Dissecting the Economic Debacles of the George W. Bush Administration

George W. Bush signs tax cuts into law.

Insightful historians likely will someday argue that George W. Bush oversaw the most disastrous administration in American history.

More evidence to support that claim came over the weekend from Washington Post reporter Lori Montgomery. In a piece titled "Running in the Red: How the U.S., on the Road to Surplus, Detoured to Massive Debt," Montgomery shows how choices made shortly after Bush took office turned the Clinton surpluses into record deficits.

Montgomery provides perhaps the most concise description yet of the events that led to an economic calamity in which we still are mired. And many Americans remain clueless about how we got here.

Writes Montgomery:

Polls show that a large majority of Americans blame wasteful or unnecessary federal programs for the nation’s budget problems. But routine increases in defense and domestic spending account for only about 15 percent of the financial deterioration, according to a new analysis of CBO data.

The biggest culprit, by far, has been an erosion of tax revenue triggered largely by two recessions and multiple rounds of tax cuts. Together, the economy and the tax bills enacted under former president George W. Bush, and to a lesser extent by President Obama, wiped out $6.3 trillion in anticipated revenue. That’s nearly half of the $12.7 trillion swing from projected surpluses to real debt. Federal tax collections now stand at their lowest level as a percentage of the economy in 60 years.

It didn't have to happen, Montgomery reports. In fact, this is a classic self-inflicted wound, one that happened because Americans did not know how to deal with prosperity. Bill Clinton left an economy that was so strong the Congressional Budget Office (CBO) predicted the U.S. could pay off all its debts within a decade. A rational, informed electorate would have given the 2000 presidential election to Clinton's vice president, Al Gore, in a landslide. But enough Americans inexplicably voted Republican to make the election close, and GOP chicanery carried the day in Florida, ushering Bush into the White House.

Were Americans tired of peace and prosperity under Clinton? Apparently they were, and Bush quickly set the nation on a new course:

Voices of caution were swept aside in the rush to take advantage of the apparent bounty. Political leaders chose to cut taxes, jack up spending and, for the first time in U.S. history, wage two wars solely with borrowed funds. “In the end, the floodgates opened,” said former senator Pete Domenici (R-N.M.), who chaired the Senate Budget Committee when the first tax-cut bill hit Capitol Hill in early 2001.

Now, instead of tending a nest egg of more than $2 trillion, the federal government expects to owe more than $10 trillion to outside investors by the end of this year. The national debt is larger, as a percentage of the economy, than at any time in U.S. history except for the period shortly after World War II.

Montgomery's article might be the single most important piece of political reporting in the past 10 years. It shows that Republicans who try to blame the burgeoning debt on Democrats and President Barack Obama are . . . well, full of feces. But how many Americans will read the article? How many will grasp what it means?

Obama’s 2009 economic stimulus, a favorite target of Republicans who blame Democrats for the mounting debt, has added $719 billion — 6 percent of the total shift, according to the new analysis of CBO data by the nonprofit Pew Fiscal Analysis Initiative. All told, Obama-era choices account for about $1.7 trillion in new debt, according to a separate Washington Post analysis of CBO data over the past decade. Bush-era policies, meanwhile, account for more than $7 trillion and are a major contributor to the trillion-dollar annual budget deficits that are dominating the political debate.

Montgomery should be applauded for a tough, hard hitting article. But she is being much too kind to Bush here. She lays $1.7 trillion in new debt at Obama's feet, while putting $7 trillion of new debt under Bush. But almost all of the Obama-era choices were an attempt to jump-start an economy drowning in the Great Bush Recession. That means the blame for almost all of the $8.7 trillion in new debt should fall on Bush.

How do we get out of this mess? Montgomery says that new tax revenue must be part of the equation. But with House Speaker John Boehner calling new taxes a "non-starter," that means Americans probably lack the political will to get their economic house in order:

As Congress prepares this week to launch a high-stakes battle over whether to raise the legal limit on borrowing, the analyses offer a clearer view of the drivers of the debt — and of the difficulty of re-balancing the budget without new tax revenue.

Even former U.S. Senator Pete Domenici (R-NM), who played a pivotal role in pushing the Bush tax cuts, now admits they probably were ill advised:

“Nobody would have thought that all these things would have happened after you cut taxes,” Domenici said. “That you’d have two wars and not pay for them. That you’d have another recession. A huge extravaganza of expenditures” for the military and homeland security after the Sept. 11, 2001, attacks. “You would pause before you did it, if you knew.”

So why are Congressional Republican intent on making the Bush tax cuts permanent--even though "CBO forecasts are unrelievedly gloomy, showing huge deficits essentially forever," according to Montgomery?

No one seems to have an answer for that one.