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It’s the Tax Cuts, Stupid!
Critics of the Burgeoning National Debt Just Don’t Get It
598 words
By David Demers
For decades critics of the growing national debt (now at $34 trillion) have been spewing out the wrong reasons for and causes of the debt.
Their most popular theory is that “government is spending too much.”
But, after controlling for inflation, federal expenditures have only increased at a average annualized rate of 2.3 percent since 1980. This rate of increase even includes the $6.2 trillion spent to combat the effects of the Great Recession and the COVID pandemic.
Another popular theory is what I call “debt creep.”
This view was expressed in a July 12 CNN commentary by Maya MacGuineas, president of the nonpartisan Committee for a Responsible Federal Budget. “Our alarming fiscal situation is not the result of any one president, any single emergency, policies on just the spending or the tax side of the budget, or a particular political party.”
In other words, everyone is to blame — even the voters, according to MacGuineas.
The problem with debt-creep theory is that it doesn’t jive with history.
Most of the national debt can be traced to three Republican presidents: Ronald Reagan, George W. Bush, and Donald Trump, all of whom promoted and signed into law tax cuts that resulted in massive windfalls for the wealthy and elephantine wealth gaps.
The wealthiest 10 percent are paying about 50 percent less in taxes today than they did in 1950. In contrast, taxes on the working and middle classes have increased 59 percent. The wealthiest 10 percent have an average of $3.5 million in assets compared with $14,000 for the bottom 50 percent and $140,000 for the middle class (the 50 to 90 percent group).
The national debt increased $1.6 trillion under Reagan, the largest peacetime increase in history at that time. He proposed and signed into law three major tax cuts, which slashed the top earned income tax bracket from 70 to 28 percent and the capital gains tax from 28 percent to 20 percent.
Bush added $4.4 trillion to the national debt, which was three times more than the debt increases during the two-term Bill Clinton or Reagan presidencies. Some of the Bush debt stems from the wars in Iraq and Afghanistan, but, despite these increased costs, he continued to cut taxes on earned income, capital gains, and estates, all of which benefited the wealthy. These cuts denied the government $4 trillion in tax revenues, according to Bobby Kogan of American Progress.
Trump added $7.4 trillion to the national debt, much of which stemmed from his 2017 tax cut bill that slashed the corporate tax rate from 35 percent to 21 percent (but most corporations only pay 15 percent). Kogan estimates that the Bush and Trump tax cuts alone have cost American taxpayers $10 trillion, which represents nearly a third of the national debt.
The bottom line is that spending and debt creep aren’t causing the national debt — failure to collect enough tax revenues from the wealthy is the problem. The national debt has been and continues to fuel the largest transfer of wealth to the wealthy in history.
If Democratic campaign strategist James Carville were serving as an advisor to President Biden’s re-election campaign, I am quite confident that he would provide the following advice to Biden’s campaign workers, “It’s the tax cuts, stupid.”
And if taxes are not substantially increased on the wealthy soon, my estimates show that the national debt will double in 10 years. At that time, the debt will be twice as large as the gross national product, which is the tipping point for financial disaster, according to the Wharton School at the University of Pennsylvania.
*Dr. David Demers is author of Falling Behind: Why Wealth Gaps Are Preventing You and Half of America from Getting Ahead, which will be published in 2025. He has written two dozen books and worked as a professor of communication and sociology at Washington State University before retiring to spend more time writing books. He lives in Phoenix. Portions of the book are available online at https://www.DrDavidDemers.com He can be reached at [email protected] or [email protected]
It’s the Tax Cuts, Stupid!
Critics of the Burgeoning National Debt Just Don’t Get It
598 words
By David Demers
For decades critics of the growing national debt (now at $34 trillion) have been spewing out the wrong reasons for and causes of the debt.
Their most popular theory is that “government is spending too much.”
But, after controlling for inflation, federal expenditures have only increased at a average annualized rate of 2.3 percent since 1980. This rate of increase even includes the $6.2 trillion spent to combat the effects of the Great Recession and the COVID pandemic.
Another popular theory is what I call “debt creep.”
This view was expressed in a July 12 CNN commentary by Maya MacGuineas, president of the nonpartisan Committee for a Responsible Federal Budget. “Our alarming fiscal situation is not the result of any one president, any single emergency, policies on just the spending or the tax side of the budget, or a particular political party.”
In other words, everyone is to blame — even the voters, according to MacGuineas.
The problem with debt-creep theory is that it doesn’t jive with history.
Most of the national debt can be traced to three Republican presidents: Ronald Reagan, George W. Bush, and Donald Trump, all of whom promoted and signed into law tax cuts that resulted in massive windfalls for the wealthy and elephantine wealth gaps.
The wealthiest 10 percent are paying about 50 percent less in taxes today than they did in 1950. In contrast, taxes on the working and middle classes have increased 59 percent. The wealthiest 10 percent have an average of $3.5 million in assets compared with $14,000 for the bottom 50 percent and $140,000 for the middle class (the 50 to 90 percent group).
The national debt increased $1.6 trillion under Reagan, the largest peacetime increase in history at that time. He proposed and signed into law three major tax cuts, which slashed the top earned income tax bracket from 70 to 28 percent and the capital gains tax from 28 percent to 20 percent.
Bush added $4.4 trillion to the national debt, which was three times more than the debt increases during the two-term Bill Clinton or Reagan presidencies. Some of the Bush debt stems from the wars in Iraq and Afghanistan, but, despite these increased costs, he continued to cut taxes on earned income, capital gains, and estates, all of which benefited the wealthy. These cuts denied the government $4 trillion in tax revenues, according to Bobby Kogan of American Progress.
Trump added $7.4 trillion to the national debt, much of which stemmed from his 2017 tax cut bill that slashed the corporate tax rate from 35 percent to 21 percent (but most corporations only pay 15 percent). Kogan estimates that the Bush and Trump tax cuts alone have cost American taxpayers $10 trillion, which represents nearly a third of the national debt.
The bottom line is that spending and debt creep aren’t causing the national debt — failure to collect enough tax revenues from the wealthy is the problem. The national debt has been and continues to fuel the largest transfer of wealth to the wealthy in history.
If Democratic campaign strategist James Carville were serving as an advisor to President Biden’s re-election campaign, I am quite confident that he would provide the following advice to Biden’s campaign workers, “It’s the tax cuts, stupid.”
And if taxes are not substantially increased on the wealthy soon, my estimates show that the national debt will double in 10 years. At that time, the debt will be twice as large as the gross national product, which is the tipping point for financial disaster, according to the Wharton School at the University of Pennsylvania.
*Dr. David Demers is author of Falling Behind: Why Wealth Gaps Are Preventing You and Half of America from Getting Ahead, which will be published in 2025. He has written two dozen books and worked as a professor of communication and sociology at Washington State University before retiring to spend more time writing books. He lives in Phoenix. Portions of the book are available online at https://www.DrDavidDemers.com He can be reached at [email protected] or [email protected]