One-time money

There’s an ad running for President Obama’s reelection campaign that features President Bill Clinton. In the ad, Clinton says that electing Mitt Romney would mean a return to fiscal policies similar to those of the Bush Administration, which he says caused the current recession. Clinton expanded on that point in his remarks to the Democratic National Convention last night.

When Democrats talk about Bush-era policies, they’re usually talking about the Bush tax cuts, which the Center on Budget and Policy Priorities found was the largest single contributor to projected U.S. debt. (Along with Bush’s two wars, the cuts count for half of all U.S. debt… And Paul Ryan voted for all of it, by the way.) Cutting taxes for top income brackets is, according to “trickle-down theory,” is supposed to spur the economy because it gives the wealthiest more money to spend. There’s a lot to argue about there, but that isn’t what I want to go into today.

I’m not an economist. I read economic analysis to try and better understand why something like the 2008 crisis happened, and my eyes glaze over. I guess I just don’t understand why it has to be so complicated.

But one thing I do understand is this: if you have one-time money, then you use it for a one-time purpose. And I may not be an expert on macroeconomics, but I can remember events that I lived through 12 years ago.

President Clinton left office not just with a balanced federal budget, but with a small surplus. What to do with that surplus was a major issue of the 2000 presidential campaign. Al Gore wanted to use the extra money the U.S. collected that year to pay down the national debt (“Al Gore believes we should use the projected surplus to build our economic prosperity, invest in our families, secure Social Security and Medicare for future generations, and pay off the national debt in 15 years.. -- www.algore2000.com”). George W. Bush wanted to return the surplus to taxpayers in the form of a tax cut (“’But the best way to reduce the fat in Washington is to send money back to the people who pay the taxes. And that's exactly what I intend to do.’ -- Iowa GOP Debate 1/15/2000”).

What Bush said makes sense on its face… I mean, if you give the cashier at McDonald’s a 20, they still give you back your change. But the problem is that the Clinton surplus was a bit of a fluke; thanks to a booming economy, the government collected more than usual in income and capital gains taxes. In other words, it would’ve been irresponsible to assume that the government would see that surplus every year. It was one-time money.

When you get one-time money – a larger-than-expected tax return, a salary bonus – you probably do one of two things: you either pay down your personal debt, or you make a one-time purchase of a new washing machine or a vacation. What you don’t do is go out and make a down payment on a Ferrari. Because you have the common sense to know that this is one-time money, and that you’re not going to get this windfall every day. You know not to take one-time money and add a permanent expenditure to your household budget.

That’s exactly what Bush and the GOP-controlled Congress did, and – this is worth repeating – it’s the single-largest item on that $16 trillion balance sheet the GOP complained about all last week. It was more about ideology – the size of the federal government is more important than its effectiveness – than what made sense as a sustainable fiscal policy. If Bush had pushed for a one-time rebate to taxpayers, that would’ve accomplished the same thing while not adding as much to the debt.

And Mitt Romney wants to do the same thing, even as our debt balloons because the government isn’t collecting the revenues it did in, say, the Clinton or Reagan years. This would be happening anyway because people are earning less right now. But the regressive Bush tax laws certainly don’t help.

Why would Republicans do this? Either they don’t understand how budgeting works, or they don’t care. Why should they? When a Wall Street bank ties up its entire asset sheet in mythical financial products and finds itself days away from bankruptcy, the government holds its nose and bails it out. When Mitt Romney’s investment bank is on the ropes because it over-spent, its executives loot its cash reserves and tell the FDIC – and the taxpayers who fund it – to go jump in a lake. They know that they and their backers will be taken care of, no matter what. It’s “my daddy’s going to call his lawyer” on a national scale.

I don’t trust that Mitt Romney understands this… but I don’t know what on earth Paul Ryan’s deal is. It cannot be repeated often enough that the “budget hawk” voted for every single unfunded Bush Administration expense, and only discovered his inner Ayn Rand when it meant stalling the priorities of a Democratic president. Please spend more time looking at this man’s record before you consider putting him in the vice presidency in November.