I.O.U.S.A - Addison Wiggin [16]
The Concord Coalition was founded to warn blissfully unaware American citizens about the growing national debt and fi scal challenges faced by a nation that runs persistent budget defi cits. Based on its mission, it was only natural that it was on the hit list of organizations that we included in our fi lm.
As mentioned previously, one of our main objectives in the early part of the fi lm was to help Americans to understand basic concepts like the difference between a federal budget defi cit and the national debt. You ’ d be surprised how many otherwise intelligent human beings couldn ’ t begin to tell the difference between the two. We also wanted to warn people that running persistent budget defi cits over a long period of time can be disastrous to the currency — the dollars in your pocket. We fi gured, armed with this freshly minted knowledge, American consumers would be more likely to hold their public offi cials accountable for the decisions they make and the legislation they pass.
Bixby Goes to Washington
“ The Concord Coalition was formed to address the issue of federal debt, ” Bob Bixby says while making his way through the Washington, D.C., subway system, “ so I do feel a particular responsibility to advance the cause. Things like this (like c02.indd 24
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Chapter 2 The Budget Defi cit 25
Federal Debt: A Brief History—1776 Through 1992
Today’s federal debt is the sum of the United States’ annual budget defi cits and surpluses going back to the beginning of the Federal government. The country’s War for Independence created much of the early debt, and by March 4, 1789, the fi rst day of the federal government, America’s national debt was $75 million, which was about 30 percent of the economy. This terrifi ed the Founding Fathers and they acted quickly to pay this debt down. By 1835, the federal debt was $0—the only time in America’s history that achievement has been reached.
Of course, the United States didn’t stay there for long. The Civil War not only had a large human cost, it brought the country to the brink of bankruptcy. However, like before, the debt was paid down quickly. In 1913, the Federal Reserve System was created to help manage the nation’s money supply and to oversee national banks. That year also saw the birth of the modern income tax. Several years after the costly fi rst world war, the Great Depression brought with it extreme economic hardship for millions of Americans. The Social Security program was created to help Americans save for the future. World War II was a time of sacrifi ce, and while the government took on unprecedented levels of debt, Americans bought savings bonds to fi nance winning the war.
The large military and social spending practices of the 1960s and 1970s were two key factors that led to a major economic downturn by the 1970s. The 1980s saw the rise of such things as supply-side economics, Reaganomics, and the controversial Laffer curve, which proposed that lower marginal tax rates would eventually generate higher total tax revenues. The theory did have its critics and the debate over supply-side economics continues to this day. However, what is not debatable is that the federal debt exploded during the 1980s. A fundamental shift had occurred: America was becoming addicted to debt. Never before in the country’s history had so much debt been created during an era of relative peace and prosperity. Yes, the Cold War ended, but this came at an extremely high price, and people from across the political spectrum were becoming very alarmed.
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26 The
Mission
SOURCE: Compilation from Government Sources/MeasuringWorth.com 1992 FEDERAL DEPT
$4 TRILLION
Figure 2.1 History of the Federal Debt as Percentage of GDP
Source: Compilation from government sources and MeasuringWorth (www.measuringworth.com).
today ’ s hearing) are just a great opportunity to do so. They don ’ t come along all the time. ”
Senate Budget
Bixby is referring to his testimony before the Senate
Committee:
Budget Committee during a