August 19, 2011
It's the Spending, StupidBy Paul Kengor
Liberal Democrats have failed to heed the lessons of economic history, and it's killing our economy. In the 1980s, they blamed President Reagan's tax cuts for fueling deficits, when, to the contrary, Reagan's tax cuts had a tremendous stimulative effect, and his deficits were fueled by recession and spending. In fact, that's the lesson of the long history of this country, and particularly since LBJ's Great Society: deficits have been caused not by a lack of taxes but by recession and, most of all, by excessive spending.
The failure to learn that lesson is again on painful display, as President Obama and liberals/progressives traverse the country pointing the finger at the evil rich for not forking over enough income. Apparently, the 36% rate paid by the wealthiest Americans is somehow robbing the poorest Americans, whose federal income-tax rate is 0%; something you'd never know from Democrats' shameless class-warfare demagoguery.
Because I comment on this topic so frequently, I'm forced to address these issues practically every day. As a public service, I'd like to make it easy for everyone to see the numbers and understand the root of the problem.
The answers are as easy as going to Google and typing in the words "historical tables deficit." Two sources pop up: CBO historical tables and OMB historical tables. "CBO" is Congressional Budget Office; "OMB" is Office of Management and Budget. These are the official go-to sources for data on deficits, debt, revenues, and government expenditures.
Either source will work. To keep it simple, I'll focus on the OMB numbers. Click the OMB link and look at Table 1.1., "Summary of Receipts, Outlays, and Surpluses or Deficits: 1789-2016." That's an official scorecard of spending by the federal government since the founding of the republic.
Looking closely at the chart is an eye-opening experience. As the first two columns show, receipts (i.e., revenues) and outlays (i.e., expenditures) moved up and down throughout our history. In 1965, however, something unusual, something literally deviant, began: Spending increased every single year, non-stop, consistently, without exception, into the Obama presidency, from 1965-2009.
There are few constants in the universe: gravity, the sunrise, Democrats' class-warfare rhetoric. Add another constant: spending by the federal government; it rises every year.
Significantly, revenues don't increase every year. The most dependable reason for declines in revenues is not a lack of tax increases, or high enough income-tax rates, but recessions. Since 1965, as the chart shows, annual revenues declined seven separate times.
At the start of the Great Society, in 1965, revenues and expenditures were nearly equal, with expenditures only slightly higher, leaving a manageable deficit of $1.4 billion. By 2009, however, annual expenditures ($3.5 trillion) had far outpaced annual revenues ($2.1 trillion), leaving a record deficit of $1.4 trillion.
Significantly, the biggest one-year drop in revenues was from 2008-9, when they declined from $2.5 trillion to $2.1 trillion. Worse, President Obama and the Democratic Congress, elected by a clueless American public, responded with an $800-billion "stimulus" package that did not stimulate. In other words, they responded in the worst way: with another $800 billion in government spending. That gave us the record deficits/debt we now face. The math is very simple.
Government spending, which has hampered growth rather than spark growth, caused this fiscal crisis -- not a lack of tax revenue.
It's crucial to realize that this spending addiction is a new thing in American history. Previous generations of politicians showed much more restraint. Prior to 1965, expenditures were not following an ever-upward trajectory; expenditures decreased year-to-year many times, including nearly two-dozen times between 1901 and 1965, and even including the administrations of big-government liberal presidents, like Woodrow Wilson and Franklin Roosevelt.
This changed in the mid-1960s.
The federal government has a serious spending problem. Liberal Democrats either don't understand this or don't want to understand.
How do we communicate the crisis to the wider public, beyond charts and data?
I suggest comparing the situation to a household: Your family's annual revenue probably has not enjoyed a 40-year-plus consecutive increase. For some years, you were paid less. Perhaps you lost a job, took a pay cut, or switched jobs. Maybe your spouse was laid off, or left work to have a child. You bought a house one year, another 20 years later, spent a ton of money on your children's college education, lost on a bad investment.
I doubt your family's yearly revenue has been a steady upward climb since 1965. Life doesn't work that way, obviously.
And yet, imagine if each successive year, without fail, you spent considerably more money than the previous, including money that isn't yours. You added debt each year, creating massive debts for your family and children. You paid taxes with a credit card.
How long would this go on before you ended up with a credit downgrade or in jail? Get the picture?
So do Obama and the Democrats. And yet, their version of economic facts is not this one; reality doesn't fit their ideological/political purposes. And to imagine the likes of Warren Buffett, who come along and merrily aid and abet their objectives, telling the public that our fiscal crisis is due not to spending but a lack of sufficient taxes. Warren Buffet is the perfect dupe for Democrats.
During the 1992 presidential campaign, the slogan for Bill Clinton and Democrats was, "It's the economy, stupid." For Republicans in 2012, it should be, "It's spending, stupid."
Paul Kengor is executive director of the Center for Vision & Values at Grove City College. His books include The Crusader: Ronald Reagan and the Fall of Communism and Dupes: How America's Adversaries Have Manipulated Progressives for a Century.
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