hamster143 said:
We had a balanced budget and even ran a surplus for several years under Clinton administration.
If Clinton had had a Democrat Congress, I do not think he would have achieved a surplus. He declared that "the era of big government is over," then he got elected, and apparently the era of big government was back. The Republicans taking control of Congress in 1994 is what stopped this, and Clinton then went on to govern, economically, as a center to even center-right President. Many Obama supporters I notice never take this into account, they say, "Well under Clinton we had a balanced budget," yes because Clinton governed like a Republican to a good degree, because of the Republican Congress. The mainstream Democrats despised him for this too from what I understand.
Then the Republicans won the Presidency and did a 180 turn and became big-spenders themselves. They would have railed if Clinton had wanted to expand Medicare by $400 billion I bet ("TAX AND SPEND LIBERAL!") but it was fine for Bush to do this (albeit the idea was to incorporate free-market principles, by increasing competition between the drug companies, but it was still a gamble).
Under clinton, there was the technology bubble which increased revenues, along with the fact that he cut capital gains tax rates, signed welfare reform, and spending was constrained due to the Republican Congress. Defense spending was also curtailed (George H. W. Bush as President engaged in the most massive defense drawdown since the end of World War II, and further cuts occurred under Clinton).
Once the economy recovers, a complete pullout from Iraq and Afghanistan (assuming we don't get into any new expensive wars), plus a complete repeal of Bush tax cuts, should be sufficient to close the gap.
Pulling out could be disastrous long-term, especially regarding Afghanistan, and reversing the Bush tax cuts will likely not close the deficit. Government will never cut spending, they just increase it with new revenue. Also, reversing the capital-gains tax cuts of Bush would probably cause a drop-off in revenues.
Science tells us that it's the correct response to engage in deficit spending during recessions, when your economy is not functioning at full capacity. You incur some debt, but you stimulate the economy by reducing unemployment and increasing GDP, and that typically more than offsets the cost of stimulus. (It also tells us that direct spending is several times more effective, per dollar of deficit, than tax cuts.)
Keynesian economic theory tells us this, but historically this is very debatable. I'm not saying it isn't true, as the Keynesians say we have never spent enough money, but it is still debatable.
But then you have to stop spending and start paying off your debt when unemployment is back down to healthy levels.
Yup.
In a way, Bush administration was justified in passing its tax cuts, even though direct stimulus would've been preferable. The real problem was that it failed to close the deficit when the situation improved circa 2004-05. And now, for some reason, the same people who pretended back in 2005 that everything was fine are suddenly rediscovering virtues of fiscal responsibility, even though this is probably the worst possible time to do so.
Maybe, maybe not, although I agree the Republicans spun a 180 again. They are playing it slick though, saying, "We may have run deficits, but we never spent money in the way this current administration is planning too." Politics, politics, UGH
They are just as screwed as we are - the US is too big to fail. If we went down, the world would go down with us.
