Tax Cuts and Debt

Dear President Bush:

Your budgeting has been so disastrous that, despite starving social programs such as SCHIP and your own education program, you still ran record budget deficits and increased the national debt by over 50%. Even in the latest budget, your last (thank God), the budget deficit is running at some $400 billion. Now I know you’ll want to blame the Democratic Congress, like Reagan did, so here’s what I’ll do: I’m going to focus on the first six years, when your GOP had total control of Congress. From 2001 to 2006, you Republicans had the majority in the House of Representatives. And the Senate was in the GOP’s hands for five of those six years, with the Democrats holding just a single-seat majority for a little less than a year after Senator Jim Jeffords switch parties. So, we can safely blame this all on you and your party.

You and the Republican Congress slashed taxes, increased government spending (though certainly not on important domestic programs) and fought two major wars. The result? You added about three trillion dollars to the national debt in six years. To be more specific, we’ll look at the first six budgets prepared by you and the GOP Congress, FY 2002 – FY 2007. On September 28, 2001, at the close of FY 2001, the national debt stood at $5.807 trillion, roughly 57% of that year’s GDP, and on September 28, 2007, it stood at $9.008 trillion, roughly 68% of that year’s GDP. (Source: Treasury department web site). That’s an increase of roughly $3.2 trillion in six years, or we can look at it as an extra 11% of our GDP. That is a gargantuan increase for just a six-year period, over five hundred billion dollars per year. It’s a good thing that you’re all “fiscal conservatives.” How bad would it be if you were “fiscal liberals”?

$3.2 Trillion Dollars in Six Years!

That’s how much more our kids have to pay back because you’re a scumbag who can’t take care of money.

The two biggest causes of this fiscal crisis you gave us are your tax cuts and war/defense spending. In this post, I want to focus on the revenue side of the equation, i.e. the tax cuts.

Right off the bat, we have a problem here. When, in this nation’s history, have we ever cut taxes in a time of war? You passed your first tax cut before 9/11. It was the wrong move then, as we should have used that historic surplus to finally start paying of the national debt, which would have shored up Social Security as well. It became an even worse move after the tragedy of 9/11, as a responsible leader would have tried to revoke the tax cuts to pay for the coming war on terror. As if that wasn’t bad enough, you continued to cut taxes well into your first term, even after the new spending on the Department of Homeland Security, the war in Afghanistan, the (ridiculous) war in Iraq, and the massive increases in defense spending. Quick memo: throughout our history, we have always raised taxes in time of war, to gain the necessary funds to fight it, and also to ask for shared sacrifice from the population. You ask everything from our troops and nothing from the rest of us.

At this point, I want to launch a pre-emptive strike against your next talking point. You love to claim that your tax cuts actually increased the government’s revenue, so that we can have tax cuts and all that spending. Hurray! The only inconvenience is that you are completely lying when you say that. Other than that, it is a pretty good point. Here are the actual numbers, liar. The government’s total tax receipts in fiscal 2001, the last year budgeted by President Clinton, were $1.991 trillion. Right after you took office and passed your initial tax cut, the revenue fell. It dropped to $1.853 trillion for fiscal 2002 and to $1.782 trillion for fiscal 2003. That’s in absolute dollars; in real terms, it’s worse. If we use constant FY 2000 dollars, so that we adjust our analysis for inflation, government receipts fell, over that period, from $1.946 trillion, to $1.779 trillion to $1.669 trillion. Because you have an excuse for everything, you insist that initially, the revenue fell simply because of the recession of 2001. While there was a brief recession, it did not last long and there was an actual slight increase in GDP over the course of fiscal 2002 and fiscal 2003. So, the revenue was down despite economic growth, dropping a whopping 14.2% in real terms over the course of just two years. That’s not just a dip in revenue; it’s a fall off of a cliff.
In fiscal 2004, the revenue finally increased a little from the previous year, both in real terms ($1.880 trillion), and in constant 2000 dollars ($1.722 trillion), but both were still below the fiscal 2001 level. In FY 2005, total government receipts finally surpassed the FY 2001 level in absolute terms, hitting $2.053 trillion. That total is, however, still under the FY 2001 levels after adjusting for inflation; in constant 2000 dollars, FY 2005 government revenue was $1.833 trillion. In FY 2006, government revenue hit $2.178 trillion, remaining slightly lower than FY 2001 levels in real dollars, at $1.906 trillion. In 2007, government revenue finally overtook the 2001 levels in both absolute and real terms, $2.344 trillion and $1.987 trillion, respectively. It took six years for revenue to reach the FY 2001 levels. Under normal circumstances, economic growth should always result in increasing government revenues, so it should have increased every single year of your presidency in real terms. If not for your tax cuts, my kids would have far less debt to pay back.

In the budgets prepared during President Clinton’s two terms, FY 1994 to FY 2001, government revenue increased in absolute and real dollars every single year until the very last year, when it took a very small dip.

(Source for government revenues: White House budget website.)