Reader Matthew McOsker writes more on the deficit:
History Lesson – Deficits as a % of GDP, Tax Rates
DISCLAIMER: This is not a defense of Bush II. Just the facts on the deficit, and a further discussion of sectoral balances and some tax rate info.
Let’s look at some history, because the belief is that Bush II ran the biggest budget deficits ever, and ruined the Clinton surpluses. I wish we did not spend so much on the military under Bush. However, the Bush deficits were not that large as a % of GDP. His father, and Reagan ran bigger ones. The deficits were not that far off where we were at the end of the 70’s either. Now keep in mind, that the trade deficit does factor in – been having trouble assembling historical data on this. When running a trade deficit we need to run a federal deficit to keep the private sector in balance.
See Credit write downs on sectoral balances:
The key formulas is as follows:
Domestic Private Balance + Domestic Government Balance + Foreign Balance = 0
Via Business Insider L Randall Wray
Lastly, the Obama deficits are exactly what we needed to make up for the deficits that were probably too small under Clinton and Bush II.
Now, much of the talk on historical Tax Rates focuses on marginal rates- I found this table to be quite interesting as it looks beyond the top marginal rates, and breaks out lower income folks.
Data is for 3 groups 1/2 median income; Median Income ; Twice Median income respectively
Year — Average Combined Rates for each group that includes payroll taxes and EITC , and the last numbers are the top and bottom marginal rates that excludes payroll taxes ( I just sampled a few years, go to the link to see more. I used average cause that better reflects what one actually pays) :
1970 — 9.45% — 12.7% — 15.15% — 14% and 70% Nixon
1979 — 11.24% — 16.97% — 20.32% — 14% and 70% Carter
1982 — 13.21% — 17.76% — 21.94% — 12% and 50% Reagan
1990 — 12.77% — 16.98% — 19.83% — 15% and 28% Bush I
1992 — 12.2% — 16.83% — 20.13% — 15% and 31% Bush I
2002 — 5.42% — 14.18% — 19.83% — 10% and 38.6% Bush II as Clinton Rates still in effect
2003 — 3.45% — 12.99% — 18.05% — 10% and 35% Bush II
From Tax Policy Center