The 8 True Causes of Deficits and the Debt

November 18th, 2011

Published on Zcommunications, by Jack Rasmus, November 17, 2011.

… The total US federal government debt rose between 2000 and 2011 by approximately $9.2 trillion, from $5.6 trillion in 2000 to $14.8 trillion today, according to the Federal Reserve’s ‘Flow of Funds’ reports. There are basically eight causes of the $9.2 trillion rise in the US federal debt over the past decade:   

  • excess inflationary defense-war spending;
  • the Bush tax cuts from 2001-2011;
  • the direct Congressional funded bailouts of banks…
  • and corporations following the banking crash of 2008;
  • Bush and Obama’s successive fiscal (tax cuts and spending) stimulus packages of 2008-11;
  • price gouging by health insurance companies …
  • and health services providers;
  • and simple interest on the debt for all the above.

The amounts and calculations for each are summarized in Table 1 as follows (see chart 1): … //

… Another $255 billion is from lost tax revenue due to chronic unemployment for the past three years. Before the recession began in December 2007, there were 7.1 million unemployed. For the past three years that number has been 25-26 million without change, or about 18 million. Assuming a median annual earnings of $47,000 for the 18 million, an unemployment period of 6 months on average, and an average income tax rate for the group of 20%, the total lost for the past three years in federal income tax revenue is $255 billion. And that does not count lost payroll tax or corporate income tax revenue associated with the layoffs.

The final item, interest on the debt is calculated based on a simple assumption of non-compounded interest over the decade, which comes to $270 billion for the $9.2 trillion.

In summary, the true causes of the deficits and therefore the $9.2 trillion run-up in the federal debt are wars and runaway Pentagon equipment spending, the Bush tax cuts, the bailouts of banks and corporations, the fiscal stimulus packages of Bush-Obama that didn’t result in economic recovery, the chronic three year long 25 million jobless situation, and price gouging by health insurance and health services providers. (full text).

(Jack Rasmus is the author of ‘An Alternative Program for Economic Recovery’, Kyklos Productions, October 2011; Epic Recession: Prelude to Global Depression, Pluto Press and Palgrave-Macmillan, May 2010; and the forthcoming Obama’s Economy: Recovery for the Few, same publishers, February 2012).

Comments are closed.