My blogfriend Moe posted this recently. What a great historical perspective her post provides. Can it be any more clear that the election of Reagan in 1980 marked a hugely important tipping point in our fiscal history? Pre-Reagan: government funded with taxes. Reagan and beyond: government funded with debt.

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I have been saying for years that the orthodoxy of tax cutting that originated back in the Reagan administration is as responsible for today’s vast deficits and federal debt as over-spending. After all, say what we will about FDR and the New Deal, or Johnson and the New Society — at least through the 1970s we pretty much paid for the government we demanded. Jimmy Carter left office with less than $1 trillion in federal debt. Since then, though, it has exploded, driven by both steadily rising spending and by tax cutting measures. Debt doubled under Reagan, and nearly did so again under Bush 43. By the time we get to Obama, debt is piling up at the rate of more than $1 trillion a year.

As a result, I have been highly critical of Tea Party and other right-wing types who espouse a “cut spending, cut taxes” view of fiscal policy. I believe that deficits and the resulting debt are the great threat to our future. Tax cuts in this environment are not merely illogical, they are irresponsible. If your family is deeply in debt, you work to cut spending and raise your income. You don’t cut spending and ask your boss to cut your pay. We cannot in good conscience cut today’s taxes, which raises the deficits and puts an even greater burden on future generations.

Now, along comes a front page piece in USA Today, of all places. The headline reads “Tax bills in 2009 at lowest level since 1950“. On average, 9.2% of our personal income is paid in taxes at all levels of government. Our taxes are at their lowest level in 60 years. Let’s have that sink in: lowest in 60 years. What could possibly be the argument for cutting taxes even further than a 60-year low when we are saddling our children and children’s children with more than $1 trillion in debt by the year?

Do you know what is “conservative”? Conservative is paying for what you buy, and not acting like a god-damned socialist and expecting someone else to pay for it instead. Spending cuts and tax increases, please.

Let’s imagine the most improbably successful outcome imagineable for the tea party movement. Suppose they actually managed to obtain a majority in Congress, or at least to unseat the Democratic majority in favor of Republicans. What happens when, two years later, voters see that spending has increased again, and federal debt has continued to rocket upward? To paraphrase Mr. Grayson from Kentucky, what happens when people learn that honking horns does not solve traffic? The Tea Party movement seems to be based on the notions that government spending can be controlled without shrinking popular programs, and that government debt can be curtailed without increasing taxes. Both are absurd fantasies. So is the idea that Republicans have any intention of reducing spending or reducing federal debt. What happens when that lesson is learned?

There are only two possibilities, mathematically speaking — either we have a balanced budget, or debt goes up. Can people of all political stripes agree on that?

Here is my question to my friends on the conservative end of the spectrum. Assuming that continuously increasing debt is intolerable, we must balance the budget, right? Okay, how do we accomplish that? There are only two variables in the balanced budget equation: spending and taxation. But you flatly reject taxation as a solution. So that leaves us trying to balance the budget ENTIRELY through spending cuts. With the deficit running at $1.3 trillion annually, we would need spending cuts in that amount to balance the budget. I would be curious just what cuts you have in mind of that magnitude. If you cannot cut $1.3 trillion in spending, and if we cannot raise taxes, then how is it mathematically possible to balance the budget? And if you cannot balance the budget, are you not advocating for for increased federal debt? The math is inescapable.

Here is my question to my friends on the liberal end of the spectrum. This is a breakdown of Obama’s FY2010 budget:

Mandatory spending: $2.184 trillion (+15.6%):
$695 billion (+4.9%) – Social Security
$453 billion (+6.6%) – Medicare
$290 billion (+12.0%) – Medicaid
$0 billion (−100%) – Troubled Asset Relief Program (TARP)
$0 billion (−100%) – Financial stabilization efforts
$11 billion (+275%) – Potential disaster costs
$571 billion (−15.2%) – Other mandatory programs
$164 billion (+18.0%) – Interest on National Debt

Discretionary spending: $1.368 trillion (+13.1%):
$663.7 billion (+12.7%) – Department of Defense (including Overseas Contingency Operations)
$78.7 billion (−1.7%) – Department of Health and Human Services
$72.5 billion (+2.8%) – Department of Transportation
$52.5 billion (+10.3%) – Department of Veterans Affairs
$51.7 billion (+40.9%) – Department of State and Other International Programs
$47.5 billion (+18.5%) – Department of Housing and Urban Development
$46.7 billion (+12.8%) – Department of Education
$42.7 billion (+1.2%) – Department of Homeland Security
$26.3 billion (−0.4%) – Department of Energy
$26.0 billion (+8.8%) – Department of Agriculture
$23.9 billion (−6.3%) – Department of Justice
$18.7 billion (+5.1%) – National Aeronautics and Space Administration
$13.8 billion (+48.4%) – Department of Commerce
$13.3 billion (+4.7%) – Department of Labor
$13.3 billion (+4.7%) – Department of the Treasury
$12.0 billion (+6.2%) – Department of the Interior
$10.5 billion (+34.6%) – Environmental Protection Agency
$9.7 billion (+10.2%) – Social Security Administration
$7.0 billion (+1.4%) – National Science Foundation
$5.1 billion (−3.8%) – Corps of Engineers
$5.0 billion (+100%) – National Infrastructure Bank
$1.1 billion (+22.2%) – Corporation for National and Community Service
$0.7 billion (0.0%) – Small Business Administration
$0.6 billion (−14.3%) – General Services Administration
$19.8 billion (+3.7%) – Other Agencies
$105 billion – Other

Why must we have a 13.1% increase in discretionary spending? Isn’t that the height of irresponsibility in these times? The economy is booming again. The stock market is up by 60% in the past year. The massive job losses  of 2007-08 have ended, and all signs point to job creation around the corner as the economy continues to expand. Surely we can have a budget that acknowledges the economic drag that $1.3 trillion annual deficits, and $13 trillion of cumulative federal debt, have.

No matter how I look at things, I come back to the same conclusion. Ideologues are America’s greatest enemy.

Which president is this?:

This president faced a severe recession early in his administration, which he battled with a combination of tax cuts and spending increases. The stock market responded to the economic improvement with a long, sustained rally. To be sure, federal debt skyrocketed as a result, but that was left for later generations to deal with.

Barack Obama?  Ronald Reagan? The answer is, of course, both.

That’s not to say there aren’t big differences, certainly. Federal debt nearly tripled under Reagan, where it is increasing at “only” about 10% per year under Obama, although from a much higher starting point. The economic crisis Obama has had to battle was far more severe than the Reagan recession. And there’s something we don’t know yet. Reagan’s years ended with a thud: the financial markets in free fall (remember the crash of 1987?) and the economy headed into another recession, which landed during GHW Bush’s term. We don’t yet know if that fate will befall Obama.

My point is, if you find yourself lauding President Reagan and critical of President Bush — or listening to pundits who adopt that posture — you should ask yourself why. Isolate what Reagan did right and what Obama is doing wrong, and then analyze how they are different. It’s harder to do than you may think.

I have been having a very thoughtful exchange with another blogger about these tea parties, and what they represent. It finally dawned on me why I am vaguely mistrustful of the tea party movement, even though I support its basic message. I suspect I differ from most tea-party folk in terms of our understanding of what the ramifications of such a movement will mean.

Much anger is directed at frivolous, wasteful and excessive spending. By all means, let’s light the torches and demand an end to all that. But, once all of that has been taken away — all the Congressional perks, all the earmarks, all the unambiguously pork projects — what do we have? An annual deficit of maybe $700 billion instead of $1 trillion.

People have to be ready for the cold, hard reality that this means large-scale reductions in government services. This may mean that Social Security and Medicare start at 68, not 65. And that grandma has to live in the spare room instead of the nursing home, due to Medicaid cuts. And that I have to fork over $700 for a laptop for my highschooler, because the schools don’t have enough computers. And that expressways become tollways because of cuts in federal transportation funding. And that food plants are inspected less often. And that national parks are closed from November through March. And that we withdraw precipitously from Iraq and Afghanistan. And that the cost to ride Amtrak or mail a letter goes up by 50%.

The list is endless, and more importantly, it isn’t painless. In fact, it will be extremely painful.

Government may be broken, but WE broke it. Candidates told us we could have all these services, and pay less in taxes, too! Glory be! Sign me up!!! We got exactly what we asked for.

There was no betrayal, except of ourselves, by ourselves. We are not the victims, we are the perpetrators. And the pain of restoring order will be our pain, not theirs. I pray that people get that.

I hope that people are rallying for the right things and with the right motivations. It sure would be unseemly if it turned out that most people at yesterday’s “tea parties” were driven solely by the personal desire to pay less in taxes (who doesn’t want that?!!!), and not by a desire to see our country embark on a fiscally responsible future.

What does “a fiscally responsible future” actually mean, when it comes to the federal government? More than anything else, it means that government live within its means. And, as much as any of us hate to admit it personally, that is going to mean we end up contributing more to the government, not less.

Why is this? Our government runs vast deficits. Deficits accumulate into debt. This is not conservative. This is no different than you or I living beyond our means while our credit card balances grow ever larger.

Our federal government essentially adhered to conservative fiscal principles until 1986. Conservatives may not have liked government adding Social Security in the 1930s, massive road construction projects in the 1950s, or Medicare in the 1960s. But, the government paid its bills. Whatever we as a society decided our government should do, we paid for it. Between 1932 and 1980, the top federal income tax rate ranged between 63% and 92% (with a brief bump to 94% during WWII). It was a period of tremendous growth and prosperity in America. When Jimmy Carter left office at the beginning of 1981, federal debt stood at a modest $900 billion.

Then came the dawn of the Age of Tax Cutting. The top federal rate was cut to 50% in 1982, and again to 28% in 1988. It has ranged between there and 39.6% ever since. This would have been a wonderful expression of fiscal responsibly, except for one ugly fact: federal spending continued to rise unchecked: the Reagan years +7.6% annually; Bush 41 +6.7%; Clinton +3.3%; Bush 43 +6.2%. But the federal revenue is not there to support it. Beginning in the 1980s, spending up, taxes down: the federal government no longer could pay its bills.

How have we gotten by? Debt. Debt and more debt and more debt. Since 1980, our federal debt has exploded from $900 billion to $11 trillion. Our pandering politicians decided to further their own interests at the expense of our country’s financial future. They started giving us tax cuts, the political equivalent of distributing crack on the playground. It feels great to pay less taxes, and we can turn a blind eye to the giant pile of debt that builds up.

Now we have reached the point where the current deficits are so steep, and the accumulated debt is so high, that only more taxes can ever address the issue. Ask yourself this: Do you think the political leaders you sent to Congress are going to cut spending by such an astonishing amount that it balances the federal budget? And even if by some miracle that happened, what do you think is going to happen to the $11 trillion that already has been borrowed? Do you think the US is going default on its debt? No. You have to pay it. I have to pay it. There is no Chapter 7 for our government.

For these reasons, I caution people about their desire for tax cuts. Cutting taxes is our dessert. First, we have to eat our vegetables. First, we have to balance our budget and pay back our debts. Dessert will not be served for a long time.