What Is To Be Undone
All the King's Math
Objects in the mirror look more embarrassing than they appear
“There are no morals in politics. There is only expedience. A scoundrel may be of use to us just because he is a scoundrel.” Whoever is stage-managing the remains of the Bush presidency must know his Lenin. Here’s Bush speaking on Feb. 5: “By keeping taxes down, we actually generate strong revenues to the Treasury. … I strongly believe Congress needs to listen to a budget which has no tax increase, and a budget, because of fiscal discipline, that can be balanced in five years.” This after the most bankrupting presidency in the history of the nation. But even deceit pays short-term dividends.
The president was celebrating a budget deficit of $248 billion, down from the record $413 billion two years earlier. He was promising a budget surplus of $61 billion by 2012, three years after he leaves office — assuming that Congress doesn’t stop the Alternative Minimum Tax from wiping out what modest benefit the middle-class enjoyed from the Bush tax cuts; assuming that corporate profits and the stock market continue to break paper records; assuming that Iraq and Afghanistan become gardens of Eden in the next two years; and assuming Social Security and Medicare benefits owed the coming Baby Boomers didn’t exist. Assuming, in sum, that Dr. Seuss came back from the dead to write the history of the next decade (“If I Ran the Zoo, the Sequel”).
The reality is that merely balancing the budget isn’t enough to keep the country from bankruptcy anymore than a household can stave off bankruptcy just by paying the interest on a mass of debt: Sooner or later a small interest rate rise or a mild economic shock collapses the arrangement. The larger the debt, the more painful the collapse. People who bought in on the housing bubble’s gimmickry of deferred or adjustable interest rates in the last few years are feeling that pain now. The nation’s economy as a whole is one big adjustable rate mortgage.
Let’s assume that all of Bush’s projections were to come true and a surplus was realized in 2012. According to the Republican playbook, the story either ends there or reverts to the old ploy of more tax cuts. But the story neglects a small detail: The national debt. During the Bush years, the debt grew from $5.7 trillion to $8.8 trillion, a 54 percent increase. By the time Bush leaves office, it’ll have grown past $10 trillion. In other words, Bush will have saddled the country with more debt than all previous presidents combined, including Ronald Reagan, the previous champion of Republican fiscal discipline.
So what? There’s always been debt. There’ll always be debt. True. But the debt depends on people willing to finance it. As of today, $5 trillion of the debt is held by the public — individual Americans, banks and, increasingly, governments like China, Saudi Arabia, the European Union. At any point those governments could choose to invest elsewhere. If that happens, Americans have to make up the difference. The problem is that Americans are the biggest debtors on the planet, and the biggest among them is their government: $3.8 trillion of the national debt is owed by one part of the federal government to another. Simply put, when Bush spends $2 billion a week on his wars in Iraq and Afghanistan, he’s borrowing that money not only from China or Saudi Arabia, but from future Social Security and Medicare recipients, too. The Social Security trust fund, which is generating a surplus, literally lends the money to the Treasury.
Balancing the budget will fix none of that. Only vast surpluses in the $200 to $300 billion range over several decades can. That’s why the Clinton administration never proposed massive tax cuts when it reversed previous Republican administrations’ Decade of Debt and started running surpluses in the late 1990s: Clinton knew that if the country was to meet its obligations to coming retirees and stay fiscally sound enough for investors to keep their money here, modest surpluses alone wouldn’t do. Debts had to be paid. That means big budget surpluses year after year.
Bush built his economic promises on two lies: That tax cuts would “generate strong revenues to the Treasury” — demonstrably false, considering the near doubling of the national debt (in straight numbers—unudjusted for inflation—tax revenue is at an all-time high, but it's still well below what it was, as a proportion of GDP, in the 1990s: relative to the economy's true size, tax revenue is declining, though government obligations aren't.) Bush's second lie was that balancing the budget is the end game. Why, then, did his administration report last week once again that Medicare and Social Security are heading for bankruptcy by 2019 and 2041 respectively, even as the administration keeps badgering Congress to make permanent the tax cuts that amplified bankruptcy? Because the true end game is to use bankruptcy as a means of ending government programs socially beneficial to tens of millions while rigging the tax code to benefit the nation’s wealth and dividend class — its richest 1 percent and overwhelming profiteers of the Bush years.
None of that is inevitable, especially if the Bush tax cuts of 2001 and 2003 are mostly reversed (preserving the tax cuts for those making $200,000 or less, as Democrats are proposing, is still needlessly generous). But as long as scoundrels run the zoo, collapse is a matter of years, and America’s experiment with mass prosperity a matter of history.