The Big Federal Credit Card
by Jeff Scott

I am a fiscal conservative, and I want lower taxes for all Americans. That's why I am a Democrat who voted for Al Gore.

Forget the rhetoric, look at the facts at http://www.publicagenda.org.  Click "federal budget" in the left-hand margin.  All data in this message is from these graphs.

Now click "federal spending".  Who are the bigger spenders, Republicans or Democrats?  Annual federal budgets increased 50% from $1T (trillion) per year to $1.5T per year under Reagan and Bush from 1980 to 1990. Under Clinton/Gore, those budgets stayed nearly constant below $1.55T until the 1995 Republican congress came in, and since then have grownmodestly to $1.62T in 1999.  All these figures are in constant 1996 dollars.

That is a lot of money.  Where is it all going?  Shouldn't we be spending less?  Yes we should, but look at the numbers.  Click "federal budget expenditures" for the pie chart for 1999.  Social Security and Medicare/Medicaid are almost $700B (billion), but those are funded by specific, regressive taxes: you pay a large percentage of your income for these programs, but wealthy people do not.  So let's look at how the government spends its income tax money.

Defense, veterans benefits and other retirement: $400B total.  No cuts there, right?

Interest on the debt.  Interest payments for money the government owes to people it borrowed money from to cover the federal deficits during our lifetimes.  $229.7 Billion in 1999.  Billion.  Almost $1000 for every man, woman, and child in the United States, every year.  More than the government spends on education ($56B),
unemployment ($23.6B), housing ($27.7B), food assistance ($33.1B), family support ($19.1B), the earned income tax credit ($25.6), and foreign aid ($15B) combined. The rest of the budget is roads ($42.5B), justice
($25.9B), and everything else ($88.7B).  Yes there are savings to be had here, but it is dwarfed by the interest payments on the debt.

So, all of the argument about income taxes and how we spend them is over these $600B and change, and almost $230B is interest on the debt.  Money we pay every day, almost $700 million per day of your hard-earned money and mine, and we get nothing for it.  Nothing.  And it goes on forever! We pay it every year, forever!  Until the country either defaults on its debts (a bad idea), or pays off its debts (a better idea).

How much debt?  $5.6T.  Trillion, with a T.  Almost $25,000 for every man, woman, and child, put on the federal credit card in our lifetimes.

Whose fault is this debt and the resulting interest payments that suck up our tax money today?  Click "federal debt" or "federal deficit/surplus".  Ronald Reagan came in 1980, campaigning as a deficit hawk and blasting Carter for running deficits and borrowing money.  The accumulated deficit in constant 1998 dollars was a total of $400B during Carter's four years.  Under Reagan, the annual deficits ballooned, peaked at almost $300B (1996 dollars) in 1985, and stayed above $260B per year through Bush's term. Whose fault was it?  The Democratic Congress?  There is plenty of blame to go around, but a Republican president signed every one of those budgets into law.

Under Clinton/Gore, those deficits have dropped rapidly, and the US government finally stopped borrowing money in mid-1997.  How did we eliminate the deficits under Clinton/Gore?  Well, as noted, we stopped
spending more and more money every year.  We also raised taxes on the wealthy.  Click "top federal tax rates".  When Reagan came in 1980, one of his first actions was to lower taxes for the rich.  The top marginal
rates (the percentage the wealthiest person in America pays on their last dollar of income) dropped from 70% to 50% in 1981.  It dropped again to 30% early in Reagan's second term.  That is a major reason why we got into debt in the first place (another was the defense buildup that won the Cold War).  One of Clinton's first acts was to bring that rate back up to 40%, where it has stayed ever since. Painful for those in the top bracket, but hardly radical.

Don't we all pay enough in taxes?  Isn't it unfair to make the wealthy pay so much?  Our total total tax burden in 1996 was 28.5% of our economy, equivalent to Japan and the lowest of any other industrialized nation.  The wealthy pay a disproportionate share, which is only fair. But note that the top tax bracket in the US is 39%.  I pay almost the same percentage of my income in federal taxes as the super-rich, and you probably do too.  Why?  Because we pay social security and medicare taxes on every dollar we earn, while they do not.  (Finally, I have never forgotten that my taxes went up under Reagan, not down.  I went to college in 1981, the same year that Reagan eliminated the tax deduction for interest paid on student loans, and in fact instituted a 10%
"origination fee" for student loans.  I was borrowing money from a bank, not costing the US government a dime unless I failed to pay it back, and yet I had to pay 10% of what I borrowed to the feds before I even got the check from the bank.  That's enough to make anyone a Democrat.  There are other examples of ways the
little guy got screwed while the wealthy paid less.  It has never been different.)

While I'm on the subject of taxes, it annoys me that Dick Cheney is saying in his speeches that federal taxes are
increasing as a percentage of the economy (GDP).  The truth is that federal expenditures peaked at 22.9% of the economy early in Reagan's second term in 1985,and have fallen steadily under Clinton/Gore to 18.7% of
GDP in 1999.  If Reagan managed to spend at 22.9% while holding the tax burden lower than it is now, it was only because he was willing to borrow the money rather than taxing to cover his expenditures, leaving us with
that huge debt today.

To summarize, I have always heard Republicans say they want a smaller federal government and lower taxes.  But I have watched closely in my lifetime, and they have never delivered.  They have raised my taxes while cutting taxes for the wealthy, and they built up a massive debt so that now the government wastes more money on interest payments then it has ever spent on all the programs the Republicans have always complained about, programs that help real people every day.

So here we are.  We're in a hole, a $5.6T hole.  We're there in part because we cut taxes on the wealthy under the last Republican administrations.  Because we're in a hole, we pay hundreds of billions of dollars a year for nothing, forever, more than 30% of your income taxes and mine.  Under Clinton/Gore, we stopped digging deeper, and started filling the hole in.  Gore wants to stay the course and keep filling the hole in, so eventually we won't have to pay that interest money every year, and we can all pay less.  What does Bush want?
Surprise!  A giant tax cut, half of which will go to the wealthiest 1% (not you and not me).  In 1997
those wealthiest 1% paid 33% of the taxes, but they also made 17.4% of the money, more than the whole bottom 50% of the people.  We have a huge gap between rich and poor in this country.  In this country you can become fabulously wealthy and keep most of your money.  It's a great country, and those who benefit from it most should pay their share to keep it going.  So,when/how will Bush pay off the debt with this tax cut?  Answer: he won't.  Same song, different decade.  And this W is no Ronald Reagan.

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