Nel's New Day

September 16, 2011

Where the Country’s Money Went

Filed under: Uncategorized — trp2011 @ 6:08 PM

Why does the United States have such a high deficit? Right now it’s in the neighborhood of $12.7 trillion—a pretty pricy neighborhood although less than last January. So how did this amount double in the last decade?

Over their 10-year lifespan, George W. Bush’s tax cuts from 2001 and 2003 reduced tax revenues by around $2.4 trillion, with $474 billion of that coming in the first four years. The first-term impact of those tax cuts is equivalent to about $574 billion in today’s dollars, or about 1.1 percent of gross domestic product.

President Obama signed two major pieces of tax-cutting legislation into law. The first, the American Recovery and Reinvestment Act, directly reduced a family’s income tax bill by up to $800 and reduced tax revenue by about $116 billion. The act also patched up the alternative minimum tax, providing $70 billion in tax cuts, and cut a wide array of business taxes, together totaling another $60 billion. All told, the Recovery Act included $243 billion worth of tax cuts through 2012.

The biggest piece of another tax-cutting law, The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, was the two-year extension of all the Bush tax cuts and alternative minimum tax relief at a cost of more than $400 billion. (Remember the tantrum that conservatives had until this was passed?) In addition, the deal extended a variety of business tax cuts and incentives, which reduced revenues by some $150 billion and cut the estate tax—a tax paid by only a very few super-wealthy, massive estates—by $65 billion. (Again, the temper tantrums.) The bill also cut the payroll tax paid by employees by 2 percentage points, delivering more than $110 billion in tax cuts to working Americans. With all these combined, President Obama has already signed into law tax cuts amounting to more than $900 billion from 2009 through 2012.

What upsets conservatives, however, is that Obama’s tax cuts are far more targeted at the middle class than the ones from Bush. While his tax cuts gave more than half the benefit to the richest 20 percent, 85 percent of the Making Work Pay tax credit went to the bottom 80 percent of households. Because the very wealthy don’t pay payroll taxes on all of their income, the payroll tax cut, too, benefits the middle class much more than the Bush tax cuts did.

Bush’s $2.4 trillion plus Obama’s $.9 trillion comes to over $3.3 trillion. At the same time the cost of the Iraq and Afghan “wars” has passed $4 trillion—and that’s without the regular military expenditures. Homeland Security efforts have added another $1.1 trillion.

Combining the loss of revenue with the extensive expenditures to make people in the United States feel safer has resulted in at least $8.4 trillion—two-thirds of the current deficit. The $12.7 trillion deficit means that each one of 312,228,615 people in the United States owes $40,668.38. Without the lowering of taxes, the wars, and the homeland security, each person in the United Stateswould owe $26,898.77.

Without these expenditures and lack of revenue, better leadership during Bush’s two terms could have further reduced the deficit. President Clinton had developed a plan that could have paid off the deficit in the next decade. Instead Bush lowered the taxes at the same time that he went into war, a sure bet for disaster, and then led the country into another disaster when the housing bubble exploded, causing high unemployment and home foreclosures. Throughout his tenure, Bush encouraged people to spend more money than they had in the mistaken belief that this would strengthen the economy. Then he pushed them into buying houses that they could not afford because he believed that all people should own houses rather than renting their homes. Losing taxes from all the resulting unemployed people led the economy on a drastic downward spiral. Conservatives are still doing nothing to save the country from this crisis.

The next time that someone cries about how our children and grandchildren will have to pay for the sky-high deficit, explain to them that the only solution is to add revenue from the people who have sacrificed nothing for the past decade—and won’t feel any sacrifice if their taxes are raised now. The people of the United States have made the choice to pay trillions of dollars into the military and homeland security so that can be protected. It’s the freedom of the voters who much now live with the results.

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