How America Got So Deeply in Debt
Allen W. Smith, Ph.D.
Federal budget deficits and the soaring national debt are now very much in the news, and they have become a major concern for many Americans. That is good, but the question I would like to shout out from the mountain top is, where have all these journalists and concerned Americans been for the past 28 years? They are a quarter-century too late to nip the problem in the bud.
In 1981, the public debt reached $1 trillion for the first time ever. It had taken 200 years, and the combined deficits of all the presidents from George Washington through Jimmy Carter, to accumulate that first $1 trillion. But then, the nation threw caution to the wind and began traveling a course that would eventually lead it to the brink of national bankruptcy. Just during the next 12 years, the debt skyrocketed from the $1 trillion, that took 200 years to accumulate, to an astronomical $4 trillion!
Where were all the critics of big deficits at that time, when they were so badly needed? I was a critic during those years, but I certainly didn’t have much company. I began writing a self-syndicated weekly newspaper column, in 1990, called “Economic Alert,” that appeared in 30 papers, Week after week, I warned readers about the disastrous economic path the nation was following. But messengers of bad news are never welcome. I became a target of those who didn’t want the American people to know about the huge deficits and skyrocketing national debt that were resulting from the practice of Reaganomics. I received many hostile letters, and was called “un-American” a “Marxist” and many other choice names.
When Bill Clinton became president, he pushed a deficit-reduction package through Congress, that included both higher taxes and cuts in government spending. The deficits gradually diminished during Clinton’s first six years, and, during the last two Clinton years, the nation experienced small budget surpluses, after 38 consecutive years of deficits. But not all of Clinton’s actions were positive. He misled the public into believing that there would be large budget surpluses for at least a decade, thus creating the dangerous budget-surplus myth.
President George W. Bush pushed through Congress huge tax cuts under the guise that the government had large amounts of surplus money. Bush led the government back into deficit territory during his first year in office, and the deficits just got bigger and bigger throughout the rest of his presidency. When Bush turned over the reins of power to President Obama in January 2009, the national debt, which had been $1 trillion in 1981, and $5.7 trillion when Bush took office in January 2001, was more than $10.6 trillion.
In 2008, the unthinkable happened. At a time when the nation was already spending massive amounts of borrowed money on two wars, the nation’s banking system and the economy went into free fall, and we came much closer to a 1930s-style depression than most Americans realize. The financial system had to be bailed out, and the economy had to receive a large stimulus, in order to keep the nation from plunging into another great depression. This action has contributed enormously to the large deficits and the growth in the public debt in the short term.
We, as a nation, must acknowledge the reckless financial and economic policies of the past and resolve to make a major change in course as soon as the economy recovers enough to minimize the risk that stringent new fiscal polices might throw the economy back into a recession, or worse yet, a depression. But, let us not forget that more than 90 percent of the $10.6 trillion national debt that Obama inherited was accumulated during the years between the beginning of Ronald Reagan’s presidency and the end of the George W. Bush presidency.
Allen W. Smith, is Professor of Economics, Emeritus, Eastern Illinois University. The author of seven books, including his newly published, “THE BIG LIE,” Smith has been researching and writing about Social Security and government finance for the past ten years. Visit his website at www.thebiglie.net.