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Tuesday, May 03, 2011

Report: Bush administration and its neocon policies bear primary responsibility for rapid collapse of U.S. economy

How U.S. squandered its finances in 10 years

(The Washington Post) -- by Lori Montgomery --

WASHINGTON — The nation's unnerving descent into debt began a decade ago with a choice, not a crisis.

In January 2001, with the budget balanced and clear sailing ahead, the bipartisan Congressional Budget Office forecast ever-larger annual surpluses for the foreseeable future. The outlook was so rosy, the CBO said, that there would be enough money by the end of the decade to pay off the nation's debt.

Voices of caution were swept aside in the rush to take advantage of the apparent bounty. Politicians chose to cut taxes, jack up spending and, for the first time, wage two wars solely with borrowed funds.

"In the end, the floodgates opened," said former Sen. Pete Domenici, R-N.M., who chaired the Senate Budget Committee when the first tax bill hit Capitol Hill in early 2001.

Now, instead of tending a nest egg of more than $2 trillion, the government expects to owe more than $10 trillion to outside investors by the end of this year. The national debt is larger, as a percentage of the economy, than at any time in U.S. history except for the period shortly after World War II.

Polls show a large majority of Americans blame wasteful or unnecessary federal programs for the budget problems. But routine increases in defense and domestic spending account for only about 15 percent of the financial deterioration, according to a new analysis of CBO data.

The biggest culprit, by far, has been an erosion of tax revenue triggered largely by two recessions and multiple rounds of tax cuts. Together, the economy and tax bills enacted under former President George W. Bush, and to a lesser extent by President Obama, wiped out $6.3 trillion in anticipated revenue. That's nearly half of the $12.7 trillion swing from projected surpluses to real debt. Federal tax collections now are at their lowest level as a percentage of the economy in 60 years.

Big-ticket spending initiated by the Bush administration accounts for an additional 12 percent of the shift. The Iraq and Afghanistan wars have added $1.3 trillion in borrowing. A new prescription-drug benefit for Medicare recipients has contributed $272 billion. The Troubled Assets Relief Program bank bailout, which infuriated voters and led to the defeat of several legislators in 2010, added only $16 billion — and TARP eventually may cost nothing as financial institutions repay the Treasury.

Obama's 2009 economic stimulus, a favorite target of Republicans who blame Democrats for the mounting debt, has added $719 billion — 6 percent of the total shift, according to the new analysis of CBO data by the nonprofit Pew Fiscal Analysis Initiative. All told, Obama-era choices account for about $1.7 trillion in new debt, according to a separate Washington Post analysis of CBO data over the past decade. Bush-era policies, meanwhile, account for more than $7 trillion and are a major contributor to the trillion-dollar annual budget deficits that are dominating the political debate...MORE...LINK

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