Cutting our Debt and Deficit
Dear Constitents
Each one of us is justifiably concerned about our nation's debt and deficit. It weighs heavily on our collective well-being, and if left unaddressed, will dim the promise of America for future generations. As we consider this enormous challenge, it's important to examine how we got to where we are today, and what policies I believe we need to ensure America's future prosperity.
When I first came to Congress in 1993, we passed the Deficit Reduction Act. This eliminated the deficit and lead to a decade of budget surpluses and economic prosperity. We balanced the budget for the first time since 1969, and eventually produced surpluses for four years. In fact, we had eight consecutive years between 1993 and 2000 with a declining deficit and an increasing surplus, setting a postwar record.
Between 1998 and 2000, the publicly held debt declined by $363 billion—the largest three-year pay-down in American history. By comparison, under the previous two Administrations, the public debt quadrupled. By the time President Clinton left office, we were on track to pay off the entire debt by 2009. It's also worth noting that when he left office, the federal government was the smallest it had been since the Eisenhower Administration, with 377,000 fewer employees.
On January 20, 2001, the Congressional Budget Office estimated the total budget surplus for 2002 through 2011 would be $5.6 trillion. A national debate about how to use the surplus ensued, with one side advocating a "lock box" to protect Social Security, and the other calling for tax cuts. In crafting the cuts, the Administration unfortunately ignored a looming problem with the Alternative Minimum Tax (AMT). We knew then more and more people would be subject to the tax each year without raising its minimum threshold, but the tax cuts included no such increase because it would have made the tax cuts appear far more expensive.
As a result, since 2001, Congress has had to continually extend an AMT "patch" so that millions of taxpayers are not subjected to this outdated tax. The true cost of what was advertised as a $1.6 trillion tax cut is now $2.2 trillion because of these "patches" and the need to finance the debt created by the tax cuts.
The other major contributors to our national debt are the two expensive wars in Iraq and Afghanistan, and the decision to once again cut taxes in the midst of these wars. The wars and the tax cuts were all charged to the national credit card and have added enormous amounts to the national debt. According to the Congressional Research Service, the total cost of the wars between 2001 and 2010 is $832.2 billion for Iraq, and $557.1 billion for Afghanistan. Together, they have cost us $1.4 trillion so far, plus the cost of added security at our military bases, and the substantial health costs associated with the care of our veterans. In addition, the nonpartisan Congressional Budget Office (CBO) estimates the cost of the wars over the next decade could be $500 billion to $1 trillion, depending on troop levels. It's almost impossible to overstate the staggering costs of these military engagements, every cent of which was financed with borrowed money.
Yet another turning point came in 2003, with passage of the Medicare Part D prescription drug benefit. The cost of the benefit was advertised as $395 billion between 2004 and 2013, even as Medicare's chief actuary had concluded it would cost at least $534 billion over the same period. Over the next ten years, according to Republican economist Bruce Bartlett, the benefit will cost more than $1 trillion. This, too, is completely deficit-financed. Most people are not aware that the health reform bill President Obama signed into law last year is a deficit-reducer. According to the CBO, it will save $143 billion in the first decade and $1.2 trillion in the second.
In 2000, our government ran a record $230 billion surplus. On January 20, 2009, the deficit was $485 billion and the debt was $10.6 trillion, a record debt for any Administration. Any honest assessment will point to these elective policies—two massive tax cuts and two wars waged with borrowed money, as the primary reasons.
In late 2008, the end of the "housing bubble" and the Wall Street meltdown dealt our country catastrophic harm, precipitating the worst recession since the Great Depression. In 2009 alone, American households lost almost $8 trillion in stock market wealth and $6 trillion in the market value of their homes—the combined $14 trillion loss is comparable to the entire 2008 GDP. Out of necessity, the government took steps to stem these historic losses and begin to rebuild the economy, including passage of the Recovery Act, which created or saved millions of jobs. In the final days of the Bush Administration, Congress also passed the Troubled Assets Relief Program (TARP), which, though authorized at $700 billion, is now estimated to cost taxpayers about $19 billion in total. While still significant, this figure pales in comparison to the cost of a global economic meltdown. The reason for the lower amount is that the loans to the automobile industry and financial institutions have either been totally repaid to the taxpayers with interest, or the amounts owed have been substantially reduced.
Today, to have any hope of addressing our unsustainable deficit and growing national debt, we must begin with a clear and honest understanding of how they were created. This burden is one we all bear and it is the responsibility of Congress and the Administration to address these fiscal challenges.
I will continue to sponsor and support sensible legislation to help our country return to sound fiscal footing. As always, should you have any questions or comments, let me hear from you. I'm proud to represent a Congressional District where my constituents are informed and ask serious-minded, thoughtful questions, which provide me with valuable feedback.
Most gratefully,
Anna G. Eshoo
Member of Congress