Spend and Borrow: The Reagan Legacy and the Republican Addiction

"You know, Paul, Reagan proved deficits didn't matter," argued Vice-President Dick Cheney in a discussion about raising taxes. As reported in Treasury Secretary Paul O'Neil's book, The Price of Loyalty , the VP wanted to reduce taxes further after winning reelection in 2004 to reward their supporters and diminish the US government. The Reagan political solution: to borrow from Paul (investor class and technocracy) to pay Peter (entitlement voters and the military industrial complex) became the Republican addiction taken up by Bush I and later the Bush-Cheney administration. "Borrow and spend" haunts the Republican Party to this day.

READ MY LIPS, NO NEW TEXANS! The popular bumper sticker during the 2000 election made light of Bush I's pledge of "No New Taxes" during the 1988 Republican convention where the Sr. received the Presidential nomination. Not only did he break his pledge and raise taxes (Well, Reagan did it 13 times) but the deficits ballooned to their highest levels in history. Reagan's "no pain policy" was effective politics but problematic economics and led to the rise of EDS founder Ross Perot, who campaigned for the Presidency on the promise of restoring fiscal responsibility and effectively ensured the election of Arkansas Governor Bill Clinton.

When the Clinton Administration took to their offices in early 1993, the new administration was looking at budget deficits approaching a half a trillion dollars a year by 2000. The massive government spending and tax cuts of the 1980s had resulted in unprecedented government debt and yearly budget interest payments that exceeded US$185 billion in 1990, up substantially from the $52.5 billion a year when Ronald Reagan took office in 1981. By the time Clinton could produce the first budget surplus since before the Vietnam War, interest payments would roughly equal the budget for national defense.

Bush II has had the advantage of a larger GDP based on the 1990s boom but quickly squandered the debt-busting opportunity. In fact, the surpluses of the Clinton years began to make the bond markets nervous. Bush tax cuts combined with the dotcom and telecom crashes quickly resolved this "problem" and the 9/11 induced wars restored the "borrow and spend" model. One lucky recipient was Cheney's former company Halliburton, which was nearly destroyed by Cheney's inept management, marked most significant by the purchase of a company with major asbestos liabilities. Contracts for the Middle East wars restored the company to profitability despite its huge payouts.

Some of the sad implications of this policy are the huge debts, the lack of respect for civic service, and the poor performance of government officials. No one really knows how big the government debt has grown. A reasonable estimate is about $9 trillion dollars and for the last 2 years the amount has been growing at about $1.5 billion a day. The discourse on taxes has also denigrated civic responsibilities. While no one wants to pay exorbitant taxes, many people recognize that government provides services that are worthwhile and are willing to pay their fair share. But the "spend and borrow" philosophy belittles all taxes, preferring to pass on the burden to the unborn. Finally, while government grows, belief in the value of government action diminishes. You have to wonder how much of President Bush's incompetence is really the result of a negative attitude about the positive value of government action. From 9/11 to the FDA's poor record on food inspections to the pitiful war planning, the record of this administration has been atrocious. The Reagan legacy left behind a new civic malaise that has eaten at the core of American society and especially its government.