How The War on Terror and Obama’s Bailout is Still Costing America
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How did Bush’s tax cuts and the War on Terror start America’s deficit spiral?
Welcome back to All the Wrong Moves, How America Made Trump. So last week, we told you how we got the first thing wrong in Seattle, 1999, watching those protesters who didn't want China to be admitted into the World Trade Organization, thinking that they just didn't understand the future. Well, it turns out I was wrong. And that when you break a promise to American workers once, you don't just get to walk away from it. You pay it forward. And that's exactly what happened next.
So this week, we're looking at two more catastrophic decisions, back to back, each one making the last one worse.
First, George W. Bush decides to fight a multi-trillion dollar war in Iraq and Afghanistan while cutting taxes at the same time. No sacrifice asked for anyone, just borrowed money and a promise that someone someday would pay it back.
And then just a few years later, Wall Street gambles that borrowed money on a housing bubble. The whole thing collapses and it's President Obama who has to decide who gets saved and who loses their home.
That's right, Katty, two different presidents and two different parties. And in both cases, the bill landed On the same people, the poorest, the angriest, and the most desperate for change. That's the anger Donald Trump would eventually walk in and claim as his own.
So let's go to the second catastrophic decision, what you call war without taxation. And a quick scene setter here, Bill Clinton has just left office in January of 2001, and America has experienced a moment of peace and prosperity. They've had a post-Cold War decade of booming prosperity and peace around the world, And Bill Clinton has managed to bring down the deficit and he has created a $236 billion federal budget surplus. And during the election between George W. Bush and Al Gore, the debate had been over what to do with that surplus. Al Gore wanted to use it to fund more welfare programs. George W. Bush wanted to use it to cut taxes, arguing that that is what would create growth. It's the same old debate, right, that you've heard for decades between the two parties.
It feels like it's a little stale, nothing new, but it's where the duopoly, as you call it, is stuck.
You know, Katty, this is something that needs to be understood. There was actually a period of good executive leadership in the country. Whatever you thought of George Herbert Walker Bush, George W. Bush's dad, or Bill Clinton... They agreed on a certain principle that got started in the Bush administration. And it's very important to bring this up. There was legislation passed by George Herbert Walker Bush in 1990. which effectively became called the pay go legislation or pay as you go. He actually reached out to Dick Gephardt, a personal friend of mine, and he convinced Dick Gephardt to get many Democrats to vote for constraints on the Congress. And so put simply, if you wanted a tax cut. You had to cut social services in the budget and bring down spending.
If you wanted to increase social services, well, that's no problem. Then you had to have a tax increase. Bush signed this into law, Caddy. We then had the accidental Gulf War I where the Iraqis invaded Kuwait. It put the Americans in a recession. Bush wanted more social services spending. And so he broke his pledge. If you remember, read my lips, no new taxes, but he just signed this PAYGO legislation. And so he raised taxes. In comes Ross Perot to disrupt that election. But this is very important for people to understand. Bill Clinton... adhere to this Republican policy. And there was a very famous debate. Bob Woodward wrote about this in the book called The Agenda. In March of 1993, they called it the Battle of the Two Bobs.
Robert Reich, my old law school professor, who was Secretary of Labor, and Bob Rubin, my old boss, who was an economic advisor to Clinton, they were fighting in the Roosevelt Room Reich wanted more deficit spending. Rubin told Clinton, if you want that social services, go get the tax increase. And Katty, you may remember this. It was the largest tax increase in U.S.
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Chapters
4 chapters
1
How did Bush’s tax cuts and the War on Terror start America’s deficit spiral?
0:08–5:49
2
What was the impact of the 1990 PAY‑GO legislation on future tax and spending decisions?
5:49–11:18
3
How did 9/11 reshape political unity and set the stage for prolonged war spending?
11:18–16:00
4
Why did the Bush administration refuse to raise taxes to fund the wars?
16:00–21:13
Speakers
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