2020, A Scenario Romney won the election and Congress passed the Romney-Ryan tax cuts.
As with prior Republican administrations, the tax cuts were not funded. By 2020, the Federal Budget reached its tenth year of annual deficits of about 10 per cent of GDP, and the National Debt reached over 200 per cent of GDP.
Eventually, the world refused to accept payment in dollars. Without critical imports, the U.S. economy came to a halt. People couldn’t get to work, food couldn’t be delivered to stores, unemployment increased to 25 per cent in three months, families were starving in the streets, and martial law was declared.
This dystopian future may seem like science fiction. However, something like this scenario is already happening in Greece. And if Romney wins, based on the performance of past Republican administrations and Romney’s campaign promises, it is plausible for America.
Romney supports Representative Ryan’s tax plan, which reduces personal income tax rates to just two brackets (10 per cent and 25 per cent). However, even assuming the Republicans implement their significant cuts to the social welfare net, Ryan’s plan is short $4.6 trillion in revenues. Romney-Ryan don’t deny this $4.6 trillion shortfall, but say the details for closing this gap will be explained after Romney’s election.
If Romney (as with prior Republican administrations) passes the tax cuts and doesn’t cut government spending — we’ll be on the road to continuous budget deficits of 10 per cent of GDP per year, and heading toward national insolvency.
Romney’s script resembles what our last three Republican presidents used to get elected. Remember the plot: Republican candidate claims to be a fiscal conservative, denounces ‘tax and spend’ Democrats, promises big tax cuts, and says Republicans have a magic formula for replacing lost revenues.
Let’s look at the numbers for the last four presidents.
President Reagan (1981-1989) cut taxes and claimed his tax cuts would produce growth in tax revenues (they didn’t). In addition, Federal expenditures remained approximately constant as a percentage of GDP. Results: When Reagan left office in 1989, the National Debt had increased from 31 per cent to 51 per cent of GDP.
The first President Bush (1989-1993) followed Reagan’s example. In four years, Bush increased the National Debt from 51 per cent to 65 per cent of GDP. Again, Federal expenditures as a percentage of GDP weren’t reduced.
President Clinton (1993-2001) reduced the National Debt from 65 per cent to 57 per cent of GDP, and turned the budget deficit he inherited (4 per cent of GDP), into a surplus of 1 per cent of GDP. He also reduced Federal expenditures as a percentage of GDP from 23 per cent to 19 per cent.
The second President Bush (1993-2001) was frightening. He turned a budget surplus of 1 per cent of GDP, into an annual deficit of about 10 per cent of GDP. Bush passed major tax cuts for the rich and increased expenditures as a percentage of GDP (from 19 per cent to 23 per cent). As a result, under Bush, the National Debt grew from 57 per cent of GDP, to 80 per cent of GDP.
So much for the myth of ‘tax and spend’ Democrats. It was the Republicans who managed our economy by tax cuts, government spending and saddling future generations with an ever-increasing National Debt (See Charts 1 and 2, below for a summary of these numbers).
Obama hasn’t completed four full years, and inherited his first budget from Bush. However, under Obama’s leadership, Congress agreed to a real deficit reduction program (the Budget Control Act of 2011). According to the non-partisan Congressional Budget Office: The 2011 Act will reduce the budget deficit by half in 2013, and more importantly puts America on a long-term stable fiscal path that reduces National Debt as a percentage of GDP.
Romney-Ryan are horrified at the Budget Control Act of 2011’s tax increases on the wealthy, and budget cuts for the military. They’ve proposed throwing out this compromise, and replacing it with increases in defence spending and massive tax cuts, which will all somehow pay for themselves, somewhere (somehow) down the road.
The Budget Control Act of 2011 is a compromise. It has lots of provisions I don’t like, but it’s a real solution to our challenges. As Americans, we should insist the Republicans provide a detailed plan before we abandon this compromise, and not be deceived by promises of painless solutions.
If America is again deceived by the GOP’s con game, we will reap what we have sown. And the opening scenario may well be our future.
Follow Steven Strauss on Twitter at: @Steven_Strauss or on Facebook at: https://www.facebook.com/Steven.Strauss.Updates
Note: Budget, National Debt and GDP data are from www.wolframalpha.com unless otherwise noted.
About the Author: Steven Strauss was founding Managing Director of the centre for Economic Transformation at the New York City Economic Development Corporation (NYCEDC). He is an Advanced Leadership Fellow at Harvard University for 2012. He has a Ph.D. in Management from Yale University and over 20 years’ private sector work experience.
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