There is a key issue that should be driving the 2012 election – How are we going to address our national debt crisis?
Framing that question correctly requires understanding several nearly universally accepted half-truths.
If you missed the “Clinton Surplus” when reviewing the growth in our national debt, you just became part of the 1percent that knows it never actually happened.
We have rewritten American history to reward our own self-interests, claiming the federal government actually turned a net surplus of $69 billion in FY1998, $123 billion in FY1999 and $230 billion in FY2000. What actually happened was that trust fund surplus from programs such as Social Security allowed the federal government to decrease public debt, replacing it with intra-government holdings.
Notice that while the public debt went down in each of those four years, the intra-governmental holdings went up each year by a greater amount. 99 percent of America believes in the Clinton Surplus legacy, yet Treasury notes that national debt has increased yearly.
None of the prior information should be misconstrued as an intentional misrepresentation. The Social Security Administration is legally required to take all its surpluses and buy U.S. Government securities. As an example, in FY 2000, Social Security ran a $137 billion surplus. For decades, the federal government had spent Social Security money and other trust funds, which constitute obligations, to present and future recipients on current obligations.
Those past surpluses no longer apply. Most Americans understand that between 2001 and 2008, the total national debt grew by $4 trillion. Unfortunately, far too much attention is placed on the 2001 and 2003 Bush tax cuts. It is important to understand that the Congressional Budget Office (CBO) scored the Bush tax cuts to reduce revenues by $1.7 trillion before sunsetting after 2010. That projection was mitigated due to the economic impact of multiple recessions, reversals in the equity markets, and the bursting of the housing bubble. Nearly a trillion of the national debt increase during the Bush era was caused by military spending in the U.S.-Middle East conflicts. Medicare Part D added just under $350 billion.
What is rarely discussed concerning the Bush deficits was that net trust fund changes exceeded any other change in expenses. Between 2000 and 2007, Social Security annual outlays increased by 43 percent from $409 billion to $586 billion. Medicare outlays increased 90 percent from $197 billion to $375 billion. In 2007 alone, America spent $365 billion more on Social Security benefits and Medicaid than it had in 2000. That total of $365 billion would have represented 1/5th of the total 2000 budget. In seven short years, the surplus trust funds had all but vanquished.
Today, America’s national debt stands above $15 trillion. Over the past four fiscal years, our deficits have added an additional $5 trillion to the national debt. That debt was largely a function of $1.6 trillion in decreased revenues from the recession, $1.4 trillion in multiple stimulus programs, and $1 trillion in increased income security benefits and entitlement payments.
During the 2012 budget presentation, the president proposed to add another $7 trillion to our national debt by 2022. At a mean average of U.S. Treasury debt over the past twenty years, Americans would be paying $1.1 trillion in interest to finance our $22 trillion national debt by 2022. Whether you realize it or not, America is gearing toward a $5 trillion plus budget in 2022.
Unless we act now to address our national debt, it will become the most expensive line item in the budget. By 2022, America will need to expend more revenue than we have ever collected from individual returns in any fiscal year. Our indulgences of today will guarantee higher taxes tomorrow, serving as anchors in an economy driven by consumer spending.
This brings us back to why the 2012 presidential elections key issue must be, “How are we going to deal with our deficit crisis?”