Judd Gregg and the GOP's Triple-Double on National Debt
Timing, they say, is everything. On the very night President Obama suggested Republican critics of his $3.6 trillion budget plan have a "short memory" when it comes to the sea of red ink he inherited, PBS' Frontline offered a stinging reminder in a documentary titled "Ten Trillion and Counting." Featured prominently among the Republican amnesiacs was Senator Judd Gregg (R-NH), who just one day earlier slammed Obama's "banana republic" budget. Absent, of course, from Gregg's recollection for PBS was the inconvenient truth that the U.S. national debt tripled under Ronald Reagan, only to double again under George W. Bush.
To be sure, Frontline's Forrest Sawyer presented a grim picture of the dangerous and irresponsible Bush tax cuts of 2001 and 2003. But despite studies showing that windfall for the wealthiest Americans accounted for half of the mushrooming budget deficits of the Bush years, Gregg tried to maintain the tried and untrue GOP talking point that tax cuts produce revenue gains for the Treasury:
SAWYER: Way back in 2000, there were surpluses projected, and that had come after some good luck with the economy and some hard work. And then came along this massive tax cut. Was that in retrospect a mistake?
GREGG: No, absolutely not. The surpluses that were projected weren't lost because of the tax cut. They were lost because of...the fact that we went into a recession as a result of 9/11 and the Internet bubble bursting...much like the real estate bubble we are going through today...The surpluses which we were running, which we thought we were going to run for a long time, simply weren't realized as a result of those two events.
But if that delusion sent jaws dropping to the ground, Gregg's admission of the myth of Republican fiscal discipline kept them there. The failure of conservative government, Gregg acknowledged, is a feature, not bug:
SAWYER: What happened to the Republican Party during those eight years?
GREGG: What happened was that conservatives, when they took the majority position in the government, decided to use the government in a very aggressive, conservative way to promote conservative programs and to spend money for conservative initiatives.
SAWYER: Isn't that sort of not the conservative position?
GREGG: Absolutely. I think you'll find I voted against almost all that spending.
In defense of Obama's aborted Commerce nominee turned gadfly, the Republicans' fiscal rot didn't begin with George W. Bush, but with Ronald Reagan. It was the legendary Gipper whose financial recklessness and tax-cutting fetish came to define the modern GOP.
The numbers tell the story. As predicted, Reagan's massive $749 billion supply-side tax cuts in 1981 quickly produced even more massive annual budget deficits. Combined with his rapid increase in defense spending, Reagan delivered not the balanced budgets he promised, but record-settings deficits. Even his OMB alchemist David Stockman could not obscure the disaster with his famous "rosy scenarios."
Forced to raise taxes twice to avert financial catastrophe (a fact conveniently forgotten in the conservative hagiography of Reagan), the Gipper nonetheless presided over a tripling of the American national debt. The $998 billion debt he inherited in 1981 exploded to $2.9 trillion by the end of his second term. By the time he left office in 1989, Ronald Reagan equaled the entire debt burden produced by the previous 200 years of American history.
For his part, George H.W. Bush hardly stemmed the flow of red ink. And when Bush the Elder broke his "read my lips, no new taxes" pledge to address the cascading budget shortfalls, his own Republican Party turned on him. While Bush's apostasy helped ensure his defeat by Bill Clinton, it was Clinton's 1993 deficit-cutting package (passed without a single GOP vote in either house of Congress) which helped usher in the surpluses of the late 1990's.
Alas, they were to be short-lived. Inheriting a federal budget in the black and CBO forecast for a $5.6 trillion surplus over 10 years, President George W. Bush quickly set about dismantling the progress made under Clinton. Bush's $1.4 trillion tax cut in 2001, followed by a second round in 2003, accounted for the bulk of the yawning budget deficits he produced.
Like Reagan and Stockman before him, Bush resorted to the rosy scenario to claim he would halve the budget deficit by 2009. Before the financial system meltdown last fall, Bush's deficit already reached $490 billion. (And even before the passage of the Wall Street bailout, Bush had presided over a $4 trillion increase in the national debt, a staggering 71% jump.) By this January, the mind-numbing deficit figure reached $1.2 trillion, forcing President Bush to raise the debt ceiling to $11.3 trillion.
None of the above is to suggest that President Obama's budget won't add to the mounting debt. The urgent need for massive federal deficit spending to counter the deepening Bush recession combined with needed investments in health care, energy and education could produce another near-doubling of the debt by 2019 (according to the CBO). The debt would top 80% of GDP, a level not seen since the years after World War II. And persistent annual deficits of 5% of GDP, as Obama's OMB director Peter Orszag acknowledged "would ultimately not be sustainable."
But in the near term, the Obama administration has little choice. The severity of the economic crisis makes continued deficit spending unavoidable and any tax hikes beyond the rollback of Bush's giveaway to the wealthy out of the question. Meanwhile, needed savings from Medicare and Medicaid (and to a much lesser extent, Social Security) hinge on entitlement reform that Congress likely won't tackle before the 2010 midterms. This is one reason why both the Obama and CBO projections show the deficit increasing again after being halved by 2013.
But the biggest reason for Obama's budgetary straightjacket is the dual legacy of fiscal ruin bequeathed to him by Ronald Reagan and George W. Bush. Republican fiscal mismanagement left President Obama with red ink as far as the eye can see even as he battles to undo the economic carnage they wrought. Worse still, the party of Reagan and Bush has made raising taxes almost impossible even during boom times. . (It was, after all, Vice President Dick Cheney who in 2002 announced, "Reagan proved deficits don't matter.")
Judd Gregg's selective amnesia notwithstanding, it is the GOP which is home to the Banana Republicans. And the triple-double debt they produced represents Bush's handcuffs and Reagan's poison pill.
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Posted by Steve at Cuttingedge History on August 4, 2010 11:21 AMNo, absolutely not. The surpluses that were projected weren't lost because of the tax cut. They were lost because of...the fact that we went into a recession as a result of 9/11 and the Internet bubble bursting...much like the real estate bubble we are going through today...The surpluses which we were running, which we thought we were going to run for a long time, simply weren't realized as a result of those two events.
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