All this sequester talk is boring isn’t it? I admit that it is, but it makes my mind wander differently than most people. It has made me take a deep look at how our nation has been spending its money over the past 20 years.
While the talk of the sequester has been mostly dull, I hear an interesting nugget every once in a while. One friend of mine compared the budget cuts to a forced amputation, in which you get to choose which limb you have to cut off.
I had to ruefully inform him that if any “limb” of the budget is going to be cut off, it’s not going to be any of the initial two arms and two legs, but one of the many extraneous limbs that have sprouted since the ’90s.
In 1997, Congress passed the Balanced Budget Act, and during the following year, the federal government actually spent less money than it was taking in for the first time in eons. America’s fiscal house was coming to order. After President Clinton left office, President Bush stepped in with his “Compassionate Conservative” mantra.
Bush immediately cut taxes, but also increased spending. He had a hard time vetoing any bill that came across his desk. He had gone back to spending money that America didn’t have. This is where the extra limbs began to sprout at record rates. By the end of President Bush’s second term, America’s $800 million budget surplus had collapsed into a trillion-dollar deficit.
What happened? Was it the lower taxes? Or the increased spending?
In 2008, I was sure that sanity was within reach when then-presidential candidate Barack Obama denounced the $4 trillion national debt that President Bush had accumulated as unpatriotic and vowed to cut it in half by the end of his first term as president.
At the end of his first term the deficit was over $16 trillion and counting. I think its fair to say that this going in the wrong direction.
The reason a lot of this big spending happened is because the president included a provision in the spending legislation that would allow spending cuts to come later in attempt to compensate for the growing government. That provision is the infamous sequester. But the $85 million in cuts is a very small drop in the $16 trillion bucket.
Now President Obama says that we cannot cut our way to prosperity. He is right.
But we can’t tax our way there either. At least not alone. We need both to close the gap.
But that gives rise to a tough question that no one seems to be answering: Which one strayed the farthest away from the equilibrium of the balanced budget of the ’90s? The tax rate or the spending rate?
In 2007, when President Bush’s tax cuts were in effect, the government brought in record amounts of tax revenue. It still was not enough to close the deficit. It should also be noted that despite the evidence that the economy was growing at the time, job creation was still horribly stagnant. Why must economics be so complicated?
Now that it’s clear we need both taxes to rise and spending to fall, which of those do we need more of to get back to the ’90s?
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