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Posted by on Sep 4, 2012 in Politics | 27 comments

The debt story that the media seem to willfully ignore

If I asked you which contributed the most to our ongoing debt crisis — the wars in Iraq and Afghanistan or TARP et al or the Bush era tax cuts (2001, 2003) — which would you choose? Me, I thought it was the war effort. But I was wrong.

This chart gives me a headache:

CBPP debt chart, May 2011

This CBPP chart from May 2011 uses CBO data.

What it shows — plainly — is that the Republican tax cuts enacted in 2001 and 2003 and then extended in 2010 have contributed as much to the current federal debt as the wars (initiated under Rs and continuing under Ds), TARP and other mortgage-related programs AND the economic downturn. And an argument can be made that the conditions that allowed the banks to bring the economy to its knees came about because of Republican-led initiatives.

From 2001 to 2005, private lenders’ share of mortgage-backed security issuance rose to 55.2 percent of the market from 19.7 percent.

And we would not have needed recovery measures if we’d not had a financial crisis that threatened the world’s well-being, not just our own.

Ezra Klein shared this chart last week during the RNC.

Republicans [are] blaming Obama for the policies they pushed in the Bush years, and the recession that began on a Republican president’s watch, and a continuation of tax cuts that they supported. They’ll have to. Because if they took all that off the debt clock, there wouldn’t be much debt there to blame him for at all.

Never mind the hypocrisy of Mitt Romney’s rhetoric compared to role as a debtor and his own FDIC bailout when at Bain. From Fortune:

There is a fundamental hypocrisy in a former leveraged buyout investor railing against America’s ballooning debt. Leveraged buyouts, by definition, add debt to a company’s balance sheet — weighing it down in the short-term so that it can (hopefully) thrive in the long-term. Romney defenders point out that America is not the same as a private equity-backed company, a truism that only goes to underscore the flimsiness of using Romney’s Bain Capital experience as a singular qualification for the Oval Office.

Here’s Mitt back in January:

Let [the mortgage/housing crisis] run its course and hit bottom.

Mitt is a do-as-I-say not as-I-do kinda guy. From RollingStone:

[G]overnment documents on the bailout obtained by Rolling Stone … [under the Freedom of Information Act] reveal that Romney’s initial rescue attempt at Bain & Company was actually a disaster – leaving the firm so financially strapped that it had ‘no value as a going concern.’ Even worse, the federal bailout ultimately engineered by Romney screwed the FDIC – the bank insurance system backed by taxpayers – out of at least $10 million. And in an added insult, Romney rewarded top executives at Bain with hefty bonuses at the very moment that he was demanding his handout from the feds.

The Federal Deposit Insurance Corporation is a depression-era institution (1933, Glass-Steagall Act) that provides insurance of $250,000 per depositor per bank. How in the world it got involved in bailing out a private equity firm I still don’t understand.

Nevertheless, you need to share a copy of this chart on Facebook and Twitter and all of your digital social networks. Print copies to give to folks who don’t play with politics online.

Because this is important.

Romney and the Republicans want to extend the tax cuts. LOOK at what that does to the debt. (Remember, the reason the debt effect starts at zero in 2001 is because the BUDGET WAS BALANCED when Bush took office.)

Democrats want to extend the tax cuts for those making less than $250,000. I’d love to see CBPP estimate that that chart would look like.

[Tip: Newsvine]

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  • So there are two hysterical ingredients here:

    One is that the GOP thinks things are free. They talk about “personal responsibility” but also insist that we don’t have to pay for things. That’s what anti-tax rhetoric really is: we don’t want to pay for stuff. This is true because people also don’t want to cut spending (poll after poll that asks specifics on what to cut comes up with “nothing” as the #1 answer). We’ve lost total sight of the fact that things aren’t free and all your favorite programs actualy, well, ya know, COST MONEY!! The notion they continue to spout “underpants gnomes” economic principles such as “a tax cut doesn’t need to be offset with spending reductions” or “reduce taxes = more revenue” or “if you tax the rich less they’ll create jobs” only adds to the stupidity.

    The second hysterical ingredient is the notion that we can cut spending to make up the difference. Look at that chart again. The tax cut portion is just about as large as everything else! You can’t possibly cut enough out of the budget to make up for it. It’s a mathematical impossibility! Put another way: the 2012 budget is about 1/3rd deficit spending. Is there any realistic scenario where 1/3rd of our soending is truly waste and can just be cut? Actually, THIS is the question: is there any realistic scenario where the majority of our legislators can agree that something is waste? Hell no! I think the farm bills are largely waste. Could enough legislators agree to cut it out? No. Even if we did eliminate it outright, could it get us close to 1/3rd of total spending? Not even close. And could farmers be hurt financially if it was cut? Absolutely! Every $ spent benefits somebody, cuts that deep would never make it through Congress.

    I agree that the federal government wastes money. I agree that Congress operates with fiscal inanity. But 1/3rd of the budget cut so the rich don’t have to pay taxes? A completely ludicrous notion.

  • adelinesdad

    “That’s what anti-tax rhetoric really is: we don’t want to pay for stuff.”

    As a conservative-leaning moderate I see a key element missing from conservative thought: the idea, which should be a conservative one, that you should pay for what you buy. Even if you don’t like all the spending, you pay for it, you don’t leave it to future generations to pay for. And you certainly don’t start a war and cut taxes at the same time.

    So I advocate repealing the Bush tax cuts: all of them. If Clinton level tax rates weren’t so bad, as we’re always told, why shouldn’t everyone pay them? Because people are struggling? People who are making less already pay less due to progressivity, so what’s the problem? (A side benefit is that when people see their tax bills go up, they might think harder about all the spending.) What the chart above doesn’t show is that the majority of the cost of the tax cuts were for the middle class–cuts Democrats also want to keep. (Democrats, do you really want to admit that Bush was right about most of the tax cuts?) So, even if the Democrats get their way, most of the orange will still be there. Tax cuts are sticky just like spending increases are.

    Secondly, what concerns me more than what has caused our debt until now is what will cause it going forward, which is primarily driven by Medicare. The chart is a bit deceptive in that it implies everything else is in the bottom gray, which a bit of thinking will reveal that is not true: You could make a similar graph and include other elements of spending and come out with a different picture. It all depends on what you consider “debt spending” and “paid-for spending”, which of course is a meaningless distinction since money is fungible.

    We need to repeal the Bush tax cuts (all of them) and aggressively reform Medicare. Show me a candidate or party who is for both and they’ve got my vote, but I’m not holding my breath.

  • dduck

    A, I basically agree with the above, but I still think repealing only the top tier at $300,000 to $500,000, joint, would be better and less of a shock. The cliff on Jan. 1 is so high that a full repeal will really hurt the lower tier too much.

  • slamfu

    “We need to repeal the Bush tax cuts (all of them) and aggressively reform Medicare. Show me a candidate or party who is for both and they’ve got my vote”

    Well in the case of Romney/Ryan you have a party that wants to aggressively reform the Bush tax cuts(all of them) and repeal Medicare. Close enough?

  • adelinesdad


    I’d prefer a phase-out approach, but given that would require legislation that neither side wants, I’d accept a stalemate-induced full expiration as a last resort, though I don’t expect that either.

  • What the chart above doesn’t show is that the majority of the cost of the tax cuts were for the middle class–cuts Democrats also want to keep.

    You know what REALLY irritates me? The payroll tax cut.

    Who are the biggest payers of the payroll tax? Working-class folks.

    What do payroll taxes fund? Social Security.

    Who are the biggest beneficiaries of Social Security? Retired working-class folks.

    So the payroll tax cuts are harming the very safety net intended to help working-class folks in their retirement!

    Basically the Democrats voted to weaken the very program intended to help their very constituency, which leads into Republican plans to cancel Social Security because it’s “insolvent”!

    It’s the Mobius Loop of Stupid!

  • dduck

    Barky, bingo. I always wondered how that rob Peter to pay Paul, Three-Card Monte worked. You cut the taxes that are funding SS. Do you make it up from some deep pocket, does it really matter, do you make it up later, WTF. Anyway, they slipped it past me thinking I must be missing some important point.
    Thanks, Barky.

  • adelinesdad


    No, and neither would the less rhetorically enhanced version of their policies. In my view, Democrats are half right on the tax cuts, and Republicans are half right about Medicare, which puts them both at 25% right over-all. Not close enough.

  • dduck

    Slam said: “and repeal Medicare.” I think you mean Obamacare.

  • slamfu

    Nah, Ryan’s plan pretty much was repealing Medicare as we know it. The voucher system, lol. What it doesn’t do is account for the fact that if you give everyone the average amount to cover costs, even if it is enough which Ryan’s plan isn’t, might work on paper. But in reality, what you have is 1 out of 10 people actually getting really ill, running up $100k in medical bills, thereby bringing everyone’s avg cost up to $10k. This averaging of payments doesn’t address the reality, the sudden, massive, and unplanned expense of being an old person who needs to stay in the hospital for a long time. Any system that isn’t built with that in mind is not really being built to handle reality.

  • DaGoat

    Pretty much agree with AD. What is left out in the OP discussion is that the proposed Obama plan of increasing taxes on high earners barely puts a dent in that graph. If the message is that the Bush tax cuts were a mistake then let them expire. This is actually suggested in the CBPP analysis that accompanies the graph, as well as their suggesting controlling expenditures. No party and few politicians are suggesting these measures, and attempting to use the graph to support one party over the other would be misleading.

  • dduck

    DG, I’m shocked that a person of your erudition would cast aspersions on a graph. They are what separates us from the apes. And, to further say that politicians would use these highly sophisticated illustrations to mislead we “graph challenged” into believing an erroneous conclusion, is beyond the pale or behind the pail, if you prefer.

  • adelinesdad


    So, seniors will be directly responsible for their medical bills? I didn’t realize that Ryan’s plan also repeals the point of insurance. 😉

    (My understanding is that insurance companies offering alternatives to traditional Medicare under Ryan’s plan would not be able to vary prices depending on health status, but I’ll accept correction if I’m wrong about that.)

  • slamfu

    When in recession, raise taxes. Bush 41 did it, Reagan did it, FDR did it, raise the freaking taxes already. Does it wipe out all causes of our current woes and deficit? No, of course it doesn’t. What it does do is take the first and largest step towards getting back on track. The US economy has historically rebounded when the govt shows that they are serious about paying our bills. Every republican argument against this course of action is based on nothing but ignorance, of math, of history, of their own past leaders’ actions.

  • adelinesdad

    To further illustrate the problem with this graph which I didn’t explain very well before, and that I’m guess <10% of the population grasps which I’m sure some creating and pushing such grasps count on:

    Imagine I get $100 a month and I spend $120 a month, giving me a $20 monthly deficit. Over time I build up a pretty big debt and now I want to do something about it, so I hire two financial advisers to tell me how to fix the problem.

    The first shows me a graph that shows that since I spend $20 a month on candy, the entirety of my debt is due to candy consumption. Therefore it’s all the candy’s fault.

    The second shows me a graph that shows that I spend $20 a month on soda so all the debt is due to soda. If I would have not had any soda, my debt would have been $0.

    On the surface, the two graphs seem contradictory, but they are not. They are both right and both misleading.

  • dduck

    A, graphs can be misleading? Wow.

  • slamfu

    Its true dduck, I have a pie chart that shows 112% of graphs are misleading.

  • The_Ohioan

    “A, graphs can be misleading? Wow.”

    Only if you really want them to be. You could rename all the items on the chart and say it shows a big surplus, if you were so inclined. A graph is only as informative as your understanding of the numbers on which it is based. This graph is based on public debt as a portion of GDP. Not the total debt; the part which affects the cost of borrowing which causes the deficit and raises the debt – according to the CBPP.

    Here’s another chart for you

    [If current policies are continued without changes, deficits will likely approach those figures in 2010 and remain near $1 trillion a year for the next decade.

    … If not for the tax cuts enacted during the presidency of George W. Bush that Congress did not pay for, the cost of the wars in Iraq and Afghanistan that were initiated during that period, and the effects of the worst economic slump since the Great Depression (including the cost of steps necessary to combat it), we would not be facing these huge deficits in the near term.

    … Although policymakers should not tighten fiscal policy in the near term while the economy remains fragile, they and the nation at large must come to grips with the nation’s long-term deficit problem. But we should not mistake the causes of our predicament.]

  • dduck

    Go growth young man, it shrinks the percentage growth of debt.

  • The_Ohioan

    About those middle class Bush tax cuts: (Don’t worry, dd, it’s a table not a graph. Well, there is a graph, but just close your eyes and hit the scroll bar six times and you won’t have to look at it).

    **In 2004, the middle 20 percent of households will receive 8.9 percent of the tax cuts.

    **By contrast, millionaires — totaling just 0.2 percent of U.S. households — will receive 15.3 percent of the tax cuts. In other words, the small handful of millionaires will receive total tax cuts far larger than those received by the entire middle 20 percent of households.

    **The tax cuts will confer more than $30 billion on the nation’s 257,000 millionaires in 2004 alone.

  • adelinesdad


    Are you suggesting that graphs can only be misleading if they are mislabeled?

    A graph can’t show what is driving the deficit or debt, as both graphs claim to do, unless it fully encompasses all categories of spending and all forms of revenue, not just cherry-picked ones that the author arbitrarily (or for his or her own ideological purposes) decides to assign to the category of “things that increase the deficit” rather than “things that are offset” Every dollar spent increases the deficit by one dollar. Every dollar received decreases the deficit by one dollar. A graph that doesn’t tell that story is misleading.

  • dduck

    Thanks, Ohio. Wow $30 billion. That’s like 15 presidential campaigns (see table A.) or 20 fighter jets (chart, 1b), or the fraud in Medicaid or Medicare, or……. (graphs. 1-89).

  • adelinesdad


    Since when did “middle class” mean “middle 20 percent”? If the top 0.2 percent are getting 15.3% of the tax benefit, who is getting the other 84.7%? Everyone else. That means repealing the tax cuts for only the wealthy doesn’t make much of a dent, which is all anyone claimed here, not that the wealthy didn’t get a good-sized cut, in proportion to the taxes that they pay. In any case, if the argument is that the cuts were regressive, then by all means repeal them all. That should make it more progressive, right? Why aren’t Democrats for that then?

    Here’s my more in-depth take on the bush tax cuts and progressivity:

    And more looking back to Reagan, which I actually think is more interesting:

    (Warning: Those links have a lot of graphs, complicated but hopefully not misleading ones, at least not intentionally so.)

  • The_Ohioan

    AD The middle 20% of income earners doesn’t mean “middle class”, necessarily.

    The Bush tax cuts (2001 + 2004) were 15.3% for greater than $1 million averaging $123,592
    24.2% for the top 1% averaging $34,992
    8.9% for the middle 20% averaging $657

    The 257,000 millionaires receive more than the entire middle 20%.

    the rest (51.6%) is a tax cut in the form of child tax credits for lower income earners with children. Had they not been criticized for providing no tax cuts for these lower income families (who owed no income tax but paid payroll taxes) those child tax credits would not have been included.

    But you can go to my links and find this information just as well as I can, so I will let you do that, and while you are there, you can go to the other link which shows not the entire contribution to the deficit, but the portion of it that is driven by lower revenues and higher costs to service the debt as a result of the combination of the Bush tax cuts, two wars, the stimulus, and falling revenue due to the not-so-great depression.

  • adelinesdad


    The fact that the tax cut benefited people in raw dollars roughly in proportion to how much taxes they pay in raw dollars is not surprising or concerning to me. The omission of the proportion of taxes paid by a subset of the population by your links is as bad as when the right omits the proportion of income earned by a subset when talking about the share of taxes paid. I believe my analysis that I linked to is a more comprehensive way to look at it than partisans on both sides have presented.

    I’m not sure where you got the 51.6% figure. It seems you’re double-counting the 15.3% and you are supposing that the middle 20% and the top 1% are the only ones that benefited from provisions other than the child tax credits, which is hard to believe. Furthermore, I’m not interested in debating the politics of a decade ago. Whether or not the Bush administration was as full-throated in support of the child tax credit doesn’t change the fact that they are there and we need to decide what to do with them. I say get rid of all of the tax cuts? Since you are making the case that the package was regressive, as a whole, do you agree?

    The graphs in the other link suffer from the same problem that I’ve been describing. I’m sorry that I still apparently have not explained the problem well enough. Unless you are referring to the table from 2004 that compares spending and revenue as a percentage of GDP and argues that it is a revenue problem. Well, the spending number is out-of-date and I’d argue now we have a spending and revenue problem. Which is why I’m advocating raising taxes and spending less.

  • Thanks – I began reading with trepidation when I saw 25 comments. I thought the explanation of how the chart was generated was well documented and rests on CBO terms/definitions. I think debt discussion is important – I’ve written about it a lot altho admittedly in waves. But it’s the hyprocisy coming out of Mitt Romney’s mouth that is killing me.

  • SteveK

    … the hyprocisy coming out of Mitt Romney’s mouth that is killing me.

    I’m more depressed (for lack of a better word) by what’s coming out of middle America sycophants that, even though the Republican “plan” [sic] will make them even less, think he’s the answer.

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