Back to Work - Bill Clinton [15]
We did all this on borrowed money, increasingly from overseas, with China, Japan, the United Kingdom, Saudi Arabia, and South Korea buying the bulk of our bonds. Foreign governments now hold more of our debt than Americans do. China has more than 25 percent of the foreign holdings, at $1.2 trillion, with Japan not far behind at $900 billion.
What did we do with the money? We didn’t invest it in new scientific and technological research, in rebuilding our manufacturing base, in reversing our fall from first to twelfth in the percentage of young adults with college degrees, in creating the millions of jobs that would flow from a serious response to climate change. Instead, we consumed it, in ways that distort our economy today and cloud our children’s tomorrows.
From 1981 to 2009, the greatest accomplishment of the antigovernment Republicans was not to reduce the size of the federal government but to stop paying for it. As a result, the national debt more than quadrupled from 1981 through 1992, then doubled again between 2001 and 2009, even before the financial meltdown, which then required more government spending—the financial-system bailout, increased unemployment, food stamp, and Medicaid expenditures, and the stimulus—to put a floor under the downturn. At the same time, tax revenues declined as unemployment rose, businesses closed, and Americans spent less. Because interest rates are so low, it doesn’t cost much more to service the increased debt today, but when the economy picks up and there’s more private demand for money, interest rates will rise, and financing the debt will cost a lot more, leaving less money for investments in our future, including education, technology, research, and energy independence.
Click here to view a larger image. (Illustration credit 2.1)
Look at these charts. They show how our debt grew from 1981 to 2011; what would have happened if the tax system and spending restraints of the 1990s had been maintained over the last decade, compared with what did happen when we eliminated both; and how much spending and tax cuts under President Obama have contributed to the problem compared with the policies of President Bush.
Click here to view a larger image. (Illustration credit 2.2)
Essentially, the numbers demonstrate that after I left office, the president and Congress gave up a decade of surpluses in favor of doubling the debt. The charts also make the relentless attacks on President Obama as a big spender look a little lame when you compare the eight-year total cost of President Bush’s spending and the projected eight-year cost of President Obama’s initiatives. Stimulus spending will turn out about the same under both presidents. All told, the combined cost of the Obama spending increases and tax cuts is about the same as the costs of the wars in Iraq and Afghanistan and almost $400 billion less than the Bush tax cuts alone.
Click here to view a larger image. (Illustration credit 2.3)
While the decision to keep cutting taxes and spending more was driven by the antigovernment bloc that took control of the Republican Party in 1980, Democrats are not completely blameless. Some voted for both the Reagan tax cuts and more spending in the 1980s. Back then, some liberals simply didn’t think the deficits mattered, though they led to higher interest rates on small-business, home mortgage, credit card, college, and car loans. Only three Democratic senators voted against the tax cuts and for the spending reductions. One of them was Arkansas’s senior senator, my friend Dale Bumpers.
No one did enough to rein in escalating health-care costs, which rose at three times the rate of inflation between 1981 and 1993 and again between 2001 and 2009.7 And for too long, there was bipartisan support for the increasingly risky financial practices of the quasi-public mortgage agencies Fannie Mae and Freddie Mac, which eventually contributed to the severity of the financial collapse. In 2000, well before the agencies made large purchases of subprime mortgage securities from