Why Politicians Will Never Solve the Debt Problem: Balancing the Federal Budget (1997)

• published: 04 Mar 2015
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Why Politicians Will Never Solve the Debt Problem: Balancing the Federal Budget (1997) The President proposes the budget for the government to the US Congress. Congress may change the budget, but it rarely appropriates more than what the President requests. Economist Mike Kimel notes that the former Democratic Presidents (Bill Clinton, Jimmy Carter, Lyndon B. Johnson, John F. Kennedy, and Harry S. Truman) all reduced public debt as a share of GDP while the last four Republican Presidents (George W. Bush, George H. W. Bush, Ronald Reagan, and Gerald Ford) all oversaw an increase in the country's indebtedness. Economic historian J. Bradford DeLong, former Clinton Treasury Department official, observes a contrast not so much between Republicans and Democrats, but between Democrats and old-style Republicans (Eisenhower and Nixon) on one hand (decreasing debt), and new-style Republicans on the other (increasing debt). David Stockman, director of the Office of Management and Budget under President Ronald Reagan, as op-ed contributor to the New York Times, blamed the ideological tax-cutters of the Reagan administration for the increase of national debt during the 1980s. Bruce Bartlett, former domestic policy adviser to President Ronald Reagan and Treasury official under President George H.W. Bush, attributes the increase in the national debt since the 1980s to the policy of starve the beast. While noting that George H.W. Bush's budget deal was one of the reasons for improvement of the fiscal situation in 1990s and ultimately for budget surplus, Bartlett is highly critical of George W. Bush for creating budget deficits by reducing taxes and increasing spending. On the other hand, especially in recent decades, Congress has been very active in restraining government expenditures which may not reflect the inclination or objective of the incumbent president. The standoff between Congress and the president in relation to the debt ceiling and expenditures has resulted in a number of financial crisis. On August 5, 2011, after Congress 2011 U.S. debt-ceiling crisis of the United States federal government, the credit rating agency Standard & Poor's downgraded the credit rating of the United States federal government from AAA to AA+. It was the first time the US had been downgraded since it was originally given a AAA rating on its debt by Moody's in 1917.[44] According to the BBC, Standard & Poor's had lost confidence in the ability of the United States government to make decisions.[45] Together with the budget deficit, the political climate at the time was one of the reasons given by Standard & Poor's to revise the outlook on the US sovereign credit rating down to negative on April 18, 2011.[46] Standard and Poor's downgraded the credit rating by one notch from AAA to AA+ on August 5, 2011, for the first time ever. The long-term outlook is negative and it could lower the rating further to AA within the next 2 years.[47][48] The downgrade was met with severe criticism from the Obama administration, commentators, and other political figures. The US still has a AAA rating from other ratings agencies.