WP: Running in the red: How the U.S., on the road to surplus, detoured to massive debt

[SkinsHokieFan]

http://www.washingtonpost.com/business/economy/running-in-the-red-how-the-us-on-the-road-to-surplus-detoured-to-massive-debt/2011/04/28/AFFU7rNF_story.html

It is clear taxes need to go up along with spending down to gain some fiscal sanity. This is a great look at how we got here through the past decade.

If I were in charge I would realize a few things. The surplus was a result of a social security surplus as well as capital gains revenue going through the roof. Along with that we didn't just give away thousands of dollars for having a kid.

Change the capital gains tax rules to 1997 rules and tax short term cap gains as income and tax it at income tax level. You'll see an end to bubblenomics which has been our economy since 1997.

Eliminate the marriage "credit" and reduce the child tax credit to Clinton levels. Raise the tax on millionaires back up to Clinton levels. I am still not keen on hitting the 250k-1 million spot because you have tons of economic activity there.

I think you make a big dent with those simple changes

The nation’s unnerving descent into debt began a decade ago with a choice, not a crisis.

In January 2001, with the budget balanced and clear sailing ahead, the Congressional Budget Office forecast ever-larger annual surpluses indefinitely. The outlook was so rosy, the CBO said, that Washington would have enough money by the end of the decade to pay off everything it owed.

Voices of caution were swept aside in the rush to take advantage of the apparent bounty. Political leaders chose to cut taxes, jack up spending and, for the first time in U.S. history, wage two wars solely with borrowed funds. “In the end, the floodgates opened,” said former senator Pete Domenici (R-N.M.), who chaired the Senate Budget Committee when the first tax-cut bill hit Capitol Hill in early 2001.

Now, instead of tending a nest egg of more than $2 trillion, the federal government expects to owe more than $10 trillion to outside investors by the end of this year. The national debt is larger, as a percentage of the economy, than at any time in U.S. history except for the period shortly after World War II.

Big-ticket spending initiated by the Bush administration accounts for 12 percent of the shift. The Iraq and Afghanistan wars have added $1.3 trillion in new borrowing. A new prescription drug benefit for Medicare recipients contributed another $272 billion. The Troubled Assets Relief Program bank bailout, which infuriated voters and led to the defeat of several legislators in 2010, added just $16 billion — and TARP may eventually cost nothing as financial institutions repay the Treasury.

Obama’s 2009 economic stimulus, a favorite target of Republicans who blame Democrats for the mounting debt, has added $719 billion — 6 percent of the total shift, according to the new analysis of CBO data by the nonprofit Pew Fiscal Analysis Initiative. All told, Obama-era choices account for about $1.7 trillion in new debt, according to a separate Washington Post analysis of CBO data over the past decade. Bush-era policies, meanwhile, account for more than $7 trillion and are a major contributor to the trillion-dollar annual budget deficits that are dominating the political debate.

Bill Thomas, the former House Ways and Means Committee chairman who helped shepherd the tax cuts through Congress, defended the 2003 package as “fuel for the economy.” But he said in an interview that the 2001 measure was larded with “stuff that I was not all that wild about,” including bipartisan priorities such as a big increase in the child tax credit and a break for married couples — provisions Thomas believes did little to promote economic growth and amounted to “throwing money out the window.”

[deejaydana]

certainly things have to change but our government's abiity to change (and I don't limit this to either party) I would liken to a tanker ship making a U turn at sea (it's aint gonna happen soon nor quickly).

[Bang]

certainly things have to change but our government's abiity to change (and I don't limit this to either party) I would liken to a tanker ship making a U turn at sea (it's aint gonna happen soon nor quickly).

Because the people actually affected by these changes (ie: those receiving contracts or benefits) won't have any of it.

~Bang