There are a lot of Republicans like my Dad who vote Republican largely based on the perception Republicans are the party of fiscal responsibility. This perception comes from the 1950s when Republicans were actually fiscally responsible. However, starting in 1980 and the “Reagan Revolution”, that changed. The Republicans became the party of “borrow and squander”. Regrettably, they have left the US with a legacy of debt that will burden our children, grandchildren and probably our great grandchildren. Moreover, as the US population ages and the baby-boomers retire, it could crush the US’ national budget.
Below I will run through a history of US budget deficits and total debt. There is some debate among various economic factions about what debt to use when discussing the US’ public debt which is divided into publicly held debt and intra-governmental debt. Publicly held debt is debt held by the public. Intra-governmental debt is held by various government agencies when they borrow from one another. I will use the total amount of debt which totals the combined public and intra-governmental debt. The reason is simple: regardless of who holds the debt. it is still a debt obligation of the US government and much be paid off on maturity.
All of the information here is derived from the Congressional Budget Office and the Bureau of the Public Debt.
Before we delve into the actual fiscal record of the various administrations, I want to deal with the Laffer curve. This economic theory states that tax cuts will eventually pay for themselves because lower tax rates will empower individual taxpayers to work harder because they are keeping more of their money. This harder work in turn leads to increased tax revenue. The Reagan administration used this theory to cut tax rates in 1981. However, it is very important to note that before this theory came into prominence among conservative ideologues, tax revenue from individuals was already increasing, essentially doubling every ten years. From 1962 – 1970 revenue from individual taxpayers increased from 45 to 90 billion dollars (non-inflation adjusted) and from 1970 revenues from individual taxpayers increased from 90 billion – 244 billion (non-inflation adjusted). The point of these previous observations is many factors aside from marginal tax rates are responsible for increased revenue from individual taxpayers.
Reagan
The beginning of the 1980s marked the Republican’s return to power, as Regan took control of the presidency and the Republicans gained control of the Senate.
Reagan used the Laffer curve to justify cuts in marginal tax rates. As a result, tax receipts barely increased from 1981-1984, when receipts from individual taxpayers were 285 billion, 297 billion, 288 billion and 298 billion respectively. At the same time, outlays increased from 678 billion to 851 billion, respectively. As a result of the difference between receipts and expenditures, the federal budget deficit increased from 73 to 188 billion from 1981-1984. This pattern of events established in the early 1980s by the Republicans is clear: cut taxes on the wealthy, increase spending and hope the Laffer curve works.
Reagan raised taxes in 1983 as a result of his administrations concern over the growing federal debt load. However, he did not curtail his spending
Ronald Reagan started his term with total debt outstanding of 930 million and increased total debt outstanding to 2.7 trillion. This is a 13.71% compound annual increase. He never balanced a budget.
Bush 41
The biggest point of Bush’s presidency was his breaking the “no new taxes” pledge. However, it is important to note this was the fiscally responsible thing to do. It is also important to note that the increased taxes did not help the budget situation in the slightest. Receipts from individual taxpayers increased from 991 to 1091 billion. At the same time, federal expenditures increased from 1.064 trillion to 1.381 trillion.
Bush I started his term with outstanding debt of 2.7 trillion and increased total debt to 4 trillion. This is a 10.32% compounded annual increase. He never balanced a budget.
Bush II
Bush essentially tried to do the same thing Reagan did – cut taxes and increase spending. He cuts taxes for the wealthy which decreased tax revenue from individuals from 1.991 trillion to 1.880 trillion. At the same time, he increased spending in turn increasing the deficit from 32 billion in 2001 to 567 billion in 2004.
Bush II started with 5.6 total outstanding debt and increased total outstanding debt to 7.7 trillion. This is a 6.5% annual increase. He has never balanced a budget.
Conclusion
Simply put, the Laffer curve is better named the Laugher curve; it is a joke. Tax revenue increases are just as likely the result of GDP growth.
More importantly, Republican economic thinking has dominated national economic policy for 17 of the last 25 years. It has accomplished nothing more than indebting this country for numerous future generations.