What caused the Budget Deficit (Before the Financial Crisis)?

[girl gone mad]

What caused the Budget Deficit (Before the Financial Crisis)?
http://ataxingmatter.blogs.com/tax/2010/06/what-caused-the-budget-deficit-before-the-financial-crisis.html


Kash on Angry Bear put together a really good graph in 2006 comparing where we might have been if Clinton policies (bad as they were in many cases) had stayed in place compared to where we were and expected to be with the Bush tax cut and spend policies. http://www.angrybearblog.com/2006/05/responsibility-for-federal-budget.html?showComment=1277476257000#comment-c6522055145002186074">Responsibility for the Federal Budget Deficit, Angry Bear 2006. Deficits under Bush were projected for more than $500 billion annually. Of course, that was before the greedy, reckless banks threw the financial system into a tizzy with too much credit invested in too many houses by people with too little income to pay for them. Add the costs of backstopping the Big Banks, and we end up with the trillion dollar hole we are currently in.

Answer would seem to be--1) make the banks pay with a tax based on leverage and 2) end the tax cuts or at least a goodly share of them and 3) reinstate an estate tax that has some bite, so that those at the top who can afford to pay do pay.

Seems like there are at least a few in Congress realizing that item 3 makes some sense. Sanders, Harkin and Whitehouse have proposed that the estate tax should have a $3.5 million exemption and a graduated rate, with those at the top paying a rate of 65% (a base rate of 55% and a surtax of 10% on the amount above $500 million or above $1 billion for a couple). The surtax would mean that the estate tax would hit the 403 billionaires who have a net worth of $1.3 trillion harder than it hits the smaller estates. See Janet Novack, http://www.forbes.com/2010/06/24/billionaires-estate-tax-duncan-walton-personal-finance-senate-sanders-harkin-whitehouse.html">Three Senators Call for Billionaires Estate Tax, Forbes.com, June 24, 2010. Now that makes some sense.

Senators Kyl and Lincoln are pushing the so-called "compromise" that would eviscerate the estate tax by creating a $5 million exemption and lowering the rate to 35%. That is a step in the wrong direction. Especially when Congress is making such big noises about the deficit that it is unwilling to pass stimulus funding for unemployment benefits to support Americans hard hit by the Great Recession.

[Demeter]

1. Tax Cuts for the Obscenely Wealthy and Illegal Wars of Conquest

[truedelphi]

3. It's the American way. n/t

[Taitertots]

2. The problem was that we weren't paying it down during the good times

We should be paying down the deficit when times are good, so we can borrow to offset shocks. Instead, we have politicians who are afraid to temper the irrational exuberance rampant in our system. Paying down the deficit has to come at the expense of growth, and no one is willing to sacrifice growth for long term stability.

Even worse, we have politicians who run up the deficit to pay for wars of aggression when the country is already in a recession.

[Common Sense Party]

5. I think you mean "debt," not "deficit."

But point taken. We have no politicians in Washington with spines. We have to raise some taxes (on EVERYONE, not JUST the wealthy) and we have to cut some precious spending.

Unfortunately, no one in Congress has the guts to tell their constituents that.

[FBI_Un_Sub]

4. Tax cuts for the Super Rich, The Iraqi War

1. Tax cuts for the Super Rich,
   
2. The Iraqi War
   
3. Tax preferences for the oil, coal, timber industries.
   

[Warpy]

6. Reckless tax cutting caused most of the deficit over the last administration

and squandering money on Empire through lavisihing over 50% of the budget on the Pentagon accounts for the rest.

Stupid's wars were only a small part of the problem, believe it or not. Most of the problem was caused by his sweetheart tax cuts, set to expire in October.

[Festivito]

7. Answer is that Republicans took over. Answer to solve 1,2,3... is going to be UGLY.

The moment that Bush took over, the borrowing began.

Oh, just five percent of GDP! The RepupbliCONNED sycophants would chant.

The RepubliCON machine made up new rules on what constitutes a recession and declared that Clinton left us a recession. BIG SURPRISE.

Result, we BORROW $1500 per person and send each person a $600 check. (We'll spend the rest.)

Real result: MORE BORROWING.

Real end: We're in a hole.