Who’s to blame for the federal deficit?
The federal budget deficit is like the weather: Everyone complains about it, but no one does anything about it. Each party blames the other for our current fiscal situation. Detailed plans are few.Over the past 50 years, only two presidents have balanced the federal budget: President Johnson in his last year, and President Clinton in his last two years.Our last three Republican presidents (Presidents Reagan, George H.W. Bush, and George W. Bush) never came close to balancing the federal budget. In fact, they never even proposed a balanced budget.President Reagan presided over record deficits after he and Rep. Jack Kemp persuaded Congress to enact huge tax cuts. The tide of red ink did not start to subside until the first President Bush agreed to tax increases on the wealthy, breaking his “read my lips, no new taxes” pledge. It was the last time Republicans have been serious about deficit reduction.President Clinton came to office in 1993 having said little about the deficit. (It was Ross Perot who went on TV with his charts and graphs about the deficit.) So it was something of a surprise when President Clinton offered a plan to reduce the deficit that included an increase in taxes on the wealthiest Americans. Democrats said the plan would reduce the deficit because less borrowing by the government would cut interest rates, and that would boost the economy. Republicans said any tax increase would throw the economy into recession. Every Republican in Washington voted against the Clinton plan.History shows that the Republicans were just flat wrong. The Democratic plan did cause interest rates to decline, and the economy boomed. Instead of recession, we enjoyed the longest economic expansion in American history. By the seventh year of the plan, the federal government had its first surplus since 1969.It was a stunning achievement. The budget deficit had been licked.Unfortunately, it did not last. President George W. Bush pushed through two rounds of tax cuts without cutting spending, returning us to record deficits.He embarked on two wars, expanded spending for homeland security, and signed the Medicare drug coverage, without ever asking the American people to contribute anything toward the cost.Wall Street and our economy crashed in 2008 due in large part to over-borrowing throughout our economy (with the federal government the biggest culprit).Government revenues declined, while spending for safety net programs, such as Medicaid and food stamps, increased.The federal deficit for the fiscal year that ended September 30, 2009, was a whopping $1.4 trillion. Less than $200 billion was due to the “stimulus” bill.The remaining 85 percent was due to tax and spending decisions made before Barack Obama became president.We are back to the deficit challenge faced by President Clinton, but at a much higher level, and in more difficult economic circumstances.Our economy is slowly recovering from the Great Recession, and the government must avoid any large tax increases or spending cuts that could tip us back into recession.President Obama has proposed to repeal one part of the Bush tax cuts, affecting households with incomes over $250,000. This would reduce the deficit by about $70 billion per year. The president also proposes to return to the estate tax we have had since 1916, but only for estates larger than $3.5 million. That proposal would bring in about $25 billion a year.Republicans have responded just as they did to President Clinton’s 1993 deficit reduction plan, arguing that it will hurt small businesses and the economy.Have they learned nothing from history?Governing is about making choices. President Obama wants to reduce the deficit by ending the tax cuts for those most able to pay. The Republicans prefer to “make the tax cuts permanent,” which means we would borrow another trillion dollars from China over the next decade.Mark Fernald of Sharon was the 2002 Democratic nominee for governor.