Tax Cuts, Bush’s Spending and the Social Safety Net
May 22, 2011 Leave a comment
There are two points here. If you just let the Bush tax cuts expire the country’s capacity to pay its debt will be stable for ten years. Also, the other key to debt has been spending on wars and the Bush Medicare Part B prescription benefit. Otherwise, the remaining balance of spending as a cause of debt is trivial. In other words, cutting employment programs, education spending and other social safety nets pays for the tax cuts of the wealth. This is not a good political or economic system, nor is it sustainable over time, and may threaten our democracy eventually.
We focus here on debt held by the public, which reflects funds that the federal government borrows in credit markets to finance deficits and other cash needs. That’s the proper measure on which to focus because it’s what really affects the economy. We compare it to GDP because stabilizing the debt-to-GDP ratio is a key test of fiscal sustainability.
…simply letting the Bush tax cuts expire on schedule (or paying for any portions that policymakers decide to extend) would stabilize the debt-to-GDP ratio for the next decade. While we’d have to do much more to keep the debt stable over the longer run, that would be a huge accomplishment.