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Reagan’s gallop down deficit road
Ellen Wedum
Ronald Reagan is remembered as one of the most popular of America’s presidents, but his ratings during his term in office (1981-1989) were surprisingly poor. Like Barack Obama, he was plagued with a poor economy his first three years in office, and in 1983 his average rating was 45 percent.
However, he solved his money problems by a spectacular increase in the national debt, initiating a run of annual deficits that was only broken for the last two years of the Clinton administration. He set an as-yet unbroken record for both raising the ceiling on the national debt (17 times in eight years!) and the greatest percent increase in the national debt (he nearly tripled it!). Even though the House of Representatives was controlled by Democrats the entire time, there was little protest.
When the Republican-controlled Senate did balk at yet another increase in the fall of 1983, Reagan wrote this warning to Majority Leader Howard Baker:
“This country now possesses the strongest credit in the world. The full consequence of a default – or even the serious prospect of default – by the United States are impossible to predict and awesome to contemplate… The risks, the costs, the disruptions, and the incalculable damage lead me to but one conclusion: the Senate must pass this legislation before the Congress adjourns.”
Now here we are again, at almost the exact same length of a president’s term in office, but the Republicans are playing a much nastier game with our Democratic president than they did with Republican Ronald Reagan.
What is really annoying is that Reagan caused his own budget crisis by cutting taxes for the wealthiest Americans. As a result of the 1981 and 1986 bills, the top income tax rate (on “taxable” income, that’s after highly-paid accountants have used all the loopholes they can find) was slashed from 70 percent to 28 percent. To his credit, he did try to correct for this loss of federal revenue with bills that made it tougher to evade taxes, and through “base broadening” – that is, reducing various federal tax breaks and closing tax loopholes. Republicans today won’t even let Obama get rid of loopholes!
Obama’s budget problems are due to the ongoing fallout from the banking deregulation disaster. His administration has bailed out failed banks and saved mortgages for middle class homeowners. But regardless of the reason for the budget problem, our country is facing the same kind of financial disaster now that we faced in the early 1980s.
We can survive this one too, if we support our president and have faith in our country – and if today’s Republicans are willing to be at least as fiscally responsible as President Reagan and Senator Baker.
Ellen Wedum is a retired physical chemist who has lived in Cloudcroft since 2004. For the online sources of information for this article, e-mail her at wedum59@gmail.com.
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So Dr. Wedum, Ezra Klein (BA in Political Science) is your “expert” to make up charts to reflect objective scientific economic facts? Alll righteee then, we know how you pick scientific or economic experts now.
Thinker says: “What exactly is” too big”, anyway”. A very good question and the one at the heart of all this discussion. I would opine that “too big” is when government starts to cost more and do more than the majority of the citizens will allow and want to fund. In case you missed the 2010 elections, it seems to me the majority spoke and wanted change and hope from the status quo in DC run by the liberal wing of my party. We will see what happens in 2012, but the majority of the people are going to speak about what is “too big” very soon.
This is claim, that “government is too big” is treated as a postulate in current Republican rhetoric. I would challenge that the idea that government is “too big” is, by the rules of logic, a fallacious non sequitur. Before I accept this statement as truth, I need the following questions answered:
Firstly, how exactly do we measure the relative “size’ of our government?
Is government really “too big”, or is it just underfunded for the tasks the American people have demanded of it?
What exactly is” too big”, anyway–any government you perceive to be against your interests?
What is the size of a government that is “big enough”?
What if the government is exactly the right size, only inefficient in it’s use of the taxpayers money?
What if we could accomplish all the things the American people say they want from government (and don’t kid yourself, the majority of Americans want the very things that most Tea Party activist are working to dismantle)want the most important things we will lose if we let Teahadists run the country) with less money and more ingenuity in the income and expenditure process?
Of course, were we as a nation to actually address these questions instead of letting the morons in DC play their games wiht our futures, we might actually determing as a nation just exactly what our futures will be.
If the debt is the problem, Why do you want to more of it?
Well, being a scientist, I respect the analyses of other experts. Seems that you, DJ, only listen to yourself.
Anyway, here is another chart. This one is a bit more difficult to understand, as it actually extends downward (as does the deficit).
http://www.washingtonpost.com/blogs/ezra-klein/post/obamas-and-bushs-effect-on-the-deficit-in-one-graph/2011/07/25/gIQAELOrYI_blog.html
Dr. Wedum, charts are just charts. In one of my classes I used to call this “chart junk”, full of projections and assumptions without any equations, qualifiers, explanations, etc. It does not tell you the reasons why these things are happening, just like showing earth temperatures over the last 150 years and projecting another 100 years and concluding that man’s CO2 is the primary cause. So this chart does not prove that tax cuts (by Reagan or W) or a “banking crisis” which you blame W for, are the primary causes of debt problems, as you assert. Only a left wing group would conclude that without any data except their political agenda to rely on. As a scientist, I do not accept conclusions as to causation based on a chart as facts and data, it is not. If I were to take a political agenda along with this chart, I might make many conclusions, but none of them are scientifically proven, just politics which is the antithesis of scence.
Hmmm, so DJ states that anything posted on any blog that HE defines as left wing is not acceptable. There’s a name for that syndrome, can’t recall it at present.
So a chart based on the Congressional Budget Office’s data, as analyzed by the Center for Budget and Policy Priorities becomes invalid because it is posted on
http://www.offthechartsblog.org/what%E2%80%99s-driving-projected-debt/
To extend further debt to a disfunctionally bankrupt system will do nothing more than delay the inevitable.
Elen,
In the sixth paragraph of my commentary I said “who cares about the past….except to learn from our mistakes.” Sounds much like Edmund Burke…but not as elequnt as Burke…That is for sure. And, I agree we can learn from the past, since we have nothing much to show from our nanny state agenda of the lat 90 years. . Promoted by dems and repubs alike. I guess you feel otherwise. Do you care to carry the burden for my share? I would be happy to lay that liability off on someone else.
Best Regards Elen,
MJM
Ellen,
It is hard to disagree with much of what you wrote here. Reagan is lionized by too many on the right. Many of them embrace only the aspects of his record that they agree with and forget about those they don’t. He was a complex man and not nearly as ideological (for good or bad) as his supporters and detractors would lead us to believe.
Of course, to your point, Reagan contributed greatly to the current debt crisis and he also punted Social Security reform and Medicare reform to his successors. Of course, congresses and presidents of both parties have failed to act on these issues or have demonized those who attempted to deal with them.
The fact is that the current debate over the debt ceiling is just the start of what needs to be a massive reduction in the size of the federal government. Congress can either do this in an orderly fashion or wait for our creditors to devalue the dollar and bring our over-spending to a halt once and for all. Only time will tell what happens.
Sorry Dr. Wedum, a left wing blog is not exactly an authoritative, objective source. Calling themselves “non-partisan” doesn’t make it so, many do who are not even close, just read their body of work here. I’m sure you could also find the same conclusions at the Daily Kos, MoveOn.org, and John Podesta’s “think tank”.
No, I do not agree, MJM. As Edmund Burke (1729-1797) stated, “Those who don’t know history are destined to repeat it.”
Elen,
The past is ashes and if we as a country are to move forward, we need to concentrate on the issues at hand. I think you would agree.
You failed to answer any of my questions and I am wondering why?
So here are the facts as I see them. I still want to get your thoughts…. Raising taxes does not mean you get more revenue.
Adding regulation does not mean you get any better results. FNMA “Fannie Mae, FHLMC, Freddie Mac and other federal agencies, well intentioned as they were ,could not prevent the hosing colapse or their own demise. Keep in mind they are Federal Agencies… I did not think they would fail. But instead of letting them go we have now spent billions of dollars propping up these old poorly run agencies.
Raising taxes does not create any new jobs. Elen, as a small business man I have to look at risks of operating my business day to day. Adding an additional tax and regulatory burden does nothing to make me want to expand. It adds to my risks and makes me want to consider doing something else. I have let my employees know about my concerns.
I know that you will pontificate lots of good and bad stuff about Regan, Bush, Clinton and Obama. But who really cares about the past….Except to learn about our mistakes. These men have made lots of good and bad decisions, but just like past performance of the stock market tells us nothing about the furture performance, past political performance means even less.
For going on 80 years now we have become progressively more dependant upon government to provide all kinds of benefits. But what happens when the well runs dry? You just have to give up a bunch of your goodies. I have had to trim back. Most of have to as well. But if you either a wealthy trust funder or a beneficiary of a federal or state pension reality just has not sunk in yet.
I hope this is of interest from a guy who works in the real world.
Best,
MJM
Hmmm, I notice none of the commenters are interested in reading the sources I used for this article.
Try this source:
http://www.offthechartsblog.org/what%E2%80%99s-driving-projected-debt/
The graph shows how much the Bush II tax cuts have, and are, adding to the national debt.
I like the analogy you quoted Mr. Molitor. The problem I and most other fiscal conservatives have with this debt ceiling issue is that the government has proved it inability to live within its’ means and the constant need to keep building and funding bigger and bigger government while reducing the rights of the citizens in our society. When you watch people buy much more house, car, etc. than they can afford and use poor personal judgement and excessive credit, you see the government encourage this behaviour and practice it as well. This cycle has to stop. This current problem is not a “default” by any means. It just means the government can’t keep spending on everything it wants to and borrowing the money to do it, they have to cut back and prioritize spending to live within their means. Most families would recognize this problem, it happens from time to time. It seems August is a good example, the government wants to send out some 88 million checks to people, totaling over $300 billion, while its’ revenues are only about $200 billion for that month. What to do? Maybe we should make them do it, we have to.
Lowering the tax rate for the rich from 70% to 28% was probably the best thing he did. A 70% tax rate is insane and immoral. Think about the government taking 70% of your earnings away from you. Think of what that does to the private sector and the economy.
During the 80′s, GDP rose by 36%. Inflation decreased from 13.5% to 4.1%. And the federal revenue share of GDP dropped by 1%.
His biggest mistakes were that he didn’t CUT SPENDING, not that he cut taxes. Instead he increased government spending.
We don’t have a problem of banking deregulation. We have a problem with the reckless monetary policy of the federal reserve and the moral hazard caused by the partnership of banking corporations and big government.
I ment to say does raising tax rates increase revenues….Dyslexia is very bad today.
Ellen you make it all sound so nice and easy.
Please answer the following questions.
How many jobs are created by raising taxes?
If you raise tax rates does it automatically mean you raise more taxes?
Why do you progressives always quote from a playbook of the 1970′s or 1980′s? Don’t you think times and circumstances have changed just a bit from then?
Why do you continue to support welfare programs that were established during the Great Depression? Wasn’t that 80+ years ago? These are mandated defined benefits. Is there not a more modern solution to these issues; or do we have to defalult to an old arguement to solve a modern day problem.?
Do you support a balanced budget maendment? If not why?
Ah yes, if only we had a top tax rate of 70% for all those rich people, our problems would be solved? So all we need do is trust President Obama and all will be fine? Indeed?
Ellen,
I can appreciate what appears to me to be your sincere (albeit naive) feelings of reaching across the aisle and “solving this deficit problem” in a supportive, non-partisan spirit. In reality, this is not a political problem but is, in fact, a systemic monetary problem that dates back to 1913 and is generated by the “partnership” of the Federal Reserve Bank and Congress.
Let me explain. I went through economics school thinking that the Federal Reserve Bank was a government agency. It’s not. It’s a private cartel of bankers created in 1913 to control the production of money and debt injection in America. It creates unconstitutional money (see Article I, Sections 7 and 10 regarding “”No state shall make any Thing but gold and silver Coin a Tender in payments of debt”).
I ask, “How does Congress get its money to fund its activities?” Partly from the federal income tax, but mostly from its “partnership” with the Federal Reserve Bank. Members of Congress do not like raising taxes because that puts their jobs in jeopardy among their constituents back home. So, the Treasury issues debt (in the form of bills and bonds) and the Federal Reserve Bank buys the government’s debt (as do foreign central banks) and Congress has its money. This is a convenient partnership that has currently ran the federal debt up to $14.3 trillion dollars. The U.S. is the biggest debtor nation in the world.
Now let me return to the federal budget. Here is analogy used recently by Ron Paul I found apt called “The Pesky Neighbor and the Debt Ceiling:
This is not about Republicans vs Democrats and their historical willingness to compromise. This is about monetary reform – or, as humorist P.J. O’Rourke has said: “Giving more money and power to government is like giving whiskey and car keys to teenage boys.”