From Deficit to Debt

In the real world, if someone spends more money than they make, they run a deficit. Income – Spending = Deficit. Accumulatively, deficits become debt. In order to avoid the accumulation of debt; they need to either reduce spending, increase income, or both; a lessening of income would require a reduction in spending, an increase in spending would beg an increase in income, and so forth. Governmentally, spending stays spending and income becomes revenues (taxes).

Laffer’s plainly showed that if you chose the sweet spot at the top of a very smooth curve of tax rates vs tax revenues, revenues would be maximized. Ergo, up to some point, tax cuts would more than pay for themselves (some imagination is required). After Laffer, for some in politics, all came to be about the spending. And strangely enough, for some of these; somehow deficits caused by tax cuts didn’t matter (don’t even try). Meanwhile, back in the real world, deficits soared; so did debt.

With Laffer’s Curve in hand, some clever politicians, with a little nudge, came up with the idea of passing tax cuts for the rich with the promise that they would pay for themselves by growing the economy. Whether or not they really believed this; it didn’t happen. Instead, we got huge deficits that soon became $Trillion debts. This same clever lot now claimed that the only solution for these deficits and debts created by their tax cuts was cutting entitlement spending which is something they wanted to do from the start. Seems it was all a ploy. One that the media, perhaps unable to connect more than two dots, went along with. The ill-informed, and a bit too manipulable, working class wound up with the tab.