American Debt and Who got Us Here!


Prior to 1980 America had never reached a debt of one Trillion dollars, but with the election of  Ronald Reagan we passed that mark and then some.  When Ronald Reagan took office our national debt was a mere 900 billion dollars; give or take a few hundred million dollars. Reagan ushered in the theory called “Reaganomics” which would be later referred to as “Trickle Down Economics” (see; http://www.econlib.org/library/Enc/SupplySideEconomics.html) but by either name it set in motion an approach to monetary policies that would devastate America, but I digress.

Reagan’s presidency ushered in Reaganomics which was an approach that relied on 3 key policy/fiscal foundations; tax cuts which reduced the operational capital of government, deregulation which opened up corporate welfare and corruption, and the role of government to that of noninterference (which is how Republicons referred to government protections from corporations and money’ed interests). America believed that Reaganomics would increase investments by the wealthy in the job market and in turn would stimulate prosperity for all. I refer to this as “trickle on economics” but again I digress. Reagan would  go on to deregulate savings and loans markets; he reduced taxes, increased military spending which directly led the stock market crash in 1987. The start of deregulation of banking and investment markets by Reagan,  and the administrations that would continue this approach, would come to roost later in American history but I will cove that later. This approach would take  the debt from 930 billion to 2.6 trillion in a mere 8 years or $10,058.90 per capita for a population of 258,709,873. I would again note that this had not happened since the start of America until Reagan’s presidency. The Reagan administration increased debt by roughly 2 trillion over an 8 year period which is an increase of 189% of the debt he inherent-ed; just WOW!

Reagan set the table for economic policies that would be adopted in large parts and small from this point forward. Bush Sr. (Reagan’s vice-president) would be elected in 1989 and continue the “trickle down economic policies of Reagan and would fare no better than his predecessor  Bush Sr. would lead the country to an economic collapse and end his one term presidency with the nation in debt for a staggering 4 trillion dollars or $4,064,620,655,521.66 to be exact. This result was in spite of him raising taxes in 1992 in order to curtail the disastrous fiscal policies he continued from Reagan. You would think that Bush would have learned from Reagan’s fiscal FAIL, but Republicons (I refuse to call them “conservatives”; there is nothing conservative about them) did not learn and America was fooled by slogans and propaganda that still exists today; and again I digress. I think that you are starting to see that I digress a lot, but what can I say I have a lot of un-expressed political history in my head. So now we are at the 4 Trillion debt mark. The Bush Sr. administration increased debt by roughly 2 trillion over an 4 year period. Supply Side Economics and Republicon governance quadrupled the national debt to over $4 trillion in twelve years (1980-1992) and they call themselves “conservatives”! Bush Sr’s administration governed over an increase of the U.S. debt of what would equal an 55% increase in just one term; I dare to speculate that with another term he would have nearly equaled Reagan’s debt disaster! That’s right I said it.

President Clinton took office in 1993 and actually made an concerted effort to rewrite America’s approach to fiscal policy, but continued to buy into deregulation and insane trade policies. Back on topic, President Clinton increased taxed (marginally in my opinion; I would assert that the top marginal rate should never go under 50%) and reduced government spending which lead to a tax revenue increase which exceeded expenditures. You know he balanced the budget to the point that we had a surplus; novel approach to fiscal policies. With this approach (which was decried as socialism and got zero votes by Republicons of the time), Clinton was able to pay down the  national debt for the last 3 years of his 8 years in office thereby reducing what America owed. A good thing right, but even with this budgetary success Clinton left office with a national debt of 5.7 trillion dollars, or $5,674,209,886,86 to be exact. The Clinton administration increased debt by roughly 1.6 trillion over an 8 year period, but the good news is that by just following this fiscal policy America would have continued to have a surplus. Or so one would think! In the end Clinton increased debt by 35% over his 8 year administration.

George W. Bush took office in 2001 and returned America to “trickle down economics, but this time “trickle down economics” was on steroids enhanced with radiation. Now some would like to give Bush  a pass on some of the debt seeing that during his presidency there was the 911 attacks and the two wars (Iraq and Afghanistan), but not I. I hold the Bush administration responsible for not preventing the attack and for enjoining the effects of 911 with an un-necessary war with Iraq (although neither military conflicts were official wars seeing that we have not legally declared war since WWII). The sub-prime lending fiasco was the direct result of deregulation which Reagan started and Bush Sr., Clinton, and Bush Jr. continued. The Bush presidency should have reinforced the failures “trickle down economics” ability to deliver prosperity to all Americans, but Americans did not learn until the “Second Great Republican Depression” which ushered in the greatest collapse since the “First Republican Depression”. The one saving grace about this depression is that we had a safety net in place (Social Security Insurance, Unemployment Insurance, Medicare Insurance, and Medicaid). Without these landmark safety nets in place, America would have returned to the bread lines, destitution, and starvation of 1929. Bush left office in 2008/09 with the national debt at over 10 trillion or $10,024,724,896,912.49 which was an increase of debt of a whopping 86%. He (Bush) called himself a “compassionate conservative”. What part of his policies were conservative?

Bush would leave office in shame, but not before adding 1.4 trillion in bail outs to the banking industry, hundreds of billions in TARP funds, two wars off the books, and a fiscally and globally damaged America. Our next President would take office with the national debt at over 12 trillion dollars or $12,135,510,445,387.63 before enacting a single law or policy. President Obama said ““I found this national debt, doubled, wrapped in a big bow waiting for me as I stepped into the Oval Office”. Is this an excuse or the truth; I’ll let you decide, but I lean towards the fact that he was stating the truth seeing that every president starts their first 10 or 11 months with the budget of the previous administration (which i did take into consideration with the previous president administration described above). The current debt is over 16 trillion (see the debt clock above for the exact amount currently). Obama has raised debt by roughly 4 trillion in 4 years in office. Now I don’t want you to take this as an apology for the Obama administration, but the facts are he inherited tow wars off the books (which he put back on the books), the Bush tax cuts (which he stupidly continued as part of the debt ceiling deal), a historic depression (thanks Bush), a total crash of the housing market, historic unemployment, disastrous trade policies (which he stupidly continues), and not to mention a deliberate and concerted effort of Republicons to opposed this president’s policies;  despite what the actual policy is or who originated it. Stay tuned for the next chapter of this sad fiscal history!! Obama has increased the national debt by a lofty 35% to date and growing.

In conclusion, it is factually accurate to state that Republican presidents are responsible for the vast majority of our nations current debt and their policies are not the fix that American need to heal our debt ills. The real risk from government debt is not the amount of the debt it is the burden of interest payments as a percentage of GDP (Gross Domestic Product) which experts say when interest payments reach about 12% of GDP then a government will likely default on its debt. United States interest payments on the current 16 trillion dollars of debt is around 3.1% which is workable, but not optimal. To summarize, America’s national debt is the result of a vast departure from the manufacturing policies that the United States adopted back in early 1800 which was proposed in  The Report On Manufacturing by Alexander Hamilton back in 1791. This departure was started arguable under Reagan and continued by all presidents after him. I assert that we need to return to policies that protect targeted manufacturing areas via tariffs and import taxes. We need to eliminate the tax incentive for American business to move companies and jobs over-seas. We need to get away from some aspects of globalization, return our top marginal tax rate to pre-Reagan levels or at least above 50%, and return to a hybrid version fo protectionism. These moves will return America to greatness and fiscal solvency.

I would point out that all quoted national debt numbers are from the Treasury Department of the United States and I WILL REVISIT THE SUBJECT OF DEBT IN AN UPCOMING BLOG.

Advertisements
  1. November 18, 2012 at 10:21 pm

    The Reagan years were not good for me and I had to close a business in early 80s. I’m still waiting for the trickle down. Sure do not understand the resurrected love of Regan policy

    • November 21, 2012 at 6:20 pm

      Great comment earthstonestation! I think that if you actually look at the Reagan years, remove the misguided Reagan love, and you will find that most Republicons today would be calling him a trator (Iran/Contra), anti-American (amnesty for illegal Mexican immigrants), tax-and-spender (he raised taxes 11 times), and a myriad of other superlatives. Today’s Republican party, despite all the accolades for Reagan, would not have him in their party. I think that they have spent so many years decrying him as a saint that they have no recollection of the way he actually governed. Reagan would be a Blue Dog Democrat today; wake up right-leaning Americans!

  2. November 21, 2012 at 6:20 pm

    Great comment earthstonestation! I think that if you actually look at the Reagan years, remove the misguided Reagan love, and you will find that most Republicons today would be calling him a trator (Iran/Contra), anti-American (amnesty for illegal Mexican immigrants), tax-and-spender (he raised taxes 11 times), and a myriad of other superlatives. Today’s Republican party, despite all the accolades for Reagan, would not have him in their party. I think that they have spent so many years decrying him as a saint that they have no recollection of the way he actually governed. Reagan would be a Blue Dog Democrat today; wake up right-leaning Americans!

  3. December 1, 2012 at 5:35 am

    You seem to imply deficits are bad for the economy. Here is my view. Modern Monetary Theory is real and is verified by numbers For example,
    (Federal Deficits = Net Private Savings+ net imports), is the balance equation and here is proof in numbers
    http://pshakkottai.wordpress.com/2012/03/30/another-proof-of-mmt-4/
    If this equation is summed over all years, we get
    (sum of all deficits = gross national wealth) proved in numbers at
    http://pshakkottai.wordpress.com/2012/07/31/cumulative-deficit-vs-household-net-worth/
    and more similar data at that site.
    Deficits are the money created to feed the economy. The need to borrow money is an artifact of the gold standard that is meaningless for a money creator. For example, India, which has no debt ceiling, no federal reserve, no state income tax, mostly federal owned banking, no debt hysteria, no too-big-to-fail banks, multi-party democracy and a progressive govt and high deficits and no austerity. It has copied US constitution with slight changes.

  1. December 5, 2012 at 8:41 pm

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: