President Bush inherited record surpluses. When President Bush took office, the federal budget had been balanced for three consecutive years and was on track to balance again in 2001. We hadn't seen such a string of surpluses since the 1920s.
In Fiscal Year 2000, we had a surplus of $236 billion, the largest surplus in American history.
We were not only running a surplus in the unified budget, we were running an on-budget surplus. We were no longer diverting the Social Security Trust Fund surplus to fund other government programs.
In 1999 and 2000, we saved every penny of the surpluses in the Social Security Trust Fund. We expected to do so again in 2001. In 1998, we had saved part of those surpluses.
This ended decades of diverting the entire surplus to fund other government programs.
These surpluses were not a temporary phenomenon. The surpluses were expected to continue for the next decade, and beyond.
A total of $5.6 trillion in surpluses were projected for the next decade, Fiscal Years 2002-2011. This included the entire $2.5 trillion Social Security surplus over that decade.
This achievement came at the right time, just when we needed to prepare for the upcoming retirement of the baby boom generation.
These surpluses allowed us to reduce the national debt, putting us in a better position to honor our promise to Social Security beneficiaries.
The Bush fiscal reversal. President Bush took office and quickly turned things around, for the worse.
In 2001, President Bush and a Republican Congress again diverted some of the Social Security surpluses for other purposes. Nevertheless, we still managed to run an overall budget surplus of $127 billion that year.
By 2002, we were back in deficit, to the tune of $158 billion.
In 2003, the deficit soared to $375 billion, its highest level ever.
Deficits matter. The Bush budget deficits will have a real impact on the economy and future taxpayers.
As the economy picks up steam, private businesses will have to compete with the federal government for a limited supply of funds. This will increase interest rates and reduce the amount of investment capital available for new and growing businesses.
Future taxpayers will have to pay higher taxes in order to pay interest on the growing national debt. When President Bush took office, the public debt was shrinking and projected to effectively disappear by 2009. Under his current budget, debt held by the public will reach $7.3 trillion by 2014.
Interest payments will also increase, from $153 billion last year to $374 billion in 2014. Future taxpayers will have to pay those interest bills.
The deficits are not temporary. Under the Bush's budget, according to the CBO, we will run deficits every year for the next decade and will remain near $300 billion.
The actual deficits are likely to be higher still as the estimates do not include any costs for the war on terrorism beyond this year. Nor do they account for the costs of addressing the growing burden of the Alternative Minimum Tax.
The recession, terrorist attacks, and operations in Afghanistan and Iraq have all contributed to the deficit in the short term. But addressing these problems did not require the permanent deficits that President Bush has created.
The major reason we are experiencing permanent deficits is the Bush's tax cuts, which have brought revenues down to their lowest level since 1950, as a share of the economy.
Indeed, the CBO baseline, which assumes the tax cuts are temporary, shows budget surpluses returning soon after the tax cuts sunset. On the other hand, if we adopt the President's proposals, the deficits would remain in place indefinitely.
Bush and the GOP Congress worked to worsen deficits. Bush and congressional Republicans have declined to take action to respond to our deteriorating fiscal outlook. Republicans tout budgets that reduce the deficit in half. But that goal is only reached by leaving out significant costs and providing numbers for only the next five years rather than the customary ten years.
It would be charitable to describe the Republican budgets as neglecting the deficit problem. The reality is far worse. The deficit reduction in the Bush's budgets and both the House and Senate budget resolutions results from a falling budget baseline.