Why Americans Want Republicans and Democrats to Alternate Election Cycles
by John Lawrence
Democratic Presidents get elected and hand out a bag full of goodies, but there's no plan to pay for them. Then the American people elect Republicans because Republicans say in effect, "You don't have to pay for the goodies the Democrats gave you, and, furthermore, we'll even give you a tax cut." So is there any wonder why Democrats and Republicans alternate being elected? Or why the national debt keeps increasing? Goodies not paid for followed by tax cuts followed by more goodies followed by more tax cuts. The American people are wise to keep alternating these election cycles between Republicans and Democrats. Now that the Republican accusation of "tax and spend" aimed at Democrats has been followed by Democrat protestations of "tax the rich and spend", the wind has been taken out of Republican sails. Most of the national debt has been racked up by Republican tax cuts which mainly have benefited the rich. But as long as the Republican middle class has gotten teenie weenie tax cuts, they're more than satisfied. With Trump as their champion, Trump could even reduce taxes on the rich and increase them on the middle class and the Republican middle class would still love him. He's very special.
So why is the increasing national debt even an issue? For sure it never has to be paid off by our children or grandchildren ad infinitum. There are 2 reasons though why it is important. #1) The interest on the national debt is a budget item and it keeps increasing crowding out other budgetary items. #2) The Treasury debt assets held by other countries represent funds that can be used to purchase US assets. Of these #1 is probably the most worrisome. Interest on the debt could be controlled by the Fed and the Treasury working together. The Fed can buy Treasuries thus reducing the amount on the market or held by other entities. When interest is paid on Treasuries held by the Fed, it reverts to the Treasury Department so basically Treasuries held by the Fed are interest free - they cost the government nothing! Secondly, the Treasury Department can set the interest or coupon values for Treasuries very low. There is no need to raise the rates paid on Treasuries to reflect market interest rates because there is no need to sell any particular amount of Treasuries. Treasuries are just a safe warehouse for funds regardless of their coupon values and so there will always be a market for them, and the Fed can always by any unsold Treasuries. This is just a policy that has been in effect for years called quantitative easing. It's a tried and proven policy, and there is nothing new or revolutionary about it.
So let's examine the composition of the national debt. Without the Bush and Trump tax cuts, debt as a percentage of the economy would be declining permanently. The nation’s fiscal pictured changed in 1981 when President Ronald Reagan enacted the largest tax cut in U.S. history reducing revenues by the equivalent of $19 trillion over a decade in today’s terms. Although Congress raised taxes in many of the subsequent years of the Reagan administration to claw back close to half the revenue loss, the equivalent of $10 trillion of the president’s 1981 tax cut remained. The George W. Bush administration, empowered by a trifecta in 2001, enacted sweeping tax cuts that will have cost more than $8 trillion by the end of fiscal year 2023. These legislative changes—the Bush and Trump tax cuts—are responsible for more than 90 percent of the change in the trajectory of the debt ratio to date, and will grow to be responsible for more than 100 percent of the debt ratio increase in the future. The Trump tax cuts cost $7.8 trillion. The national debt is approximately 32 trillion,and, toting up the figures listed above, it can be seen that approximately $26 trillion of this is due to the Reagan, Bush and Trump tax cuts.
So politicians of both parties have colluded to give the American public everything they want: goodies plus a free lunch when it comes to taxes. American voters just need to alternate administrations! Americans don't vote for a President based on all he's done for the American people. Case in point: after all Joe Biden has done for the American people (in terms of goodies), Americans will probably elect a Republican President in 2024 so they won't have to pay for it. They will get a tax cut instead. And tax cuts are the gifts that keep on giving year after year ... mainly for the rich! Some might say this phenomenon of incentivizing voters to alternate the party in power is a flaw in American democracy. Keeping the same party over several election cycles might result in more consistency in government policy, but democracy is messy. The question is is it too messy. Is there a better way?
