Hard to believe, but once upon a time, economists worried that the U.S. government would pay off all its debt. Also hard to believe, once upon a time was only 11 years ago.
President Clinton had bequeathed his successor budget surpluses “as far as the eye could see.” He wanted some of them used to speed up repayment of the remaining $3.6 trillion still owed the public in Treasury bonds. He said it could all be paid off by 2013.
No magic there. A modest tax increase, controlled spending and a strong economy made more confident by disciplined budgeting had ended a scary era of deficit spending.
Can you imagine this causing concern? If the federal government didn’t need to borrow and paid off outstanding debt, it was said, U.S. Treasury bonds would disappear. Where would investors find a safe haven for their money? And suppose the U.S. government needed to borrow again in the future. How easily could it re-establish a market for Treasuries?
Wall Street analysts scoffed at the idea of a debt-free U.S. government. They figured that politicians would dip into the surpluses for tax cuts or more spending. An economic downturn could change the picture. But this is what you call a high-class problem. The surplus offered the opportunity of a generation to invest in America and its people’s well-being.
But the analysts probably never dreamed that the next president, George W. Bush, and his Republican Congress would slash taxes, run two wars and create a $1 trillion Medicare drug benefit without a thought of paying for it. Meanwhile, financial deregulation accelerated, taking the cops off a Wall Street already made drunk by low interest rates and the attendant housing bubble. The inevitable financial crash followed, kicking off the deepest downturn since the Great Depression. Before you knew it, Republicans had turned a $155 billion surplus into a $1.5 trillion deficit.
The point of all this is not to repeat a story sure to become more familiar as the presidential nominees fight over who killed America’s golden goose. The point is to note that what happened to us did not drop from the mesosphere. It was manufactured by a political process running on myths, lies and the purchase of political influence by moneyed interests.
“Republicans controlled Washington from 2001 to 2006,” GOP House Majority Leader Eric Cantor wrote last year in the book “Young Guns: A New Generation of Conservative Leaders.” “They did some good things, but they also did a lot to give conservatism a bad name.”
The good news, the Virginia rep went on, is that Republican “young guns” like himself and Wisconsin Rep. Paul Ryan would set the country aright.
First off, a few brave “old” Republicans did vote against the reckless Bush tax cuts and the unfunded Medicare drug benefit. But not Cantor. Not Ryan. They voted for the tax cuts, the new entitlement and both wars.
So boy, what an exhausting round of plastic surgery had to be done on their records to turn these guys into the fresh face of fiscal rectitude. Given Ryan’s history, his post-surgical plan to fix the deficits by radically ending the government guarantees in Medicare seems less impressive.
The baby boom generation did not suddenly appear with the election of President Obama. It was no secret that the aging boomers would make future heavy demands on Medicare. Actually, saving for that day was one of the suggested uses for the surpluses that Republicans quickly blew through.
Yes, there was a once-in-a-life opportunity to preserve the good life in America and not run up ruinous deficits. But that was once upon a time.
Froma Harrop is a Providence Journal columnist. Her email address is fharrop@projo.com.
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