Why Supply Siders Like a rising Debt
Six keys to understanding supply-side debt strategy
- Eventually they want it to come down, but first they want it to go up.
- What they really care about:(1) Dick Cheney summed it up: "Reagan proved that deficits don't matter." This is how he justified the huge tax cuts for the rich at the start of G. W. Bush's presidency. This shows that he knew the voodoo does would not work and that tax cuts would turn budget surpluses in to deficits. ♦ Lower taxes, and ♦ Smaller government.
- Lower taxes cause rising debt (no, the voodoo(2) The voodoo part of supply-side economics is the claim that reducing tax rates causes rich people to pay more tax. Of course the rich like this theory a lot. The "idea" is that with lower tax rates, the rich will be inspired to work harder and this will make them so much richer that they will actually pay more taxes. Instead, the government just had to borrow. does not work).
- Rising debt causes pressure to cut spending and raise taxes.
- The Republicans pledge not to raise taxes, so spending must be cut.
- The Republicans block military cuts, so middle-class programs must be cut.
- That’s smaller government. And this is how supply siders use debt to “strangle” the American government.
April 17, 2006. The first year, under Reagan, it was an accident—the supply sidersactually believed their own nonsense, but it soon became a plan. That’s why it has gone on for 16 [now 20] years under Republicans. The national debt is aimed at Social Security, Medicare and other government programs for the middle class. If left unchecked it will kill them. So far the federal deficit has borrowed more than $1.6 trillion [now $2.5 T] from the Social Security Trust Fund, and Republicans are warning that it’s going to be hard or impossible to pay it back.
Why? Because, with the national debt high and rising, taxes cut and tax increases blocked, repaying the debt to Social Security (and the workers and businesses who put their money into it) would require unacceptable borrowing or impossibly large cuts in military spending.
National Debt under Clinton
Clinton stopped the bleeding in just three years and then dropped the debt from 67% to 57% in his last five years. Bush wasted no time in reversing this progress and is now forecasting that he will achieve the highest ratio of debt to GDP in 50 years.