The deficit! It's growing! It hit $779 billion for the last fiscal year that ended in December. The National Debt! Panic! Gasp! It's $21 trillion and growing. Wring your hands, tear your hair!
Do you care about deficits and debts?
It's not a spending problem. It's a revenue problem. Isn't it caused by government waste? Boondoggles? Welfare? Especially from entitlements! Social Security! Medicare! Medicaid!
No. It's a revenue problem.
The best way to measure debt is in comparison to earnings, since earnings are the way it gets paid back. A personal debt of $100,000 for someone who makes $10,000 a year is problematic. The same debt, $100,000 for someone who makes $10,000,000 a year—that's just their AmEx bill after Christmas.
US debt as a percentage of GDP (the nation's earnings), shot up during World War II, then peaked in the immediate post-war years, at 120 percent.
After that it mostly went down, even through the Korean War, it ended up at about 65 percent of GDP. Through the start of Medicare and Medicaid, Social Security increases and the War on Poverty under Lyndon Johnson, plus the start of the Vietnam War, the debt still kept going down, to about 40 percent of GDP.
It continued down, mostly, under Nixon, with a slight uptick under Ford. Under Carter, it headed down again, to near just 30 percent of GDP.
Then came Ronald Reagan. It was Morning for Debt in America Again! Tax cuts, tax cuts, merry tax cuts! The debt, as percentage of GDP more than doubled under Reagan and Bush the Elder.
Then came Clinton. He raised taxes. The deficit declined. Significantly. It looked to be headed steadily down.
Then along came George W. Bush. New tax cuts. The deficits shot up. Surpassing even the great Morning for Debt in America Again accomplished by Ronald Reagan! Wow!
Didn't the debt go up under Obama!? Hugely! More than under any other president? Yes, it did. But Obama couldn't end the Bush tax cuts. Also, he had economists with advanced degrees who told him to never raise taxes in a recession and that tax cuts would stimulate the economy. He added more tax cuts but targeted them more at the middle class. Strange as it may seem, economists have about as much connection to realism as alchemists have to chemistry. As a matter of actual history, when the US economy has been hit by a big stock crash leading to a recession, it has recovered after tax increases. Also, tax cuts for the rich—like the continued Bush tax cuts—just create greater income inequality, not genuine economic growth. Even tax cuts aimed at the middle class are far less useful than economists thought they would be. After 2014, when Obama finally got to raise taxes, however slightly, on the rich, deficits and debt began to decline.
So here we are with Donald Trump, who jammed through new Republican tax cuts. The great thing about Trump is that he's so disreputable and lies so much about so many things, that people—even economists!—have been primed to realize that his claims that the tax cuts are for everyone, not just the very rich, that they will grow the economy, and said growth will raise revenue sufficiently that they will pay for themselves, are false. Even though they are the same claims made by Reagan and Bush and long ago by Coolidge and Hoover, and accepted then as quite sound and reasonable.
You may have noted that the US-debt-to-GDP ratio peaked during the Second World War. If you suspect that was a spending issue, not a revenue issue, you are correct. That suggests another issue. It's not just how much you spend, it's what you spend it on. The investment during World War II, and the fact that America was the only modern economy left standing after the war, gave our country the opportunity to become both the dominant economic and political power in the world.
In the collective mind of economists, cutting taxes is often considered the same as increased spending. That, too, takes us to the issue of what over how much. Giving the money to the rich, as all these tax cuts have done, leads to inflation in stock markets, commodities, and in real estate. It gets spent on stock buybacks, which have to be the most useless form of business spending in the world.
Let us thank Mitch McConnell for his moment of frankness. He has announced that the deficits that he has worked so hard to create by cutting revenues will next be used to attack spending—Social Security, Medicare, and Medicaid, in particular. So, it has a double purpose: Making the rich richer and creating the excuse to grab those piles of money.
Chronogram is a monthly publication. If you are reading it the first week it's out, before November 6, go out and vote. If you are at all inclined to vote Republican, consider this. Russian efforts to affect our elections have been constantly in support of Republicans and fomenting Republican issues. It seems axiomatic that Russia doesn't want to make America Great Again, or to keep it as Great as it Has Been, or to Make Us Greater. They want to diminish our strength, power, credibility, and leadership. A vote for Republicans is a vote for the Russian agenda. That's not my opinion. That's the opinion of Vladimir Putin and the FSB.
If this seems to be too broad and generic a condemnation of a political group, let me say there have been many fine Republicans who have done much to build and improve our country. Dwight Eisenhower, Nelson Rockefeller, Teddy Roosevelt, John Lindsey, Jacob Javits, and John McCain all had their moments. Sadly, what I notice about that list, is that they're all dead. If they were alive, Newt Gingrich and Donald Trump would drive them out.
