The GOP Created the Deficit


The Surplus of 2000

By the end of the year 2000, Democrats and Republicans had worked together to create a balanced budget. Not only was it balanced, but there was also a 1/2 Trillion dollar surplus. There was enough surplus to pay off the outstanding federal debt in less than five years, and it would have paid off the debt owed to the Social Security Trust Fund by as early as 2010.

The Bush Deficit

Then George W Bush and the Republicans decided to pass tax cuts that amounted to over $2 trillion PER YEAR in annual deficit. This tax increase was based on the assumption that there were no wars, we were in a peace-time economy, economic growth was 4% per quarter with growing industries based on the Internet, Cellular, and new technologies such as PDAs, Media Players, and other personal electronics innovations that could fuel new growth through the development of new growth-oriented companies.

There was a little problem, though. First, the Bush Tax Cuts cut taxes on dividends paid to investors significantly, almost to zero. Billionaires like Bill Gates got $billions in tax-free dividends. The problem was that now investors wanted high-dividend stocks and abandoned growth stocks. This dried up the available venture capital because venture capital investors couldn't get money back by taking their companies public. Suddenly the economic growth of the 1990s collapsed. Even before the 9/11 attacks, there were panics in the stock market as prices fell dramatically, thanks to the elimination of the "up-tick" rule, allowing stocks and markets to go into free-fall.

Bush argued, "You know best how to invest that surplus." The surplus wasn't invested. It was hoarded as companies bought back their stock and paid huge dividends to principal stockholders, yet small investors barely got enough to pay the filing fees. Mega-cap companies purchased innovative companies that wanted to eliminate competition and preserve the status quo.

The War on Terror

Then we had 9/11 and started wars in Afghanistan and Iraq, creating a four-front war in which rules of engagement crippled the military's ability to control and win the wars. The result was record levels of military spending. The constant use of "smart bombs" and missiles that cost as much as $1 billion/year in wars lasting as long as 20 years.

The Mortgage Crisis

During the Bush years, homeowners were encouraged to "go shopping," getting home equity loans, including loans on the "future value" of their homes, and spending that money on taxable items like cars, clothes, and consumer goods rather than investing the money in home improvements. Home buyers were getting low-interest variable rate mortgages. Mortgage brokers often used bait-and-switch tactics to get people to take the variable rate loans on the promise that the brokers could get them a new loan at even lower rates. Nobody explained that a 1% increase on a 4% loan would mean a 30% increase in their monthly payments which they could barely afford before the increases. The use of sub-prime and variable-rate mortgages led to a collapse of the entire real estate market, with house prices falling by 30% or more, especially in low-income areas. Congress had to pass a $4 trillion debt increase to "bail out" the banks holding junk bonds based on bogus mortgages. The result was defaults and foreclosures, most of which hit the market after 2008.

The Obama Administration

During the Obama Administration, the Bush Tax Cuts were made permanent because the Conservative Republicans refused to increase the debt ceiling unless they were made permanent. The Obama administration had to take extreme measures to prevent a total economic collapse, even as homes were foreclosed, jobs were lost, and the country faced another Great Depression.

The Obama measures, including fed funds rates at effectively negative rates, with the Federal Reserve getting less than it cost to service the loans - to stop the bleeding and stem the recession. Over the following eight years, the economy recovered, the stock market recovered, and the deficit was reduced, but still exceeded $2 trillion per year thanks to the Bush Tax Cuts now made permanent.

Trump Tax Cuts

Donald Trump almost immediately passed another tax cut for the rich, increasing the annual deficit to nearly $4 trillion. Obama had set up a withdrawal from Iraq and killed Bin Ladin. Trump increased the use of high-priced weapons in Afghanistan. The result was even higher annual deficits.

Under the Bush administration, millions of people who had been paying $Trillions into the Social Security Trust Fund based on the promise of complete coverage of medical care and tax-free retirement income were suddenly being "promised" that only 80% of their health care would be covered. Under Ronald Reagan, Social Security income would be subjected to taxation. Furthermore, Prescription Drug coverage was now a separate program and had to be arranged with a private provider.

The Trump organization then tried to move people off of Social Security entirely, herding retirees, especially "baby boomers," into Medicare Advantage programs that could limit coverage, had high deductibles, and were getting more profits by limiting services and providers.

Now the GOP wants the Democrats to pay for all those tax cuts and wars by cutting benefits and services paid to the beneficiaries of Social Security, Medicare, & Disability by forcing people to retire even later, forcing them to accept massive cuts if they are forced into retirement. During Trump's failure to handle COVID-19, millions of "baby boomers" in their early 60s were forced into retirement or disability and forced to accept lower payments.

Perhaps it's time to roll back the Bush Tax Cuts?

Perhaps we can also roll back the Trump Tax Cuts?

Perhaps we can roll back military spending to peace-time levels?

THEN maybe there can be a discussion of reducing benefits to healthy, able-bodied people.