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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]