When Ronald Reagan came to office, the national debt stood at $1 trillion. With his election came the tragedy of ‘supply side’ economics; this philosophy was, if you cut taxes (especially for the rich), the economy will grow; and in turn, revenue to government will grow. In two short years, the country was in a recession, and the federal budget was gushing red ink.
Realizing what they had done, over the next ten years, Reagan and George H. Bush raised taxes seven times, almost getting America back to pre-Reagan taxes. After Reagan and Bush had rung up $3 trillion dollars more in debt, Bill Clinton finally put the nation back on track. Clinton reformed welfare by eliminating 10 million from the rolls; and, with the approval of Republicans led by Newt Gingrich, raised the top rate on income tax to 39.5 percent. This gave America the first budget surplus since Eisenhower.
The first thing George W Bush did was break the compromise of Newt Gingrich, by going back to the failed supply side propaganda of tax cuts for the rich. Half of Bush’s tax cut went to the upper 2 percent. This, coupled with two unfunded wars, a new unpaid for Medicare Part D drugs plan, and an unwillingness to face out of control Medicare and Medicaid costs, set us on a course of financial disaster.
Bush increased federal spending by 85 percent while only increasing revenue by 25 percent. With the debt doubling to $10 trillion, the American economy was driven off a cliff.
Not only did Obama inherit a $10 trillion debt, but he also had to manage a drop of over $800 billion in federal revenue due to the failed economy and the Republican insistence of maintaining huge tax cuts for their wealthy contributors. Add to that Bush’s trillion dollar bailout of the banks, insurance companies, and auto companies, and Bush’s failure to deal with the growing healthcare deficit of $400 billion and you pretty much have the $1.6 billion dollar deficit Bush stuck Obama with this year.