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1-Page Summary of Running On Empty
Shifting to the Supply Side
The Republican Party has always advocated for individual rights and self-determination, but they have become less concerned with financial responsibility over time. They now believe that deficit spending can be used to invigorate the nation.
Ronald Reagan implemented a “supply side” plan, which included tax cuts and spending in order to beat the economic stagnation that was occurring at the time. This temporary fix soon morphed into excessive spending by government. In fact, more money was spent during his presidency than during World War II. As a result of this debt, foreign exchange rates were affected as well as equity performance in the capital markets.
George W. Bush’s presidency continued the trend of tax cuts, but with a Republican majority in Congress and an economic recession, the national debt increased dramatically after 2001. The stock market fell due to technology stocks and September 11th terrorist attacks. By 2002, only $1 trillion of projected budget surplus remained.
Despite earlier declarations about Social Security and Medicare, Bush instead opted to push for another tax cut program. Various independent organizations warned that the economy was recovering on its own without a need for additional tax cuts. Congress passed and Bush signed a new prescription drug program for Medicare recipients. The program created an unfunded universal benefit for 40 million people and was adopted by President Bush largely to deny Democrats the political high ground on medical aid to the elderly.
The Congressional Budget Office (CBO) projected that the bill would cost $400 billion over 10 years, but new figures put that at $535 billion. The second phase of the bill will cost more than $2 trillion, and by 2004, it will add an average of $600 billion to the deficit for each year in the next decade.
Under the Bush administration, advisors continued to push for tax cuts. However, they didn’t disclose all of the potential consequences of lost revenues. Supporters also inserted “sunset” provisions into tax cuts so that they could get them passed in Congress. To fund the Iraq war, Bush increased military spending without raising taxes on future generations or cutting Social Security and Medicare benefits. This effectively taxed future generations by requiring them to pay a considerable amount of their income towards keeping Social Security and Medicare solvent when those programs were needed most (in about 50 years). To stave off this crisis and balance the budget by 2014, projections show that we would have to raise corporate and individual income taxes by 38%, or reduce Social Security and Medicare benefits by 55%. If we wanted to balance our budget in 2030, Congress would have to boost payroll taxes 100% or cut defense spending, Social Security,and Medicare benefits by 50%. Alternately, it could keep everything as is but still face a $3 trillion deficit over 10 years.
Republicans are in control of the White House and Congress, so they have to keep their party together. They do this by isolating any Republicans who advocate for tax increases. This is a big problem because it means that there’s no way to raise taxes when we need them—like during wartime. To make sure that doesn’t happen again, the Bush administration let the Budget Enforcement Act lapse. That act required Congress to create an offsetting spending cut for every tax hike.
Republicans have talked about reducing taxes, but they have actually increased spending by 7% per year. They’ve also included thousands of special interest expenditures in the 2004 omnibus appropriations bill. Pork barrel legislation is not new, but every President has veto power over bills like this one. However, Bush has never vetoed a single bill during his term as President.
