Democratic Senates and House of Representatives supported Ford. Ford experienced a 19.8% deficit and a 13.1% deficit over the budget in 1976 and '77 respectively. The effects of Ford's budget deficit caused an increase of 5.8% in the national debt but helped pave the way for Carter's administration. Carter entered the presidency promising to "clean up Washington" and cut back on government waste. Democratic majorities in both the Senate and the House of Representatives also supported Carter. His cutting back on government waste also had positive effects on the national debt. Continuing to lower the deficit for the budget, Carter experienced a 12.9% and an 8% deficit in 1978 and '79 respectively in the first half of his term. Although there was an increase in the deficit to 12.5% in 1980, he brought the deficit down to 11.6% in 1981. Due to government cutbacks implemented under Carter, the national debt growth during his term was -.1% total. Although Carter had good intentions when he entered office, other factors caused disfavor for his presidency and he was defeated in 1982 by Reagan. Carter's defeat ushered in twelve years of Republican presidential administration. During the years of 1982- '83 there was "uninterrupted and rapid increases in the national debt" (Carroll 150) which increased the debt from $1.4 trillion to $3.5 trillion.
Reagan did not receive the support afforded to past Democratic presidencies in the House of Representatives. For six of his eight years, Reagan had support from a Republican Senate but had to contend with a Democratic House of Representatives. Reagan attempted to pass the Financial Responsibility Act of 1982, which would contain a fiscal cutback in the government of 13 billion and raise taxes in an attempt to pay for government spending, but the House of Representatives rejected his plan. In 1982 and '83, Reagan experienced a 17.2% and 25.7% deficit over the budget which was added to the national debt. Reagan was able to pass the Deficit Reduction Act in 1984, which would reduce spending. The Senate and House of Representatives could not agree on a figure to reduce the deficit by, it was argued between $149 and 182 billion, so a happy median was reached. In the years of 1984 to 1986, Reagan's administration kept a steady budget deficit of 21.8-22.4%. In 1987, the deficit dropped to 14.9% and continued falling through 1989 to 13.3%. Bush's administration experienced an opposite trend. The Senate did not back him or House of Representatives and his policies combined produced and effect which can be seen through the national debt. Beginning in 1990, Bush achieved a budget deficit of 17.7% which continued to grow to 20.4%, 21% and finally 22.2% in 1991, '92 and '93 respectively. Debt growth during the Republican years also outweighed Democratic growth with 9.2% by Reagan and 6.8% by Bush.
In comparing the four presidential administrations, there is a clear difference between the Democratic and Republican terms and how they affected government spending, deficit and the national debt. Throughout the Democratic terms of Ford and Carter, the deficit was reduced and finally there was a reduction in the national debt. This trend was due to the policies to "clean up Washington" and cutback on government spending and waste. When the Republican era arrived, America was experiencing a recession, which the increased national debt was a result in policies to help Americans get out of. Reagan sacrificed the budget to a deep deficit in order to create jobs for Americans and boost the economy. Although the Republican administration pulled America out of a recession, need-based aid such as farm subsidies and social security was cutback. The question that arises then is did the Republican administrations take the correct actions by increasing the national debt in order to pull America out of the recession. The answer most probably is yes and now America must try to reduce Reagan's and Bush's national debt. Clinton seems to be doing that by decreasing the deficit from Bush's almost $400 and #75 billion deficits in 1991 and '92 respectively to Clinton's $360 billion in 1993, $260 billion in '94, $180 billion in '95 and finally his $230 billion deficit in 1996.
In the 80's, defense spending grew while taxes were decreased, resulting in an explosion of the deficit. From 1983 to 1992 the average deficit was $207 billion; this led to an increase in the debt by over $2.2 trillion (more than three times the debt in 1983) (Structure 15). The interest paid on this debt skyrocketed from 15% to nearly 35% in only ten years. The major change in the budget which caused this deficit was a decrease in taxes; government spending actually fell relative to GDP (Breslow) (Defects and the Debt 23). The large deficit we have today is due to lingering effects of the budget changes made during the 80's. These changes imposed a large structural deficit, which is still with us in 1997. In fact, we would be without a deficit today were it not for the interest being paid on the debt accumulated throughout the 1980's (Building Blocks 21-22).
Since the beginning of the Clinton administration in 1992, significant efforts have been made to reduce the deficit and bring the spiraling debt under control. The Omnibus Budget Reconciliation Act was passed in 1993 and was designed to decrease the deficit by $500 million over 4 years. The OBRA has turned out to be more successful than predicted; it is now estimated that it will reduce the deficit by over $900 million by 1998. (Building Blocks 25). The large deficit incurred during the Reagan years has already been cut down by almost two-thirds since its 1992. The interest being paid on the debt has fallen to 28% from its peak at 34% in 1990 (Defects and the Debt 25). The debt itself has decreased to just under 50% from its peak of 50.2% in 1992 (Federal Debt 102-103).
Presently the United States is left with a deficit of $107 billion and a total debt of nearly $5.5 trillion, or 49.9% of GDP. In the 1998 budget, the government will spend $1.7 trillion, which is approximately divided as follows: Defense will spend $267 billion, International Affairs--$35 billion, Science--$17 billion, Energy--$5 billion, Environment--$23 billion, Agriculture--$20 billion, Housing--$353 billion, Transportation--$16 billion, Community--$16 billion, Education--$105 billion, Health--$193 billion, Medicare--$174 billion, Income Security--$299 billion, Social Security--$373 billion, Veterans--$67 billion, Justice--$20 billion, General Government--$58 billion, Interest--$242 billion (Investing 132-135). Regardless of the past history on the debt, each year the government is faced with the decision of how to spend its money and how much of a deficit to run.
Debt is an ever-present force in the American economy. With household indebtedness hitting new peaks, some forecasters fear a consumer belt-tightening that could bring on recession. And in the presidential campaign, federal debt is the ghost at the banquet, as every economic debate--whether over tax cuts or aid to education--turns into a fight over who will excel at reducing the government's $100 billion-a-year deficits. Since the candidates' statements aren't always credible, this would seem the perfect time for economists to provide a clear understanding of the role debt plays in shaping the economy. The debate about the federal budget is not about the debt ceiling, or deficits, or arcane accounting terms. The debate is, quite simply, about the future of our country and about what kind of America we want our children to live in. It is about people, not numbers.
Federal spending is out of control, and it has been for many decades. The fact is that we will never tax our way to a balanced budget, and we will never spend our way to prosperity. The untold story is that our budget could be balanced were it not for runaway growth in domestic spending. The defense budget has been slashed by nearly $40 billion since 1991, and yet the biggest part of our budget, domestic spending, has grown at nearly twice the rate of inflation.
The federal debt is rapidly approaching the value of the entire U.S. economy, known as Gross Domestic Product (GDP), or about $6 trillion ($6,000,000,000,000.00). The interest on that much money today stands at around $350 billion per year. That means that every man, woman, and child in the country today shares $18,000 of the national debt - - and a child born today will have to pay $187,000 in taxes over his or her lifetime just to pay the interest on the national debt.
If we ran our personal finances like the federal government, we'd all be bankrupt. Yet past politicians of all parties have not taken the problem seriously, using their voting cards like credit cards without spending limits. The 104th Congress made controlling federal spending a top priority, and we made significant progress at eliminating wasteful government spending, reducing discretionary spending by $53 billion. Although that is only 3 percent of our $1.57 trillion budget, it's a reversal of runaway spending increases that has not occurred since 1969. We also voted to give the President line item veto authority, giving the Executive Branch unprecedented ability to ferret out wasteful programs.
Does the deficit matter? It seems that the government is getting money for free; it can simply run up a large debt without any consequences--or are there consequences? Defects are regularly used to boost the economy during a recession, but large structural defects cause harm to the economy. By selling a large number of bonds to finance the deficit, the government "chokes off" investment and "shrinks" personal savings (Building Blocks 22). Additionally, large deficits continually increase the debt, and as the interest paid on the debt moves up, the government must run a larger deficit to finance the debt. This cycle can run out of control as interest takes up a larger and larger portion of the federal budget, limiting the government's effectiveness. It is easy to see how having a large deficit is not good for the economy.
A budget that is more or less balanced is ideal for optimized long-term growth in the economy. In the last few years, enthusiasm has risen for an amendment to the Constitution requiring a balanced budget. Many believe that this amendment would benefit the economy by forcefully eliminating the deficit and thereby reducing the debt. However, the amendment would mean that even if there were a recession, the government would not be able to run a deficit to boost the economy. In fact, during a recession the government would have to balance its automatic stabilizers, such as welfare, income taxes, and unemployment benefits by cutting government spending even more. This would only worsen the state of the economy and push it deeper into recession. A Balanced Budget Amendment would drastically limit the effectiveness of fiscal and monetary policy, which are the two methods that the government uses to stabilize the economy. This would make it nearly impossible for the government to prevent recessions and control the growth of the economy. A requirement for a balanced budget would most certainly harm the economy and perhaps even cause a depression (Should the Budget be Balanced?).
Balancing the budget is good, but a balanced budget requirement is bad, so what course of action should the government take? A gradual decrease in the deficit towards a balanced budget seems to be a likely plan, which would benefit the economy. Already progress has been made in decreasing the deficit and curbing the growth of the debt. If these trends are to continue for the next several years, the budget will be balanced by 2002. (Building Blocks 28-29). The debt also is projected to decrease to 44% of GDP (Federal Debt 103). It appears that, as long as efforts to balance the budget continue and the economy stays stable, the mistakes made during the 80's will be corrected without too many harms to the economy. The deficit will continue to decrease towards a stable balanced budget and the debt will eventually be outgrown by the economy. The future doesn't necessarily look bright, but it doesn't look so dim as before
