Delivering the cold facts to voters, Vice President Joe Biden set the record straight about the origins of today’s whopping federal budget deficits. Biden pointed to two costly wars in Afghanistan and Iraq started under the Bush administration. GOP political circles made a point of hanging the country’s economic woes on President Barack Obama the day he took office Jan. 20, 2009. Federal deficits have grown under Obama from over $1 trillion under former President George W. Bush to the current $1.4 trillion under President Barack Obama. When Obama took office, the nation was already in recession since Dec. 2007. Banks ran out of cash, forcing the Federal Reserve Board to print nearly $5 trillion to bailout banks and the auto industry. GOP presidential candidate Mitt Romney and his VP pick Rep. Paul Ryan have blamed Obama for the struggling economy and soaring budget deficits.
As House Budget Committee Chairman, Ryan proposed March 21 over $1 trillion in cuts to the federal budget, largely from government entitlement programs like Medicare and Social Security. “Let’s get serious here! How did we get this debt? Ladies and Gentlemen, they put two wars on a credit card. Not paying a penny, not paying a penny, even though I introduced legislation to pay for that war. They voted against it,” said Biden, telling the real story behind budget deficits. Biden contends Bush doubled the national debt by enacting a new Medicare prescription drug bill, while simultaneously cutting taxes to the lowest levels in modern U.S. history. Romney and Ryan subscribe to GOP party boss Grover Norquist’s “No Tax Pledge,” preventing them from raising taxes regardless of deficits. They plan to slash federal government spending, largely entitlements and civil service jobs.
Romney and Ryan often blame Obama for increasing the deficit and national debt. When President George W. Bush signed his $670 billion bailout bill Oct. 3, 2008, it added nearly $1 trillion to the national debt. Federal Reserve Board Chairman Ben S. Bernanke was busy ordering trillions of dollars from the Treasury to cover the dire liquidity problems in U.S. banks. Romney’s budget calls for more tax cuts, or, at the very least, hanging on to Bush’s record low tax rates. To reconcile budget deficits, Romney can only slash government entitlement programs and federal jobs. “We’ve already reduced the deficit. In four years, we’ll reduce it by another trillion dollars,” said Biden, referring to the national debt not the federal budget deficit. What’s important in the deficit is not the quantity but the fraction of the nation’s Gross Domestic Product, not the absolute value.
Unlike Romney and Ryan, Obama and Biden believe it’s appropriate to raise taxes on upper income earners. GOP Supply-Siders believe raising taxes on the wealthy hurts the Trickle-Down idea that holds that the wealthy hire more people when they have lower taxes. When the late President Ronald Reagan came to office Jan. 20, 1981, he promised to reverse former President Jimmy Carter’s $60 billion budget deficit and balance the budget. Reagan promised to balance the budget by 1983 based on a combination of tax cuts and reduced government spending. At the time of Reagan’s reelection in 1984, the deficit was more than double. By the time Reagan handed the baton to former President George H.W. Bush, the deficit was $240 billion. In other words, Reagan’s chief economist Dr. Arthur Laffer’s Supply-Side, Trickle-Down theory didn’t pan out.
When Obama took office Jan. 20, 2009, the debt-to-GDP ratio was around 10%, lower than Greece but heading in the wrong direction. Romney often compares Obama’s economy to that of Greece, at least with regard to whopping budget deficits. When you really crunch the numbers, Barack’s debt-to-GDP ration has dropped to around 7%. As unemployment improves, so does the debt-to-GDP ratio. If the current trend holds, the U.S. debt-to-GDP radio could drop to about 5% next year, paralleling the Federal Republic of Germany, typically running about 3%. If the Congressional Budget Office’s projections are correct, the U.S. doesn’t need to slash the federal budget as Romney and Ryan suggest. As unemployment shrinks, the federal budget follows suit. Fed Chairman Bernanke has warned Congress not to slash government spending during shaky economic times.
Stepping onto the debate stage at the University of Denver Oct. 3, Romney promises to reboot his campaign, finally offering the specifics of his economic plan. When you consider his plans to cut or privatize popular entitlements like Social Security and Medicare and slash federal jobs, it’s doubtful he’ll level with the American public. More likely, Romney will bash Obama’s health care overall as a budget buster. Romney doesn’t take into account the largest expansion in the health care industry in U.S. history, potentially adding thousands of new jobs. Romney wants to talk about more tax cuts but he can’t account for how he’d pay for all the government programs without raising taxes. “President Obama and Vice President Biden have no credibility on reducing our national debt,” said Romney spokeswoman Amanda Hennenberg, forgetting the trillions needed to bailout the U.S. banking industry.
About the Author
John M. Curtis writes politically neutral commentary analyzing spin in national and global news. He’s editor of OnlineColumnist.com and author of Dodging The Bullet and Operation Charisma.