The Hypocrisy of the Bush Tax Cuts

Like most of us, the United States owes money, except its debt is a bit larger than ours. About 13 trillion dollars larger. That number is the national debt: the total amount of money that the United States owes to its investors (anyone who has purchased a Treasury bill or a federally-backed bond).

The deficit is something different. It is the difference between money that the U.S. spends in a given year and the money that it takes in from taxes and other sources of revenue in that year. Every year the amount of the deficit gets added to the national debt. If the U.S. spends less money than it takes in, then it has a surplus. The United States had a budget surplus three times under President Clinton. The previous most recent budget surplus occurred 29 years before that.

In 1999 Alan Viard, Senior Economist for the Dallas Federal Reserve, wrote “If current policies are maintained, surpluses are expected to continue for 20 years, completely retiring the outstanding federal debt. However, deficits are expected to reappear after 2020 due to rising Social Security and medical spending.”

So what happened? There is no easy answer of course. September 11th, war, housing bubbles, natural disasters, and the financial crisis all contributed to changing economic conditions that affected U.S. expenditures and revenues. But one of the main reasons was the expiration of an obscure Congressional rule, and the subsequent fiscal irresponsibility of the most recent Bush administration. PAYGO, enacted in 1990 under President H.W. Bush essentially required the government to finance new expenditures with currently available money, instead of borrowing it. It’s a concept with which we are all familiar: use your debit card instead of your credit card. You may get less instant gratification, but you know you won’t go into debt. Plus, you have your whole line of credit available for an emergency.

This rule, along with a booming economy, put our spending in line with income and produced three years of budget surpluses. Then, under the Bush administration, the government decided to cut taxes (a major source of revenue) while increasing spending (example: the pointless war in Iraq). It would be as if you took a pay cut while simultaneously buying a summer home in Maine. Between 2003 and 2007 the national debt increased by over half a trillion dollars each year, and increased over 1 trillion dollars during 2008 (primarily due to the bank bailouts). During the entirety of George W. Bush’s presidency the national debt increased by almost five trillion dollars, and we entered the greatest financial and economic crisis since the great depression.

So let us be clear. In the previous two decades, it has been Democrats, not Republicans, who have handled the nation’s finances better (Credit should go also to George H.W. Bush for enacting PAYGO and raising taxes when necessary). Despite this fact, it has been conservatives who have consistently demanded that the United States reduce its annual budget shortfalls and its national debt, eagerly cutting taxes while refusing to cut costs.

Since the government spent billions upon billions of dollars injecting money into the economy in 2009, Conservatives have been yelling even louder that the country must reign in its ballooning debt. Three times this summer, Senate Republicans blocked legislation that would have provided, among other necessary services, unemployment benefits to Americans who have been out of work for an extended period of time. They voted against it because the spending was not offset (it would have added to the deficit).

Congress has the authority to spend without paying for that spending in emergency situations. One might assume that during a period of 10% unemployment, Republicans might consider extending unemployment benefits an emergency. But no. They continued to block. And here’s the rub: when the highly irresponsible Bush tax cuts expire at the end of the this year, Republicans want to extend all tax cuts, even to the richest Americans who can most afford them without – you guessed it – paying for them. Tax cuts cost money. They mean a significant loss of revenue to the federal government.

This is a black and white situation. Republicans are willing to give tax cuts to the richest Americans, but they are not willing to give even the most basic unemployment benefits to Americans hit hardest by the financial crisis (which was essentially caused by the richest Americans).

The question is, why? Is it an academic difference of opinion about how to best invigorate an economy? Or is it a more self-serving ideological motive to starve the government of resources and revenue, despite the costs to the citizens of this country? I think we already know the answer.