But we did not start with a deficit of $1.3 trillion in 2000. If we had maintained the Clinton-era tax rates (or higher…not to mention staying the heck out of countries we have no business being in), we could have had much smaller annual deficits, and wouldn’t have had to take on all the debt that we’ve burdened ourselves with over the past 10+ years, so would have a much lower debt service burden today…and tomorrow. Again, our debt service burden is unusually low considering the total debt burden (about 6% of expenditures for interest payments alone, IIRC), but that’s only because of the Fed’s interest rate policies. If/when rates go up, it’s going to get ugly.
I would also argue that keeping the tax rates high — especially on cap gains — we could have avoided a lot of the excess speculation that helped fuel our economic crisis. Of course, the Federal Reserve still bears the greatest responsibility for pushing rates to market-distorting lows, but the preferential tax rates for speculation vs. labor is largely behind the greater wealth disparity, and this “surplus wealth” has been traveling the globe, looking for the next bubble to invest in.
If we could have largely avoided the credit bubble, the idiotic “war on terror,” and maintained higher tax rates, we would not be in the position we’re in today.
That’s not to say we shouldn’t cut back on spending, of course. We could cut the heck out of the TSA budget and all spy agency activities that target U.S. citizens, for a start. Next, we should eliminate all funding directed at overturning popular foreign governments. I would personally take a chain saw to the defense budget…way too much abuse going on there.
