How Republicans created – and now exploit – the debt crisis
Speaker of the House Kevin McCarthy, R-Calif., talks to reporters just after the Republican majority in the House narrowly passed a sweeping debt ceiling package as they try to push President Joe Biden into negotiations on federal spending, at the Capitol in Washington, Wednesday, April 26, 2023. (AP Photo/J. Scott Applewhite)
It’s that time again. A Democrat is in the White House and Republicans control the House of Representatives. Sure enough, the GOP is once again engaging in dangerous political hostage-taking over America’s massive federal debt.
Republicans, in short, are demanding major concessions before agreeing to raise the debt limit. The irony is that the GOP is overwhelmingly responsible for the staggering accumulation of debt over the past four decades. In other words, Republicans are engaging in the political equivalent of starting a four-alarm blaze and refusing to allow firefighters to do their job until someone pays up.
Twice in recent history – in 1980 and 2000 – America was on track to eliminate the federal debt. In both instances, Democratic presidents passed the baton to Republicans who proceeded to balloon the debt, demolishing any hope of paring down America’s IOUs.
In 1981, Republicans (with a major assist from conservative Southern Democrats) passed the then-largest tax cut in history. In a striking abandonment of decades of sound tax policy, President Reagan’s cuts overwhelmingly benefitted the ultra-wealthy.
At the same time, the Reagan administration spent trillions on a massive – and thoroughly unnecessary – military buildup.
Despite negligible economic growth from Reagan’s massive tax cuts for the wealthy, the federal debt tripled. As one Reagan and Bush administration official put it, “In the Reagan years, more federal debt was added than in the entire prior history of the United States.”
Then, in 2000, President Bill Clinton left office with historic budget surpluses. The United States was on track to eliminate the entire national debt – yes, all of it – within a decade.
But just a few months before the Sept. 11, 2001, jihadist attacks, newly-elected Republican President George W. Bush slashed taxes on the ultra-wealthy. Any hope of reducing, let alone eliminating, the debt was shattered for decades to come.
Bush then launched a tragically unnecessary multi-trillion-dollar war of choice, swelling the debt even further.
Now, in the face of conservative historical revisionism, let’s be clear: Clinton’s record budget surpluses are a product of Democrats’ 1993 tax increase on the wealthy, coupled with the booming economy that followed. Republicans who claim that the 1997 passage of (yet more) GOP tax cuts for the wealthy led to the historic Clinton-era surpluses need to check the math.
As noted, the American economy, buoyed by the internet revolution, climbed to soaring heights in the years after Clinton and the Democrats raised taxes on the wealthy. This is a critical lesson that Reagan, Bush and Trump-style “supply-siders” apparently have yet to learn.
Indeed, the theory of “trickle down” economics – the raison d’être of the post-1980 GOP – has been exhaustively discredited. Reagan, Bush and Trump’s tax cuts for the wealthy resulted in no significant economic growth or wage benefits for workers, despite significant declines in revenue. Far worse, the cuts turbocharged inequality.
Ultimately, one does not need an accounting degree to see how massive decreases in revenue from Trump-style tax cuts for the ultra-wealthy, coupled with enormous increases in unnecessary defense spending, led to the explosion in debt that America grapples with today.
A remarkable graphic created by the U.S. Treasury Department drives this point home. Readers should digest how Trump, Reagan and Bush-style tax cuts for the wealthy led to a multi-trillion-dollar swing – from historic budget surpluses to massive debt – in just a few years.
Of note, Obama-era crisis spending (lauded by most economists) to shore up an economy hemorrhaging hundreds of thousands of jobs each month is a drop in the bucket compared to the trillions in revenue lost due to Trump, Bush and Reagan-style tax cuts for the ultra-wealthy.
But the broader implications of the debt are far more profound than the abstract metrics described above.
As trillions in government IOUs stacked up and the very wealthy became ultra-wealthy, the American middle class collapsed. From 1975 to 2018, extreme, Trump-style economic policies led to the transfer of a staggering $50 trillion in wealth from millions of hard-working Americans to the top 1 percent.
Those who lost the most over the past four decades – white, blue-collar Americans – now confront an epidemic of deaths of despair (deaths by alcohol, suicide, opioids and other drugs) unheard of elsewhere in the world. Since economic distress is closely correlated with the rise of extreme political ideologies, it should come as little surprise that this demographic makes up Trump’s base. (Case in point: Most of the individuals arrested following the Jan. 6, 2021, riot had significant financial problems.)
Make no mistake: The debt is a glaring symptom of the dangerous inequality at the root of the political, cultural and social schisms now dividing America. That Republicans continue to engage in political brinksmanship over the debt – a crisis overwhelmingly of their own making – is unconscionable.
Marik von Rennenkampff served as an analyst with the U.S. Department of State’s Bureau of International Security and Nonproliferation, as well as an Obama administration appointee at the U.S. Department of Defense. Follow him on Twitter @MvonRen.