NEW YORK (MainStreet) — For all the talk inside the Beltway about how to bring down the national debt, a new report shows that it was the legislators in Washington who largely caused the debt to skyrocket in the first place.
In the beginning of 2001, the Congressional Budget Office projected that if the government continued on its current course at the time, the U.S. would have a budget surplus of $2.3 trillion by 2011. Instead, the national debt is projected to hit $10.4 trillion by September of this year, or $12.7 trillion more than the original CBO projection of a decade ago.
According to a new report by the Pew Fiscal Analysis Initiative, a non-partisan group, the leading driver of debt has not been the overall weakening of the economy, but rather a series of costly and perhaps ill-advised pieces of legislation passed during that 10-year period. To be more precise, the report singles out six government initiatives in particular that took our country from a budget surplus to a fiscal sandpit.
Four of these initiatives were approved under the Bush administration, including the tax cuts passed in 2001 and 2003 for households earning $250,000 or more, military operations in Afghanistan and Iraq, an unfunded Medicare prescription drug benefit plan to assist seniors and the Troubled Asset Relief Program passed shortly before President Obama took office and that was designed to prevent the all-out collapse of the financial markets.
The remaining two pieces of legislation highlighted by Pew were passed during the Obama administration and include the 2009 stimulus package, intended to spur job growth during the recession, and a temporary extension of the Bush tax cuts approved at the end of last year.
More than any single piece of legislation, the tax cuts approved in 2001 and 2003 had the greatest impact in growing our debt, accounting for 13% of the total change in the country’s projected debt over the previous decade. By comparison, the military operations in the Middle East accounted for 10% of that change and the stimulus package for 6%.
In total, the Pew report, which is based on an analysis of CBO data, found that the vast majority (68%, or roughly $8.6 trillion) of the debt that the U.S. has accrued derived from these pieces of legislation.
Much of the rest resulted from technical and economic changes, primarily due to the economic downturn, which impacted the revenues of households and businesses, and in turn decreased the amount that the government collected in taxes. But while these factors may have been beyond Washington’s control, two-thirds of the increase to the national debt was directly within their power to prevent.
So if they are looking for ways to bring down the debt, legislators could do worse than to simply retrace their steps and eliminate the programs and policies that led to the debt bubble in the first place.
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