by Dr. Paul G. Kengor
We have failed to heed the lessons of economic history, with terrible consequences for our economy and country. And the most crucial of those lessons, particularly since the start of LBJ’s Great Society, is this: deficits have been caused not by a lack of income-tax increases but by recession and, most of all, by excessive government spending.
The failure to learn that lesson is again on painful display, as President Obama travels the country pointing the finger at “the rich” for not forking over enough income. By this narrative, the 36 percent income-tax rate paid by the wealthiest Americans is somehow robbing the poorest Americans, whose income-tax rate is zero percent; something one would never know from Democrats’ class rhetoric.
Because I comment on this topic so frequently, especially in the context of Reaganomics, I constantly deal with these issues from a historical perspective. Here, I would like to make it easy for everyone to see the numbers themselves and understand the root of the problem.
The answers are as easy as googling the words “historical tables deficit.” Two sources pop up: CBO historical tables and OMB historical tables. “CBO” is Congressional Budget Office; “OMB” is Office of Management and Budget. These are the official go-to sources for data on deficits, revenues, and government expenditures.
Either source will work. To keep it simple, I’ll focus on the OMB numbers. At the OMB link is Table 1.1, titled, “Summary of Receipts, Outlays, and Surpluses or Deficits: 1789-2016.” That is an official scorecard of spending by the federal government since the founding of the republic.
Looking closely at the chart is an eye-opening experience. As the first two columns show, receipts (i.e., revenues) and outlays (i.e., expenditures) moved up and down throughout our history. In 1965, however, something historically unusual, something literally deviant, began: Spending increased every single year, non-stop, consistently, without exception, into the Obama presidency, from 1965-2009.
There are few constants in the universe: gravity, the sunrise, the oceans, the moon. Add another: spending by the federal government; it rises every year.
Significantly, revenues don’t increase every year. The most dependable reason for declines in revenues is not a lack of tax increases, or high enough income-tax rates, but recessions. Since 1965, as the data shows, annual revenues declined seven separate times.
At the start of the Great Society, in 1965, revenues and expenditures were nearly equal, with expenditures only slightly higher, leaving a manageable deficit of $1.4 billion. By 2009, however, annual expenditures ($3.5 trillion) had far outpaced annual revenues ($2.1 trillion), leaving a record deficit of $1.4 trillion.
Significantly, the biggest one-year drop in revenues was from 2008-9, when they declined from $2.5 trillion to $2.1 trillion. Worse, President Obama and the Democratic Congress responded with an $800-billion “stimulus” package that didn’t stimulate. In other words, they responded in the worst way: with another $800 billion in government spending. That further mushroomed the record deficits/debt we face. The math is very simple.