I.O.U.S.A - Addison Wiggin [103]
So in 2001, when Bush 43 took over and I took over at the Treasury, we were in a total surplus condition, and arguably c16.indd 209
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(I think this was a correct argument) we needed to reduce taxes because taxes had crept up to the point where something like 20
or 21 percent of the GDP was being effectively taken by federal government. Traditionally, our level has been someplace around 18 percent or maybe 18.3. So I think it was correct to say that we could afford to have a tax cut, which President Bush 43 had run on in the 2000 election, and he set out to deliver what he promised in the election and I think that was okay. The reason that I agreed to come in as Treasury secretary was because I saw lots of things in our economy and our society that needed to be done, and I was encouraged to believe that Bush 43 was up for the diffi cult political things that needed to happen to make course corrections. Those course corrections still include fi xing the Social Security and Medicare trust funds, and fundamentally redesigning the way the federal tax system works. I thought there was some prospect that President Bush would entertain the diffi cult political choices that needed to be made in order to act on these things, and I spent a lot of time thinking about these things over a period, better part of 40 years, so I was anxious to have a go at it.
Q: How did it go?
Paul O ’ Neill: The fi rst part was the easiest part. Cutting taxes is always a cinch — it ’ s only a debate about who gets the credit and how big the cut is. But then we had 9/11 and it really changed where we were. The economy was still slow, although we were actually having positive growth in the fourth quarter of 2001.
But there was still a lot of energy and President Bush himself was bringing this energy that we need additional tax cuts. I honestly didn ’ t think that was the right thing to do, because I continue to believe we needed the revenue that we were then collecting to work on the Medicare/Social Security problems. To work on fundamental tax redesign after 9/11 while worrying about whether there was going to be another attack or a series of attacks would cost hundreds of billions of dollars. So I was against further tax reductions at the time, especially as we got into 2002, as I became more concerned that we were also going to need money since it looked to me like we were sliding into a war with Iraq. I argued c16.indd 210
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during the second half of 2002 we should not have another tax cut because we need the money to work on important policy issues that would shape the nation going forward, and we needed to have, in effect, rainy day money for the prospect of Iraq and another set of attacks like 9/11.
That was not a popular view, and in fact, it led to a conversation with the vice president where he basically told me, “ Don ’ t worry about further tax cuts, it ’ s okay. Ronald Reagan proved that we don ’ t have to worry about defi cits. ” Which is really a shock to me because whatever you may think about Ronald Reagan, I don ’ t think he or anyone else has proved that it ’ s possible to ignore not just defi cits, but federal debt as well. I think it is true that you can be sanguine about defi cits for a short period of time, but you can ’ t be sanguine about mounting debt for the United States of America. When we, the Bush 43 administration took over, we had something over $ 5 trillion, maybe $ 5.6 trillion worth of national debt. Today I think the number ’ s $ 8.8 trillion. That ’ s not an innocent change, it is a monumental change in the debt service that we have to do in addition to and on top of all of the other things that our country needs to do.
Q: Toward the end of 2002, you wrote a report that said that the current debt wasn ’ t the problem; it was the debt that we are stepping toward. Shortly thereafter you were asked to leave.