President Ronald Reagan introduced "supply-side economics"—a simple idea that, if you cut taxes for rich people, then poor people end up with more money. Today, right-wing partisans even claim it worked. That's overstating the reality. When Reagan took office as President in 1981, the national debt was $995 billion. Twelve years later, after two terms of "supply-side economics" under Reagan, plus the single term of George H.W. Bush, the national debt went up over 400% to $4 trillion.

When Bill Clinton became President, he did the opposite of Reagan. He raised taxes on the wealthy, lowered taxes on the middle & lower classes, and the United States had the longest sustained economic expansion in history. Times were good; the budget was reduced.

When George W. Bush took office in 2001, he inherited from Clinton a national surplus of $236 billion. The projected ten-year surplus was $5.6 trillion. But, Bush changed all that. He forced tax cuts that gave $630 billion to the top 1% of income earners. Bye-bye, surplus. The deficit surged back again, at a record $415 billion in 2004, not counting the extra $150 billion borrowed form the Social Security Fund. Budget numbers are imprecise. The Administration diddles the numbers; the Congressional Budget Office (CBO) does its best to give accurate forecasts.

Here's a bottom line: For FY08, the federal deficit is projected to be $239 billion. At the end of 2007, the U.S. National Debt was over $9 trillion.

Besides the damage of fiscal irresponsibility, the United States has ignored vital national priorities—like rebuilding its infrastructure, energy independence, national health care, restoring New Orleans, or paying for the failed Iraq War adventure. George W. Bush is funding his war with red ink, spending money the country does not have, pulling the country always deeper into debt. (Please don't tell the grand-kids.)

For more information, see: "Primer on Government Spending" (below); and: Robert Freeman, The Bush Budget Deficit Death Spiral, in CommonDreams.org (October 22, 2004).

1. Stop Deficit Spending
   
   
2. Balance the Federal Budget
   
   
3. Re-Balance the Tax Structure
   
   
4. Reduce Balance of Payments
   
   
5. Invest in Vital National Priorities
   
   

If the U.S. Government spent less than it collected in taxes, it would have a surplus. (And, if zebras were starships, they could fly off to Uranus.) But, governments rarely work that way. They find major, urgent expenses—like bridges to nowhere, museums to honor the mule, or rebuilding Fallujah instead of New Orleans. Politicians in Washington (today's Republicans, worst of all) just spend away, because it's your money, not theirs, so who cares? In a balanced budget, the government spends no more than it collects. (Please stop laughing!) A budget deficit is the shortfall after a government spends more than it gets in revenues.

FUN FACT:  The Office of Management and Budget (OMB) has estimated that, in FY 2008, the U.S. Federal Government's budget deficit will be $239,000,000,000 (239 billion dollars).


Wait a minute! How do governments spend money they don't have? They could just print new money. Seriously, they can really do that, by increasing the money supply via the Federal Reserve System. But, the result is inflation (the value of stuff stays the same, but the costs all go up). Over time, runaway inflation can bankrupt a country. So, instead, the government borrows money: it issues bonds, which it guarantees to pay back, plus interest. Of course, instead of paying off the loans, it may borrow more money and owe more interest. So, the total accumulation of borrowed money, plus total interest owed, is the national debt.

FUN FACT:  The Bureau of Public Debt (U.S. Department of the Treasury) calculated that the U.S. National Debt on December 13, 2007, was $9,172,270,152,373.44 (over 9 trillion dollars).


Some misinformed talking heads pooh-pooh the national debt by saying "we owe it to ourselves." But that's untrue. The ownership of the U.S. debt by foreign interests has grown rapidly. Right now, the primary U.S. creditors are believed to be Japan, China, and oil-rich Middle Eastern countries like Saudi Arabia. If they stopped buying our debt bonds, to invest at home or elsewhere—or, worse, as an act of hostility—they could quickly destabilize the U.S. economy.

FUN FACT:  According to the U.S. Department of the Treasury, in March 2000, about 35.2% of marketable U.S. Treasury bonds were owned by foreign interests. By July 2006, that amount had grown to more than half (52.0%).


The national debt is going up, not down. Some day, all debts must be paid—even federal ones. If not, the U.S. dollar will be worthless and the country will go broke. The U.S. Government should reduce expenses, increase revenues (like, rolling back the ugly Bush tax cuts of $1.35 trillion in 2001, which disproportionately nursed the very rich), and balance the budget. This turn-around will require a long-range, systematic, disciplined effort. But, if the leaders of the United States do not reverse this predictable trend, we are truly burning on credit today and passing the bills along for a generation or more, to our children and grand-children.

FUN FACT:  The U.S. Census Bureau estimated on November 20, 2007 that the total U.S. population was 303,493,041 people. Thus, your personal share of the U.S. debt—and for all your children, all your grandkids, and everyone else in your neighborhood—is only $30,115.62 each (over 30 thousand dollars). Cash only, please.


The U.S. Government has financial obligations (like Social Security), which it legally must pay. These are often called entitlements. All American workers must pay Social Security tax; however, the U.S. Government hasn't squirreled away the acorns: they spend it as fast as it arrives. So, if more old people keep retiring and living longer, while less young people are working and paying into the system, and the government keeps spending not saving Social Security payments, the system is falling deeper into a red-ink pit.

FUN FACT:  In the Nation's Fiscal Outlook of the FY 2008 Budget, the growing pie-slice of mandatory spending (i.e., Social Security, Medicare, and other entitlements) already makes up over 50% of projected U.S. committed expenditures.


In the global economy, countries and businesses trade with each other. Money flows back and forth between countries, who often have different currencies (like Canada's dollar, the EU's euro, or Bhutan's ngultrum). The balance of payments is the difference between money imported and money exported. A positive balance of payments (i.e., more money into your country) is better and helps make a country's currency stronger.

FUN FACT:  According to the Bureau of Economic Analysis, the balance of payments for U.S. international transactions for goods and services in the 2nd quarter of 2007 was negative, with a deficit of $204,200,000,200 (over 200 billion dollars).

• Bruce Bartlett, Impostor: How George W. Bush Bankrupted America and Betrayed the Reagan Legacy (Doubleday, 2006).
  
  
• John W. Dean, Broken Government: How Republican Rule Destroyed the Legislative, Executive, and Judicial Branches (Viking Adult, 2007).
  
  
• John W. Dean, Conservatives Without Conscience (Viking Adult, 2006).
  
  
• Robert Reich, Supercapitalism: The Transformation of Business, Democracy, and Everyday Life (Knopf, 2007).
  
  
• Michael D. Tanner, Leviathan on the Right: How Big-Government Conservativism Brought Down the Republican Revolution (Cato Institute, 2007)


• Richard A. Viguerie, Conservatives Betrayed: How George W. Bush and Other Big Government Republicans Hijacked the Conservative Cause (Bonus Books, 2006).