Tuesday, June 12, 2012

Two Articles that Illustrate the Erosion of Our Surplus...

Two articles I point you toward today regarding our debt & deficit:

The first article is a report generated by the Congressional Budget Office, the Bi-Partisan group in Washington DC that provides budgetary and fiscal analysis for Congress. The crux of the report is a look back at the the CBO's baseline projections since 2001. It considers the surplus we had heading into January 2001 all the way through 2011. The CBO had projected an increase in our Country's surplus by a rough factor of four.

As we know now, the surplus didn't last for another ten years. Or nine, or eight or seven...In fact, the surplus turned into a deficit within a year and by 2002, the United States was running a deficit. As we continue to do today, of course. By a factor of just under ten.

The report is highly informative with a line by line account of where the surplus was spent. Discretionary spending is where the cost of our military operations in Afghanistan and Iraq are reflected with fairly staggering numbers. Also prominent in the growth of our debt has been the outlay for the costly Medicare Advantage program that was voted into law in 2003. Which fed directly into increasing the deficit.

Click here to read their write-up and see the table.

The second article I refer you to is one by Bruce Bartlett, former Senior Policy Adviser in the Ronald Reagan and GHW Bush Administrations, who has also worked for former Congressman Jack Kemp and current Texas Congressman Ron Paul. Bartlett provides analysis of the new CBO report and considers the claim by current day Republicans that Obama is responsible all of our debt and deficit and that we should stop mentioning George Bush' name any longer as having had a meaningful role in the creation of our current debt picture.

A preview of the article from today's NY Times Economix Blog:

Republicans assert that Barack Obama assumed sole responsibility for the budget on Jan. 20, 2009. From that date, all increases in the debt or deficit are his responsibility and no one else’s, they say.
Perspectives from expert contributors.
This is, of course, nonsense – and the American people know it. As I documented in a previous post, even today 43 percent of them hold George W. Bush responsible for the current budget deficit versus only 14 percent who blame Mr. Obama.
The American people are right; Mr. Bush is more responsible, as a new reportfrom the Congressional Budget Office documents.
In January 2001, the office projected that the federal government would run a total budget surplus of $3.5 trillion through 2008 if policy was unchanged and the economy continued according to forecast. In fact, there was a deficit of $5.5 trillion.
The projected surplus was primarily the result of two factors. First was a big tax increase in 1993 that every Republican in Congress voted against, saying that it would tank the economy. This belief was wrong. The economy boomed in 1994, growing 4.1 percent that year and strongly throughout the Clinton administration.
The second major contributor to budget surpluses that emerged in 1998 was tough budget controls that were part of the 1990 and 1993 budget deals. The main one was a requirement that spending could not be increased or taxes cut unless offset by spending cuts or tax increases. This was known as Paygo, for pay as you go.

During the 2000 campaign, Mr. Bush warned that budget surpluses were dangerous because Congress might spend them, even though Paygo rules prevented this from happening. His Feb. 28, 2001, budget message reiterated this point and asserted that future surpluses were likely to be even larger than projected due principally to anticipated strong revenue growth.
This was the primary justification for a big tax cut. Subsequently, as it became clear that the economy was slowing – a recession began in March 2001 – that became a further justification.
The 2001 tax cut did nothing to stimulate the economy, yet Republicans pushed for additional tax cuts in 2002, 2003, 2004, 2006 and 2008. The economy continued to languish even as the Treasury hemorrhaged revenue, which fell to 17.5 percent of the gross domestic product in 2008 from 20.6 percent in 2000. Republicans abolished Paygo in 2002, and spending rose to 20.7 percent of G.D.P. in 2008 from 18.2 percent in 2001.
According to the C.B.O., by the end of the Bush administration, legislated tax cuts reduced revenues and increased the national debt by $1.6 trillion. Slower-than-expected growth further reduced revenues by $1.4 trillion.

Read Bartlett's full article here...

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