a financial collapse. We are getting closer and still headed in the wrong direction.

45) Comment by rgeraldwallace@cox.net - 22/09/2012

I can't believe that there are still those out there who believe that tax cuts are to blame for our national debt. It's spending and over spending that are to blame, and nothing else. History shows us in spite of all the liberal blather to the contrary that tax cuts work and overspending doesn't. If you don't believe that, go and check with the countries in Europe.

46) Comment by krl777 - 22/09/2012

Look at the charts of federal debt since 1900, or since the founding of the nation, on usgovernmentspending.com, or at federal government sites (CBO, OMB). There are two huge increases since the Second World War, each about as big as the other. The first was during the 1980's and early 1990's, when Reagan's tax cuts and Pentagon spending boost were followed by a significant recession. The second begins with the G. G. Bush tax cuts and foreign wars and ramps up sharply in the aftermath of the financial crash of 2008 when, under Obama, the Bush tax cuts were kept in place. All spending contributes to deficits and the national debt, whether it is medicare and medicaid, education, defense, or infrastructure. And all tax cuts contribute to deficits and to the national debt. Let's not fool ourselves.

47) Comment by Triple - 22/09/2012

Cousin Dave, don't think the facts support your assertion. Entitlements over the same period exceed the cost of war ( tax cuts aren't really an expense), and continue to grow while war efforts are declining. With regards to revenue, the Feds should pursue policies that maximize collection, confiscatory rates do not typically equate to max revenue.

48) Comment by bourbon-soda - 22/09/2012

So why didn't Obama and the Democrat Congress raise taxes on the rich while they were in control?

49) Comment by Cousin Dave - 22/09/2012

Two unnecessary wars in the Middle East plus tax cuts for the rich have resulted in more debt than the entitlements. You can thank Grorge W. For that.

50) Comment by ScotB - 22/09/2012

Without getting into the blame game, the fact is that we could not balance the federal budget if we fired every single federal employee. If we shuttered Congress, the federal judiciary, shut down the military, FBI, CIA, Depts of Commerce, Education, Homeland Security.....all of it. The reason is that mandatory spending - entitlements & interest on the debt - already exceeds all federal revenues. The entire federal government, every employee, is run on borrowed money. That is why Congress has not passed a budget in 4 years. At our spending rate, we cannot raise taxes enough to cover it, whether we heavily tax the rich and middle class or not. We have to get entitlement spending under control. We are fortunate right now, because we pay an artificially low rate of interest on the massive debt we have, but when we have to pay real market rates to entice our creditors to lend us more money, we will really have a big problem that could lead to destabilization of the dollar and the loss of the dollar as the world's reserve currency. Without exaggeration, we face an existential crisis for our nation. As mentioned in this article, this was one of Thomas Jefferson's greatest worries regarding the fate of our nation. --Quote--“I, however, place economy among the first and most important republican virtues, and public debt as the greatest of the dangers to be feared.”

51) Comment by krl777 - 21/09/2012

Check out the facts before you comment. A nice compendium can be found at usgovernmentspending.com, especially the Federal Deficit Chart linked to from the "top links" column. The facts are collected by an avowed right-wing "conservative," as reflected by the accompanying commentary. But the facts are honest; for example, the FY 2009 deficit of $1.4 trillion, the biggest of them all, is correctly listed under the column for "Bush Deficits" since it came from policy under Bush's last budget, as the financial crash was unfolding.