source: http://en.wikipedia.org/wiki/National_debt_by_U.S._presidential_terms
So given Regan's record and that of the other Republican presidents, I can certainly understand why the rich like the Republicans, but why do conservatives like the Republicans? I always thought conservatives disliked deficit spending.
I'm obviously missing something?
Yes, you are missing a few important issues.
ReplyDelete1. Reagan’s spending was a military build-up, which at the least coincidently produced the defeat of the Soviet Union – and in my view was the key catalyst to destroy it (if you disagree, read what ex-Soviet leaders have to say, they credit Reagan more than Gorbachov). From a deficit spending standpoint, when the US spends for war, those expenditures are temporary in nature and therefore do not create any structural deficit issues (hence conservatives are not as concerned in general). If you look at wartime deficits of WWI and WWII, they were much larger. However, government spending declined by 50% in the early 20s (post WWI) and 60% in the late 40s (post WWII). So in that context, it helps explain why the 1990s were set-up for better fiscal situations post the end of the cold war.
2. The Democrats controlled the House (which holds the keys to spending) all through the 1980s. Starting in the mid-90s, a conservative Republican house took control for the first time in 40 years in 1994. That forced Clinton to get the budget in order, with welfare reform and many other spending controls.
3. While “Republican” and conservative are rarely synonymous, they are in the case of Reagan and Coolidge (President in 1924). While Reagan reduced taxes, was central in defeating the Soviet Union, enhanced Freedom in the US, deregulated, appointed conservative judges, set the environment for the biggest economic expansion in the US in 80 years (only Coolidge did better)which helped both rich and poor - he did not do enough to shrink government excluding the military in my view. The defeat of the Soviet Union was so central to his mission, that he thought if he pushed the congress too hard to cut other spending, they would not fund his military build-up. I still think he should have tried harder.
If anyone is curious what the most left-wing govenrment, house and senate have done to that chart? As the chart above shows, we were at roughly 5 trillion in 2007, in less than 3 years we are now at 14 trillion! That was accomplished without any wartime buildup.
ReplyDeleteNet, if you put into context the times, the structural nature of the spending (is it simply for a short term military build-up with a purpose, or do they put permanent programs in place) and which party controls spending - without any doubt the least fiscally responsible President in the past 60 years (probably ever) is Obama. Bush Jr and Bush Sr were also terrible fiscally, but there really is no proper comparison as Obama is that bad.
So you are saying that Clinton deserves no credit for the debt reduction that occurred during his time in office; that a) he was simply able to capitalize on the good results of Reagan's policies, and b) a Republican House in the 90s controlled spending.
ReplyDeleteYou are saying that the sharp rise in the US debt during Reagan's time was the result of a responsible, justifiable, well thought out increase in military spending, and not irresponsible, ill conceived, self serving tax cuts.
I am no fan of Obama, and I find the rise of the US debt appalling and scary, and in some very significant respects unnecessary and ill advised. Nevertheless, I do wonder why, if Clinton deserves no credit for the debt reduction that occurred during his time in office, is Obama held responsible for the debt increase during his time? After all, most, perhaps all, of the deficit spending is a response to a recession brought on by the policies of previous administrations.
If you separate the man from the times, I think Clinton looks not so good (but not terrible) correct. If you look at the 1990s, four things brought the deficit down, only one of which Clinton deserves even partial credit. 1. Interest rates came down, reducing the interest payments on the debt 2. Military spending came down post cold war . 3 Republicans controlled spending starting in 1994, and to Clinton’s credit, he did not fight Gingrich’s cuts.
ReplyDeleteThe fourth reason, relates your other questions as well. For the past 80 years, whether individual tax rates for top payers are 92% (like they were under Eisenhower in the 1950s) or 30% under Reagan in the 1980s, individual tax revenues as % of GDP are remarkably stable between 7-8%. There are only 5 years in 80 where tax receipts from individuals fell outside of this range. Three of those years, occurred in the late 1990s, as individual tax receipts went as high as 13% of GDP in 2000, as capital gains tax revenues exploded from the gains in the stock market (this was the primary reason we had a budget surplus). With the market crash from 2000-2002, the revenues from this source evaporated. The often used line that tax cuts for the wealthy caused the deficits of the 1980s and 2000s, is 100% factually wrong. There is no grain of truth in it, as GDP and tax rates are correlated, hence lower taxes stimulate the economy as hence tax receipts staying very stable at 8% of GDP go up (because GDP goes up).
Obama however, has massively increased the debt with the country having little to show for it. Structurally, he has created more entitlements (most notably Obamacare, which is not yet even implemented, hence deficits will only increase further). I can expand if you would like, but let me be clear, I am not suggesting that Republicans are prudent fiscally and Democrats are bad – both have been pretty bad. However, I am suggesting Obama is the worst, followed by Eisenhower (a Republican).