Both Republicans and Democrats At Fault For $14 Trillion Debt

By Alan Denton

james-denton@mocs.utc.edu

WASHINGTON (AP) — Two centuries after America’s birth, the national debt was a bit under $1 trillion when Ronald Reagan took office in 1981. Just three decades later, it has soared above $14 trillion, and accusations of blame are flying. Both Republicans and Democrats played major roles in driving the figure sky high.

If the tab were divided up now, it would come to roughly $47,000 for each man, woman and child in the United States.

In what is shaping up as the next bruising economic battle, Congress is being asked by President Barack Obama to authorize fresh borrowing once the nation’s fast-growing debt slams into the current debt ceiling of $14.3 trillion — something the Treasury Department says will happen no later than May 16.

Leaders of both parties acknowledge that failing to raise the limit could force the government to begin defaulting on some of its obligations — for instance making interest payments on Treasury bills and bonds — with severe adverse consequences, including possibly pushing the economy back into recession.

Creative accounting may help forestall the crisis for a few additional months. But then the effects could be severe, or as the White House warns, “like Armageddon, in terms of the economy.”

Republican and Democratic Symbols

Republicans like to blame Obama and congressional Democrats, citing heavy spending that they claim has done little to end the recession or create jobs. Democrats argue that the stage for fiscal ruin was set by Republican President George W. Bush, with large tax cuts that favored the wealthy, two wars and a vastly underfunded prescription drug program for the elderly. They accuse Bush of squandering a budget surplus handed him by President Bill Clinton.

 

“We lost our way” during the Bush years, Obama suggested on Wednesday as he laid out his own prescriptions for taming the nation’s long-term budget woes, a move the administration hoped would also smooth the way for a debt-ceiling vote.

In fact, spending far outpaced revenues in both the Bush and Obama years. And the main culprit in addition to war spending was the devastating 2007-2009 recession, which not only prompted hundreds of billions of dollars in downturn-fighting spending by both the Bush and Obama administrations, but also resulted in a sharp dip in tax revenues due to sagging individual and corporate incomes.

The main reasons for big increases in the national debt in the years ahead are fast-growing obligations for Social Security, Medicare, Medicaid and other entitlement programs as tens of millions of baby boomers reach retirement age.

Congress has raised the debt limit ten times in the last decade alone, most recently in February 2010. But this year, the stakes are higher than usual, with Republicans and some Democrats warning Obama that they will not vote to raise it unless he agrees to mandatory restraints on future spending.

It was against this backdrop that Obama on Wednesday countered Republican budget plans with a series of his own proposals that he held out as better balanced. They included wide-ranging spending cuts, tax increases aimed at the wealthy and a “debt failsafe” trigger for additional across-the-board spending cuts and tax hikes if deficits are not headed down by 2014.

“That should be an incentive for us to act boldly now, instead of kicking our problems further down the road,” Obama said. Still, his plan faced difficulties ahead, with GOP opposition to new tax increases and complaints from some Democrats that his spending cuts are too drastic.

The U.S. has never defaulted on its debt. Its bonds are viewed as among the safest investments in the world. In addition to millions of Americans, many foreign governments and investors have vast holdings in Treasury securities, with China leading the pack.

The GOP now is in the majority in the House of Representatives after mid-term elections last November that many victors and tea-party activists viewed as a mandate for deep spending cuts.

“My members won’t vote to increase the debt limit unless we’re taking serious steps in the right direction,” says House Speaker John Boehner, R-Ohio.

After a White House meeting with Obama on Wednesday to preview the speech, Boehner said, “I think the president heard us loud and clear.” He agreed that passing a debt-limit extension is highly important. “Not meeting our debt obligations is a very bad idea,” he said. But Boehner also insisted that higher taxes not be part of any debt relief deal.

The national debt is the total accumulated indebtedness of the U.S. government. As of Wednesday, it stood at $14.27 trillion. Of this, $14.21 trillion is subject to the debt limit. For various mostly technical reasons, several small governmental programs are not counted.

The national debt should not be confused with the federal budget deficit, which is only a one-year slice. The deficit is the difference between what the government spends in a given year and what it takes in. In the budget year that ends Sept. 30, the deficit is expected to be a record $1.5 trillion. At that level, for every $1 the government spends, it must borrow about 42 cents.

Only a few times in the nation’s history has the government run a budget surplus. The most recent was in the early 2000s, when for several years the government took in more than it paid out. That helped take a nick out of the national debt, then hovering between $5 trillion and $6 trillion. Soon deficits returned and the national debt resumed its relentless climb.

“America’s finances were in great shape by the year 2000. We went from deficit to surplus. America was actually on track to becoming completely debt-free, and we were prepared for the retirement of the baby boomers,” Obama said. “But after Democrats and Republicans committed to fiscal discipline during the 1990s, we lost our way in the decade that followed.”

The national debt began when President George Washington and Congress agreed to take on debts incurred by the states for fighting the Revolutionary War.

It broke through the $1 trillion mark (that’s a $1 followed by 12 zeroes) in 1981, the first year of the Reagan’s presidency. But despite Reagan’s vow to balance the budget, the debt tripled during his two terms, to just over $3 trillion under the weight of a recession, large tax cuts and increased spending.

When his successor, President George H.W. Bush, left office in early 1993, the debt was over $4 trillion. Clinton’s eight years in office took it to nearly $6 trillion, despite those fleeting budget surpluses. When George W. Bush finished his two terms the debt had pushed through the $10 trillion mark.

A celebrated national debt “clock” near Times Square had to be rebuilt to allow for the extra digit.

In just 2½ years under Obama, the debt has grown to where it stands today.

Of the $14.27 trillion national debt, some $4.62 trillion is money the government owes itself — mostly money borrowed from Social Security revenues. Without it, the “debt held by the public” is $9.65 trillion.

According to Obama administration figures, just over $3 trillion of the $14.27 trillion debt can be attributed to Bush-era tax cuts, the wars in Iraq and Afghanistan and the Medicare prescription drug program. Stimulus spending by Obama and tax cuts he signed into law accounted for about $600 billion through last Sept. 30.

If there are no changes in government policies, the debt will soar to $18.76 trillion by 2014 and $20.8 trillion by 2016, according to administration projections.

 

Massachusetts poll hints at national political shift

By Danny Butler

WASHINGTON (UTC/AP) — Voter discontent with the direction of the government, economy and the health care overhaul helped send Republican Scott Brown to his Senate victory in Massachusetts, a poll says.

About 63 percent of Massachusetts voters in Tuesday’s election said the country is seriously off track, and Brown won two-thirds of those voters, according to the poll by The Washington Post, the Henry J. Kaiser Family Foundation and Harvard University’s School of Public Health.

In contrast, Barack Obama had solid support from the more than 80 percent of Massachusetts voters in the presidential election who viewed the country as off-course in November 2008.

Nearly two-thirds of those who supported Brown over Democrat Martha Coakley said their vote was intended partly to show opposition to the Democratic agenda in Washington, including the health care overhaul. Rather than just blocking proposals, three-quarters said they wanted to see Brown work with Democrats to get GOP proposals into legislation in general; nearly half said that specifically about the health care legislation.

Among other poll findings:

  • Half of Massachusetts voters believe government should do more to solve problems; that’s down from 63 percent when Obama was elected. The large pool of voters who saw government as overreaching helped Brown claim victory.
  • Health care and the economy were cited as the most important issues. Among voters for Brown, those issues were closely followed by the economy, jobs and “the way Washington is working.”
  • About 43 percent of Massachusetts voters back the health care proposals supported by Obama and congressional Democrats, while 48 percent oppose them. The majority of those who opposed the measures backed Brown, saying the Democrats’ plan would make things worse for their families, the country and Massachusetts.

The findings cover voter sentiment in Massachusetts but offer a hint of broader political shifts nationwide that have put Democrats on the defensive

Copyright 2010 The Associated Press