Voodoo Economics: Debt Central

There are numerous links that you can check out and see more graphs and information

The National Debt — Where Did it Come From?

In 1981, the country had just elected Reagan to cure the "all-time-high, Trillion-Dollar debt." But compared with the size of the American economy, the debt was at its lowest point in fifty years (see graph just below). Reagan was duped by the "supply siders" and his greatest "disappointment" was adding $1.6 trillion to the $1T debt he said was catastrophic.

     Now, here's the new slide show that explains what happened step by step. In case you have questions, it's documented here.  And if you agree that this story really needs telling, we hope you'll tell your friends.

The green line shows what would have happened if Reagan and the Bushes had just kept the debt growing at the same rate as the economy. That would make their parts flat. Many conservatives claim Congress increased Reagan's budgets, but this is not the case as you can see documented here. WWII caused the debt to shoot up, starting in 1942, and reach 30% higher relative to the country's wealth than it is today. The economic stimulus of that government spending pulled us out of the great depression and into high gear to win the war. (When to save / when to borrow.)

... The green line in the graph shows what would have happened if Reagan had proposed budgets that let the debt increase in step with inflation and the economy—if he had kept it at a constant fraction of GDP. That's not much to ask of a president who said he'd do far better than those before him, since every previous post-war president had actually reduced the debt as a fraction of GDP. By the end of the Reagan-Bush 12-year "revolution," the extra debt they had piled on the country was costing the country an extra 2.6% of GDP in interest—$300 million a day. Without that interest working against him, Clinton would have paid down the debt a bit faster. That helps the green-line goes down in the Clinton years. That's what would have happened without the Reagan-Bush interest burden. Now if W. Bush had held the line as all non-supply side presidents had done, the national debt would have been only 21% of GDP, and the country would have been ready to pull itself out of the Great Recession with ease. In fact when W. Bush's last budget year ended we would have had $9 Trillion less in debt. So how did Reagan, the great debt-slasher, go so far wrong? Partly it was his belief in supply-side "economics." This "theory" claims that when the government cuts taxes, especially taxes on corporations and the rich, it makes them so happy to keep more of their money that they work much harder, get richer, and pay even more taxes than before the tax cut. So the lower the tax rate, the more money the government collects to pay down the debt! Believe that happy talk, and you can run up quite debt. Of course the rich loved this "theory" and fed the press many stories about the wonders of the new supply-side "economics" (cooked up by Laffer, as a graduate student). Money talks, and a lot of people listened. It's time to rethink what radical conservatives have done and are doing to our country. The Reagan-Bushes National Debt now totals $9.2 trillion. That's the lions share of our present debt.

US National Debt Graph:  What They Never Tell You

Debt Compared to National Income Reagan got elected by telling the country the debt was "out of control." Compared to national income, it was the lowest in 50 years. He probably didn't know. But his supply-side economists did. They lied to America. In 1981 Reagan's supply siders wrote the tax cuts for the rich and his budgets. The Senate was Republican, and Reagan got the Southern Dems in the House to vote for him. All Republicans and a few Dems voted for the budget. The national debt had its worst year since 1945. The next year it got worse, and for 20 out of 20 years, the supply siders raised the debt relative to our ability to pay. Is this just Republicans vs. Democrats? Not quite, see: voodoo economics. It's a terrible thing to scare America about its debt when we're doing great and then send the debt through the roof for no reason. So the supply siders invented another lie — Congress did. As this graph shows, Congress changed the presidents' budgets only a tiny bit and more down than up — by $16 billion over Reagan's eight years. And over those eight years Reagan increased the debt by $1,860 billion. Blaming that on the tiny budget reductionby Congress is just political nonsense.More+Documentation.

Explanation and Check It Yourself This graph shows what happened since Oct. 1, 1981, the day Reagan started his first budget. First Reagan increased the debt by $1.9 Trillion (see for yourself). Then Bush brought that to $3.4 Trillion. Then all that started collected interest for the next 17 years, and with compounding that grew to $8.2 Trillion by Sept. 30, 2010. Clinton, Bush II and Obama are not to blame for that interest, and without it, Clinton would have paid off most of the $1 Trillion WWII debt that Reagan scared us with to get elected. And Bush II (and his supply siders) would have run up only $3.8 Trillion — not $6.1T, which is what actually happened under Bush II. (A clear proof of this with document links.) Before the supply siders, Dems and Repubs brought the debt down relative to our income in 27 out of 35 years. The supply siders (with Reagan and the Bushes) raised it 20 out of 20 years. That's no accident. The Supply-Sider's Hoax: Bush-I called it voodoo economics (but he got stuck with it). Their "theory" is that cutting taxes for the super rich will encourage them to work so much harder and make so much more money that they will pay more taxes, even though their tax rate went down. Well the voodoo didn't work in 20 out of 20 years. And now they want to try it again. And they've scared America again about the debt. It's easier now that they've run it through the roof.

See the Full Slide Show above The Present Danger The Great Depression lasted about 12 years with business conservatives scaring people about inflation (there was none) and about government borrowing (negligible until WWII). Now the supply siders are keeping us in the Great Recession the same way. So What Worked? World War II. Uncle Sam (the U.S. government) borrowed the equivalent of 10.5 Trillion (see top graph) and bought war goods from private industry. Supply siders say this creates no jobs. But industry hired Rosey the Riveter and millions more. Unemployment ended with over-employment. The U.S. had its greatest economic boom ever — by far. It doubled output in six years. Back then we had real Patriots. They loved Uncle Sam and they bought war bonds to help him borrow to hire people and win the war. Now people, who hate Uncle Sam almost as much as Al Qaeda, call themselves Patriots. They should call themselves Hateriots. But they have just been duped by the Wall Streeters who invented supply-side economics -- and who have been telling us lies for 30 years. America is about to vote the supply siders and hateriots into Congress. They will give tax cuts to the rich, which is what got us into debt. And though the rich will spend a bit more on gardeners, nannies, and yachts, the country will have nothing to show for this extra debt. It's simply immoral to give more tax cuts to today's rich so the next generation can pay for them. $12 trillion of this voodoo taxing of the future is enough. But the real patriots of WWII, who borrowed and spent and gave 400,000 lives for their country, showed us the way. Another lie: Spending now won't work because it's not for war. That's what the Wall Streeters tell us so we'll give them tax breaks instead. But does it help future generations more to build battle ships or to fix our bridges and dams? Does it help the economy more to put our men to work at home or send them to die in France? It's hard to imagine a more ridiculous claim than the one that spending for war is more productive than spending on infrastructure and education for our future. Supply-side "voodoo" economics is an immoral trick of thievery, designed for today's rich at the expense of the future. It hoodwinks many by offering the middle class some of the booty — the rich get the big tax cuts, but hey, the middle class can have some too, also at the expense of the future. The result of falling for this, is an out-of-control debt that scares us into staying in recession and will soon be used to kill social security and Medicare — which the rich don't need. It's time to put America back to work. Let's say thanks to our real patriots who showed us how.