Dear Scumbria:
You're memory is faulty. In 1981, Congress gave Reagan his Tax cut, but did not restrict domestic spending in any real way. Reagan wanted domestic spending cut far more than was done by the House controlled by Democrats. Furthermore, he was not believed that tax collections would rise after the tax cut, but that is exactly what they did. Had the budget passed in its entirety, it would have been in balance.
In later years, the big S&L bailout, contributed to the deficit (>$1 Trillion IIRC). I was with the minority that wanted these large institutions to fail and protect only the smaller investors (those under FDIC only). If large investors do not do the due diligence required, they should take the fall.
Bush, Sr. contributed the fall of the USSR, put the economy back on sound footing, and stopped Iraq. The House fought him and Reagan all the way. They had help however from the Southern Conservative Democrats to help and a few other exceptions. Tax collections continued to set record year after record year. The problem was always that House expanded spending faster than the revenue growth. Bush at least got the adherence to spending caps with a growth rate below the tax collection increase rate. The transition caused a small recession which we were getting out of before the election of 92 but, unfortunately, we could not definatly see that till after the election.
Bill Clinton had both houses to help him and his budget. But he always put the spending reductions toward the back of his ten year budgets. Thus the deficit would rise the first few years and then start to come down later. His 94 budget was somewhat different, it went down in the middle but then rose (and continued to rise) in the "out" years. They were all multi hundred billion in size with ones over 300 billion in far out (>10) years.
The Republicans came back with one that would get balance by 2007 or so. They passed one using the more worse case CBO estimates to be in balance by 2004. Well, CBO was far more pessimistic than anyone believed, and we got balance in 1998-9 time frame. Clinton originally claimed it could not be done. Well, with some restraint by the House weakened by Clinton with his pet pork barrel projects, it was done.
AG stated that there is a good chance that the debt go could to zero by 2007 if no additional spending or tax cuts were made.
He had a problem with the transition from a reduce deficit budgeting to balanced budgeting which would shock the economy when the defecit would hit zero. He also stated that in practical terms, we would see problems retiring bonds and T-bills that were not mature. He stated that we would probably have to pay an enormous premium to buy those securities back rather than merely waiting for them to mature. Due to this effect, he said that for all practical purposes, it would take 20 some years for actual no debt to be realized. He warned against the government holding too much claims on private assets. He would prefer that the government be as close to zero debt (or profit) as possible as this would maximize growth and the economy.
Thus he basically said that we should move slowly and deliberately to a budget in balance. He would prefer that it be brought into balance by tax cuts rather than increased spending. He also wanted the tax cuts to have a mnechanism to increase or decrease the size as needed to keep the budget in balance and the debt at or near zero.
The admission by AG that the new situation, that he always wanted for the US to get to, was never really considered as possible is now quite probable, was pleasantly shocking to hear. And for the first time, he noted some of these problems when, at last he considered the actuality of accomplishing this long awaited goal.
I hope you see or read the transcript of his testimony Thursday.
Pete |
