Paul Krugman on Paul Ryan
Can Anybody Tell Me What Bennett McCallum Means Here?

The Collapse of Fiscal Rationality In America

Those of us who worked for the Clinton administration had nothing but amazement and fury at the speed, thoroughness, fecklessness and casualness with which our work was undone by the Bushies in 2001 and thereafter.

Lori Montgomery has a good piece:

Running in the red: How the U.S., on the road to surplus, detoured to massive debt: 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 Congressional Budget Office forecast ever-larger annual surpluses indefinitely. The outlook was so rosy, the CBO said, that Washington would have enough money by the end of the decade to pay off everything it owed. Voices of caution were swept aside in the rush to take advantage of the apparent bounty. Political leaders chose to cut taxes, jack up spending and, for the first time in U.S. history, wage two wars solely with borrowed funds. “In the end, the floodgates opened,” said former senator Pete Domenici (R-N.M.), who chaired the Senate Budget Committee when the first tax-cut bill hit Capitol Hill in early 2001...

I do, however, very much wish she would not let Domenici get away with the passive voice. The floodgates did not open by themselves. Domeneci and his political allies opened them.

How America went from surpluses to deficits  Ezra Klein  The Washington Post

Montgomery:

Now, instead of tending a nest egg of more than $2 trillion, the federal 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 that a large majority of Americans blame wasteful or unnecessary federal programs for the nation’s budget problems. But routine increases in defense and domestic spending account for only about 15 percent of the financial deterioration.... 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 the 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 stand at their lowest level as a percentage of the economy in 60 years....

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....

What to do with the surplus became a central issue of the 2000 presidential campaign.... Bush pushed for a broad tax cut.... As soon as he took office, Bush pushed Congress to make good on his tax pledge. Less than a week after his inauguration, he got a boost from Federal Reserve Chairman Alan Greenspan, who testified before the Senate Budget Committee that “tax reduction appears required” to prevent the federal government from accumulating too much cash. Greenspan feared that large surpluses would turn the government into the nation’s largest investor, creating distortions in the markets. A chorus of skeptics warned against spending the surplus. Some stressed the inherent uncertainty of the CBO projections. Others said a big tax cut would unleash pent-up desire in both parties to pursue expensive priorities without the pay-as-you-go restraints that had helped produce the surplus....

Bush’s first Treasury secretary, Paul O’Neill, resigned after the White House decided to pursue the 2003 measure.... [S]ome key advocates of the tax cuts now say such a large reduction was probably ill-advised. “Nobody would have thought that all these things would have happened after you cut taxes,” Domenici said. “That you’d have two wars and not pay for them. That you’d have another recession. A huge extravaganza of expenditures” for the military and homeland security after the Sept. 11, 2001, attacks. “You would pause before you did it, if you knew.” Bill Thomas, the former House Ways and Means Committee chairman who helped shepherd the tax cuts through Congress, defended the 2003 package as “fuel for the economy.” But he said in an interview that the 2001 measure was larded with “stuff that I was not all that wild about,” including bipartisan priorities such as a big increase in the child tax credit and a break for married couples — provisions Thomas believes did little to promote economic growth and amounted to “throwing money out the window.” “I couldn’t do anything about it,” said Thomas, a California Republican who retired in 2006. “You’re the candy man when you advocate those kinds of tax cuts.”

In the end, Bush cut taxes and spent more money...

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