Follow up: is it realistically achievable ever again, and should it even be a goal to be concerned with?
In: Economics
By not cutting taxes too deep.
The US cycled between small deficits and small surpluses for most of its existence. There were some blow-ups in the debt when they had to spend a ton of money all at once (Great Depression, WWII, etc.) but, on average, annual taxes roughly covered normal operating costs.
However, starting in about the late 70s/early 80s, “trickle down economics”, famously called “voodoo economics” because its complete bullshit, took hold in political circles in the US. This is the idea that if you cut taxes on the very wealthy (capital owners) then they’ll invest that in business growth and the taxes on the growth will be big enough to offset the initial loss. So the US has been merrily cutting aggregate taxes for about 50 years now, without any equivalent cuts in spending. This created a structural deficit, because the trickle down theory doesn’t work…the people keeping the money *don’t* reinvest enough to make up for the tax revenue loss.
During the end of Clinton’s presidency the Dot Com bubble fueled incredible tax revenue at a time of relatively low military spending (Cold War over, War on Terror hadn’t started) and low entitlements spending (Baby Boomers hadn’t retired), which was *just* enough to erase the deficit and run a balanced budget. But that was a perfect storm of positivity…as soon as the bubbles burst it was back to deficits.
Latest Answers