The author is a Reuters columnist. The opinions expressed
are his own.
By David Cay Johnston
July 26, It looks increasingly as if a majority
of House Republicans, their allegiance pledged to Grover
Norquist, prefer default by the U.S. government over any
increase in tax rates, even on people who make a million
dollars a day and pay lower rates than middle-class Americans.
Many signers of the no-tax-rate-hikes pledge invented by
Norquist, the anti-tax crusader who is president of Americans
for Tax Reform, seem to have forgotten their greater duty to
the U.S. Constitution.
No matter how many spending cuts President Barack Obama
accepts, upsetting Capitol Hill Democrats, or how sternly the
financier class warns about the consequences of default, many
House Republicans believe the government levies too much,
challenging House Speaker John Boehner's ability to muster the
votes to pay the government's bills when they come due.
This is a curious stance given that President Obama's
proposed fiscal 2012 budget anticipated a federal budget
deficit one-third smaller than this year's. And that was before
all the additional cuts he accepted.
It is an even stranger stance given that fiscal year 2011
is 80 percent over and the federal debt is growing 30 percent
slower than it did in fiscal 2010. Indeed, this calendar year
the debt has grown by just $317.6 billion though last Thursday,
the latest data available. That is only about a third of the
rate for the same period a year earlier, when the debt grew by
more than $926 billion.
GROWTH THE KEY
Thank goodness these same Norquistians were not in office
in 1945. That year the government spent more than $2 for each
dollar it took in. It was, of course, a year spent partly at
war, but then today we are engaged in wars in Iraq, Afghanistan
and Libya (and, some would argue, in Pakistan).
In 1946, a year of peace, the gross federal debt was 121.7
percent of the gross domestic product, the official federal
data show. So what happened? Did this mountain of debt burden
the children and grandchildren and great-grandchildren of those
on Capitol Hill that year? No.
Even though the federal government spent more than it
levied in 26 of the next 34 years, when President Jimmy Carter
left office it was down to just 33.4 percent of GDP and the
next year under President Ronald Reagan it shrank a bit more to
equal 32.5 percent of the economy.
Then, as now, economic growth was the key to making debt
shrink relative to the economy. Since 1946 real growth per
person has tripled.
As to the reasons our debt, which was shrinking at the end
of the Clinton administration, has exploded, there are the
well-known causes: the George W. Bush temporary tax cuts that
President Obama agreed to extend for two years and those wars.
But there is another huge factor that we can now begin to
measure, as noted in testimony to Congress the other day by
Simon Johnson, the Ronald A. Kurtz Professor of
Entrepreneurship at MIT's Sloan School of Management.
In January 2008 the Congressional Budget Office estimated
that publicly traded debt would total $5.1 trillion in 2018.
Its report two years later, in January 2010, put the figure at
That $8.6 trillion increase in traded federal debt shows
how much the collapse on Wall Street added to our debt as it
caused the worst job market since the Great Depression with
banks propped up by tax dollars when they should have been
allowed to fail, as one would expect of badly run enterprises
in a capitalist system.
ROLLING OVER DEBTS
Then there is the news that many banks small enough to fail
have repaid their bailout loans, producing a $10 billion profit
for the government so far from the Bush administration's
Troubled Assets Relief Program or TARP.
Not quite, it turns out. Daniel Gross at Yahoo Finance
read through the report to footnotes 49 and 50, which reveal
that the banks paid back their TARP loans with money borrowed
from the Small Business Jobs Act passed in 2010 with one
Republican vote in the House.
That is, just like our federal government, many of the
banks simply rolled over their debts. Congress created a way
for them to avoid default by making them new loans. Should
taxpayers be treated with the same regard as banks when it
comes to refinancing?
This brings us back to the congressmen who have pledged
allegiance to Norquist. Their oath of office is to "bear true
faith and allegiance" to the Constitution, an obligation each
swears is taken "freely, without any mental reservation or
purpose of evasion."
And perhaps they will heed the words of Emil Schram,
president of the New York Stock Exchange in 1946, who described
the federal debt after World War Two as a grave problem, but
who also understood the need to look to the country's best
interests, not those of any particular group like, say,
To Norquist the tax system today is the standard, even
though that standard was enacted as a temporary tax reduction
amid visions of budget surpluses as far as the eye could see
that proved to be wishful thinking.
The problem of the federal debt, Schram said, "must be
faced courageously without any single group, whether government
or private, to impose its views or wishes regardless of the
consequences to the economy as a whole."
(Editing by Howard Goller)