came to roughly $1.2 trillion over the decade, and there was extra spending on homelandsecurity after 9/11. The expansion of Medicare to cover prescription drugs cost about $275 billion just through 2011. The much-criticized Troubled Asset Relief Program, which was used to bail out the banks, and the Obama-backed stimulus package added another $500 billion through 2011, but much of that was later recouped as banks paid off their loans.
Net from spending: $4.3 trillion
.
Four, bigger deficits mean more borrowing. In January 2001, CBO projections anticipated that the entire federal debt would be paid off by now, which would have meant no interest costs. Instead, the debt held by the public—everyone from the Chinese government to the savings bonds in American desk drawers, but excluding the Social Security trust fund—stood at $10 trillion. And more borrowing means an ever-larger interest tab.
Net increase in the deficit from interest: $1.4 trillion.
In the late 1990s and early 2000s, chief executives of corporations became celebrity heroes, and politicians seemed increasingly irrelevant amid the centrifugal force of the Internet. The pace of federal spending increases slowed, and the reforms to which Clinton and Gingrich had agreed pushed many from welfare to work as the economy boomed. Then the stock market plunged, chief executives became celebrity crooks, and the September 11, 2001, attacks shattered the notion that with theCold War over, the market could cope with nearly everything. Despite Clinton’s State of the Union declaration, government grew, again. “The era of big government wasn’t over,” said Allen Schick, the Maryland professor. “Look at what happened with spending. It was hibernating under Clinton and revived under Bush.”
Once in office, George W. Bush delivered on his campaign promise to cut taxes. His first tax cut, in 2001, was smaller than Reagan’s but was followed by additional tax cuts the following four years that collectively exceeded Reagan’s. Simultaneously, most of the spending restraints written into his father’s 1990 deficit deal expired. Then, at the end of Bush’s first year in office, his presidency was redefined by the 9/11 terror attacks, and so was the federal budget. Two wars and intensified efforts at homeland security increased spending significantly. In 2001, defense spending was 3 percent of GDP, half the Reagan-era peak.In 2011, it was 5 percent. (Each percentage point of GDP is about $150 billion.)
Bush also signed into law the first significant expansion of Medicare in forty years. When Medicare was designed in the 1960s, prescription drugs weren’t a big part of health care so the program didn’t cover most drugs. By the first decade of the twenty-first century, they accounted for 12 percent of all personal health care spending, and pressure to expand Medicare to cover them was intense. The drug insurance program created in 2003 was built around two elements of lasting consequence to the budget: One, the government would subsidizethe purchase of competing private drug insurance policies and wouldn’t negotiate directly with drug companies. And, two, no attempt was made to pay for the bill. The only constraint was an agreement to limit the tab to $400 billion over ten years, even though everyone knew it would cost more in the future.By 2010, the
annual
tab exceeded $60 billion, about $1 of every $8 in Medicare outlays. Government actuaries projected the cost would climb nearly 10 percent a year in the following decade.
Obama summed this up in an April 2011 speech at George Washington University: “[A]fter Democrats and Republicans committed to fiscal discipline during the 1990s, we lost our way in the decade that followed. We increased spending dramatically for two wars and an expensive prescription drug program—but we didn’t pay for any of this new spending. Instead, we made the problem worse with trillions of dollars in unpaid-for tax cuts.”
A
Net from spending: $4.3 trillion
.
Four, bigger deficits mean more borrowing. In January 2001, CBO projections anticipated that the entire federal debt would be paid off by now, which would have meant no interest costs. Instead, the debt held by the public—everyone from the Chinese government to the savings bonds in American desk drawers, but excluding the Social Security trust fund—stood at $10 trillion. And more borrowing means an ever-larger interest tab.
Net increase in the deficit from interest: $1.4 trillion.
In the late 1990s and early 2000s, chief executives of corporations became celebrity heroes, and politicians seemed increasingly irrelevant amid the centrifugal force of the Internet. The pace of federal spending increases slowed, and the reforms to which Clinton and Gingrich had agreed pushed many from welfare to work as the economy boomed. Then the stock market plunged, chief executives became celebrity crooks, and the September 11, 2001, attacks shattered the notion that with theCold War over, the market could cope with nearly everything. Despite Clinton’s State of the Union declaration, government grew, again. “The era of big government wasn’t over,” said Allen Schick, the Maryland professor. “Look at what happened with spending. It was hibernating under Clinton and revived under Bush.”
Once in office, George W. Bush delivered on his campaign promise to cut taxes. His first tax cut, in 2001, was smaller than Reagan’s but was followed by additional tax cuts the following four years that collectively exceeded Reagan’s. Simultaneously, most of the spending restraints written into his father’s 1990 deficit deal expired. Then, at the end of Bush’s first year in office, his presidency was redefined by the 9/11 terror attacks, and so was the federal budget. Two wars and intensified efforts at homeland security increased spending significantly. In 2001, defense spending was 3 percent of GDP, half the Reagan-era peak.In 2011, it was 5 percent. (Each percentage point of GDP is about $150 billion.)
Bush also signed into law the first significant expansion of Medicare in forty years. When Medicare was designed in the 1960s, prescription drugs weren’t a big part of health care so the program didn’t cover most drugs. By the first decade of the twenty-first century, they accounted for 12 percent of all personal health care spending, and pressure to expand Medicare to cover them was intense. The drug insurance program created in 2003 was built around two elements of lasting consequence to the budget: One, the government would subsidizethe purchase of competing private drug insurance policies and wouldn’t negotiate directly with drug companies. And, two, no attempt was made to pay for the bill. The only constraint was an agreement to limit the tab to $400 billion over ten years, even though everyone knew it would cost more in the future.By 2010, the
annual
tab exceeded $60 billion, about $1 of every $8 in Medicare outlays. Government actuaries projected the cost would climb nearly 10 percent a year in the following decade.
Obama summed this up in an April 2011 speech at George Washington University: “[A]fter Democrats and Republicans committed to fiscal discipline during the 1990s, we lost our way in the decade that followed. We increased spending dramatically for two wars and an expensive prescription drug program—but we didn’t pay for any of this new spending. Instead, we made the problem worse with trillions of dollars in unpaid-for tax cuts.”
A
Similar Books
