Bush and Reagan Created US Debt

From zFacts.com


This graph shows that $9.2 Trillion of the $12 Trillion supply-sider increase in national debt is considered problematic by economists. They say it is fine to increase the debt in step with national income. Republicans say the whole $12 Trillion is a problem.


The green line shows what would have happened if Reagan and the Bushes had just kept the debt growing at the same rate as the economy. That would make their parts flat. Many conservatives claim Congress increased Reagan’s budgets, but this is not the case as you can see documented here.


WWII caused the debt to shoot up, starting in 1942, and reach 30% higher relative to the country’s wealth than it is today. The economic stimulus of that government spending pulled us out of the great depression and into high gear to win the war. (When to save / when to borrow.)


… The green line in the graph shows what would have happened if Reagan had proposed budgets that let the debt increase in step with inflation and the economy—if he had kept it at a constant fraction of GDP. That’s not much to ask of a president who said he’d do far better than those before him, since every previous post-war president had actually reduced the debt as a fraction of GDP.

By the end of the Reagan-Bush 12-year “revolution,” the extra debt they had piled on the country was costing the country an extra 2.6% of GDP in interest—$300 million a day. Without that interest working against him, Clinton would have paid down the debt a bit faster. That helps the green-line goes down in the Clinton years. That’s what would have happened without the Reagan-Bush interest burden
Now if W. Bush had held the line as all non-supply side presidents had done, the national debt would have been only 21% of GDP, and the country would have been ready to pull itself out of the Great Recession with ease. In fact when W. Bush’s last budget year ended we would have had $9 Trillion less in debt
So how did Reagan, the great debt-slasher, go so far wrong? Partly it was his belief in supply-side “economics.” This “theory” claims that when the government cuts taxes, especially taxes on corporations and the rich, it makes them so happy to keep more of their money that they work much harder, get richer, and pay even more taxes than before the tax cut. So the lower the tax rate, the more money the government collects to pay down the debt! Believe that happy talk, and you can run up quite debt.

Of course the rich loved this “theory” and fed the press many stories about the wonders of the new supply-side “economics” (cooked up by Laffer, as a graduate student). Money talks, and a lot of people listened. It’s time to rethink what radical conservatives have done and are doing to our country. The Reagan-Bushes National Debt now totals $9.2 trillion. That’s the lions share of our present debt.

  2 comments for “Bush and Reagan Created US Debt

  1. Gregory Iwan
    February 22, 2011 at 2:16 pm

    THE USE OF THE TERM “dEBT” IS A BIG SMOKESCREEN. The real argument centers on public-sector “spending,” versus (limited) private enrichment. Huge public spending won WWII; Reagan simply out-spent the Soviets, putting an end to the COld War (the other side blinked). So he used the FDR model (Reagan had been a Democrat once, after all). But if public “spending” isn’t lining the pockets of the Beltway Bandits or other oligarchs, then it’s ipso facto a bad thing. Heaven forbid that we should help keep people from starving in the USA, or generate work. What a concept!

  2. lee
    March 16, 2011 at 11:40 am

    You fail to consider congress.
    The president doesn’t create economic policy. Look at congress for that, and you’ll find that Bush’s increase in debt to GDP ratio occurs during a democratic congress.

    If you’re theory is correct, then why hasn’t Obama turned this around? It’s because the president can’t control the debt to GDP ratio, Congress can.

    And it’s the same Congress during Obama’s term that was in power during the ratio hike of 2008-9.

    Your article fails to mention that Reagan improved the quality of life for the middle class tremendously. Reagan kept middle class low paying jobs still reasonably able to provide for a family.

    The second half of Clinton’s term (the part where the big decrease occurs) was during a conservative congress and during which Clinton shifted to conservative policies to appease the public who were drifting conservative, so that democrats could stay in power. That failed though and Bush was elected.

    The rattling on about the wars by the Democrats shifted public favor onto the Democrats side, earning them Congress, at which point they worked to drastically increase spending.

    So both Clinton’s downshift in spending, and Bush’s dramatic increase in spending where the fault of the Congress makeup who were polar opposites of the president at the time.

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