History Buff's Guide to the Presidents (25 page)

In effect, Reagan could afford to do so. After the recession of 1982–83, the economy began to benefit from the huge influx of federal dollars. Corporate profits were on the rise, unemployment was falling, and the welfare state remained relatively intact. In 1984, Reagan won reelection by a landslide, despite nearly two-thirds of Americans claiming to disapprove of his deficit spending.
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Regarding the growing debt, Reagan blamed Congress. Under Democratic control for his entire eight years and the Senate for his final two, the legislature made modest cuts to education, veterans affairs, health, welfare, and the environment. At the same time, they offered minimal opposition to increased defense spending and tax cuts. While both the White House and Capitol Hill exchanged bitter rhetoric over expenditures, neither risked losing votes to address the issue. Their eight years of hesitance nearly tripled the yearly cost of interest on the debt, but their inaction also greatly benefited themselves and the voting public—at least for the short term.
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Reagan’s budget director, David Stockman (left), and the Gipper hashed out ways to rob Peter to pay Paul during regular Oval Office meetings.

In just his second year in office, Reagan’s deficit was higher than the entire federal budget in 1970.

5
. GEORGE W. BUSH (105%)

NATIONAL DEBT IN 2001: $5.8 TRILLION

NATIONAL DEBT IN 2009: $11.88 TRILLION

For the first time in nearly fifty years, the Republican Party held the Executive Mansion and both houses of Congress. Looking forward to a respite from opposition politics and a continuation of economic prosperity, the Congressional Budget Office predicted a federal revenue surplus of $5.6 trillion for the following decade. The White House concurred and set about contemplating how to best use the inevitable windfall.

Rather than address the debt, George W. Bush opted to fulfill a campaign promise to cut income and estate taxes. The only question was by how much. Democrats demurred against any reduction but offered no more than $900 billion over ten years. Bush wanted twice as much, but he settled on $1.35 trillion. It was the largest tax reduction in U.S. history.

Months later, the terror attacks of September 11, 2001, prompted the United States to invade Afghanistan and oust the Taliban government. With the war still underway, Bush worked to make his initial tax cuts permanent.
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Warhawks in the Bush administration also lobbied to launch a preemptive strike with a much larger force into Iraq, which they initiated with overwhelming public support in March 2003. Bush still pressed for more substantial tax cuts. Congress approved a $350 billion reduction, an amount Bush called “little bitty.”
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Modest was the initial White House cost estimate for the removal of Iraqi dictator Saddam Hussein and the democratization of Iraq—$74.7 billion. Hussein was eventually captured, tried, and hanged, and elections were held in the new Republic of Iraq. Yet U.S. military operations did not progress as well as first hoped. Later official projections for securing and stabilizing Iraq exceeded $200 billion.

Economists and budget experts calculated the end total would be well above $1 trillion (with adjusted dollars, about three times the military and financial support the United States provided Great Britain in World War II).
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Just as Iraq was becoming relatively stable in late 2007, the U.S. began to financially implode, due largely to the bursting of a massive housing bubble. Emergency relief funding from the federal government (see S
IMILARITIES
B
ETWEEN
B
USH AND
O
BAMA
) helped push a record yearly deficit of $459 billion in 2008 to a gargantuan $1.413 trillion in 2009.
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George W. Bush’s deputy defense secretary, Paul Wolfowitz, initially believed the reconstruction of Iraq would cost the United States nothing, as the liberated republic would ideally fund its own recovery through oil revenues.

6
. RICHARD NIXON–GERALD FORD (100.1%)

NATIONAL DEBT IN 1969: $ 353.0 BILLION

NATIONAL DEBT IN 1977: $ 706.4 BILLION

The obvious missing link in the debt chain is Lyndon Johnson with his double-headed beast of “the Great Society” and the Vietnam War. Yet LBJ was able to curb federal borrowing by increasing its income. In 1968, the president asked for and received a taxation surcharge to help pay for the conflict in Southeast Asia, and he scaled back aspiration for his war on poverty. Fiscal 1969 actually produced a budget surplus of nearly $3 billion. In his five-plus years as president, Johnson saw the debt rise, but only from $317 billion to $353 billion, a total of 11.4 percent. In contrast, the Nixon and Ford years experienced an increase of 100 percent, with the last four years being the worst.
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Part of the problem was Nixon’s war expenditures. On top of the yearly defense bill, Nixon spent an additional fifty-nine billion dollars on Vietnam, more than LBJ, Kennedy, Eisenhower, and Truman combined. Postwar unemployment also rose. LBJ’s jobless rate averaged less than 4 percent. Nixon managed to keep his at 5 percent. Ford suffered 7 percent and up, and payouts to the unemployed more than doubled over the course of his short stay.
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The breadth and depth of public entitlements were also growing. In just eight years, the cost of funding Medicare went up 78 percent and Social Security increased 82 percent. Gerald Ford also had the misery of dealing with the aftershocks of W
ATERGATE
, Nixon’s abandonment of the gold standard, a six-month OPEC oil embargo, a doubling of inflation, the fall of Saigon, two assassination attempts, and a yearly fee of $100 billion that went purely to service the interest on the federal debt.

Gerald Ford wanted Congress to continue funding the South Vietnamese government, and he blamed the legislature for Saigon’s collapse in 1975. At the time, Saigon was home to the fourth-largest air force in the world and the fifth-largest navy, thanks largely to money and equipment provided by the United States.

7
. GEORGE WASHINGTON (~100%)

NATIONAL DEBT IN 1789: UNKNOWN

NATIONAL DEBT IN 1797: $83.7 MILLION

The first administration did not create a huge debt as much as adopt it. George Washington and his secretary of state, Thomas Jefferson, were uncomfortably familiar with personal debt. Land and slave rich but cash poor, both men were in constant arrears with lenders. Washington had to borrow money to travel to his first inauguration. As such, they viewed a national debt as the sum of all fears, something to be avoided if not dismissed.

Treasury Secretary Alexander Hamilton thought the opposite. Years before, when the feeble Continental Congress wallowed in financial straits, Hamilton contended: “A national debt, if it is not excessive, will be to us a national blessing.” A crusader for strong central government, Hamilton viewed good credit as the one and only means for national survival. And credit could only be established by paying back every penny the United States owed its people and bankers abroad—some fifty million dollars. In addition, Hamilton insisted the government also assume the balances of every state, a total of twenty-five million dollars more.
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Jefferson vehemently opposed the plan. So did the legislatures of Virginia and Pennsylvania, states that had already repaid much of their wartime liabilities. But Washington and others slowly warmed to the logic of establishing a firm financial base for the otherwise unbalanced economy. Pennsylvania became less hostile when Hamilton brokered a deal to have the national capital moved from New York to Philadelphia, where it would stay for a decade. Tensions with Virginia eased when plans were made to create a permanent “Federal City” along its northeast border.
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Alexander Hamilton was a founder of the Bank of New York, which is still in operation.

8
. JAMES MADISON (94.3%)

NATIONAL DEBT IN 1809: $53 MILLION

NATIONAL DEBT IN 1817: $103 MILLION

In 1812, the United States was emotionally ready to declare war for the first time in its young life. Financially, it did not have the capital. Britannia ruled the waves, and its failure to respect American naval neutrality during the Napoleonic Wars had robbed the U.S. Treasury of its lifeblood—tariffs and duties on imported goods. Constricted in its budget, the U.S. Navy owned but six frigates, each with forty-four guns, mere sea bass to the sharks of the British “ships of the line” with seventy-four-plus cannons each. The army consisted of barely twelve thousand men, poorly paid. The only chance was to seize Canada fast and win on the cheap.

When the invasion failed miserably, losing not only the initiative but also Detroit, James Madison scrambled to find the resources for a protracted war. He asked for twenty thousand more troops. Congress belatedly agreed. But many observed that all the patriotism in the world would not coerce recruits to fight. Money, on the other hand, might help. Said one lawmaker, “Nothing short of a little fortune will induce our Farmers or their sons to enter on a life which they cordially despise: that of a common soldier.” To fill the ranks, the government offered hefty cash bounties and 160 acres for each volunteer.
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Going bankrupt fast, Madison then turned to Treasury Secretary Albert Gallatin, the financial wizard who had helped Jefferson finance the Louisiana Purchase. The war could be executed, Gallatin told him, for a price. “This can be best done,” he insisted, “by a well digested system of internal revenue.” Fearing the voter backlash of such an unpopular measure, legislators began calling Gallatin “the Rat in the Treasury.” But the taxes went into effect on salt, sugar, land sales, and paper, eerily similar to the fees Imperial Britain once imposed on the colonies. Angered by the abuse he was receiving from Congress and citizens alike, Gallatin requested a leave of absence and never returned.
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When redcoats invaded the Chesapeake Bay area and burned Washington, the federal government understandably became more desperate, borrowing millions through high-interest loans and offering bonds to any takers. They slapped taxes on liquor, paid privateers to raid British merchant ships, and desperately hoped that pro-British Massachusetts would not leave the Union.
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By 1814, the parties were fought out. The United States was near bankruptcy. Britain had been battling in Europe for more than a decade. War had lost its luster. The ensuing peace treaty resolved almost none of the original disputes, but a cessation of hostilities allowed both sides to declare victory and begin the long road to recovery.
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The final tally for the War of 1812 came to $68,783,122, more than the United States would spend on a war with Mexico a generation later.

9
. GEORGE H. W. BUSH (51.5%)

NATIONAL DEBT IN 1989: $2.87 TRILLION

NATIONAL DEBT IN 1993: $4.35 TRILLION

The federal debt, which had tripled in the previous eight years, required $200 billion in interest payments alone. An unprecedented peacetime buildup of the armed forces raised the Department of Defense’s take from the treasury to nearly three hundred billion dollars a year.
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George H. W. Bush had the ironic misfortune of belonging to the very administration that saddled his presidency with enormous bills. Consequently, his opportunity to shift blame to its source was effectively nonexistent. Nor did he have the political capital or the personal willingness of his former superior to continue pouring money into the national economy. In the course of his four-year term, he successfully captured and convicted the military president of Panama on a number of charges, oversaw the fall of the Soviet Union, forged a coalition of thirty countries to win a decisive seven-month war against Iraq, and saw approval ratings above 80 percent. Yet he would not win reelection.

For all the positives of his foreign policy, Bush could not effectively combat an economic recession at home. Unemployment neared 7 percent. Annual deficits initially went down, only to grow and surpass the Reagan era. The Gipper’s worst deficit was $221 billion in 1986. By 1990, Bush was doing just as badly, and the ensuing years were destined to be worse.
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