The Deficit Is No Accident

A New Democracy Flyer

Debate in the media and Congress about how to balance the budget has ignored the most fundamental questions: why and how did the federal deficit and four trillion dollar national debt come about?


The national debt is mainly a product of the Reagan-Bush years. Ronald Reagan ran on a pledge to balance the budget. Why did he create a huge deficit instead?

David Stockman, Reagan's first Budget Director, admitted in a famous interview that the administration purposely created a "strategic deficit" to achieve Reagan's real goals. He wanted to put in place a mechanism for gutting programs created in response to popular movements during the previous 45 years-programs like public housing, youth employment, child nutrition, welfare, school lunches, food stamps, and other programs which give ordinary people some floor to stand on in hard times.

First the Reagan Administration cut taxes on corporations and the rich, while it increased military spending, thus creating a huge deficit. Then it claimed that there was no money left to fund social programs-a claim which
the Democratic Congress of the time largely echoed.

Reagan cut the social safety net to create a large pool of desperate people, willing to accept any work at any pay, and to send a message to those who still had a job: "Stay in line or you'll be living on the street with them." Bush continued to build up the deficit, and used it to justify more cuts and pain for working people.

The current Congressional budget blueprint continues the strategy. It gives a $245 billion tax break to the rich and increases Pentagon spending by $34 billion, while it hacks $450 billion from Medicare and Medicaid.

The deficit and national debt were created intentionally by politicians of both parties, to destroy social programs which give working people some protection against unrestrained corporate power. Together with high
unemployment, shipping jobs overseas, the use of temp labor, and other devices of corporate power, the deficit was created to strike fear in the hearts of working people and weaken their ability to organize.


President Clinton uses the deficit in the same way as Reagan and Bush and the Congress: to make people more vulnerable to the brutality of the market. As soon as he took office, Clinton declared that "the deficit is larger than we thought," and abandoned his campaign promises of large-scale job creation. Instead he proposed to "re-invent government" and to cut 250,000 federal jobs, freeze the wages of federal employees, and cut Medicare and Medicaid. He no longer pretends to disagree with the Republicans on balancing the budget, but only on timing.


Who benefits from the deficit? In addition to gaining greater political control by cutting social programs, the rich also benefit financially from the deficit. Interest payments on the debt have amounted to more than $220 billion each year since 1990. This money has gone to banks and wealthy investors who purchase Treasury notes. Instead of taxing the rich, the government now borrows from them and pays them billions in interest. According to a recent study, "Interest payments [on the national debt] represent the largest transfer of wealth in this century."


We face very serious problems in our society. Inequality. Unemployment. Crime. Destruction of the environment.

But it is important to see that, while these are serious problems for ordinary people, for the ruling elite they are not problems but solutions. Each of the problems we face is a source of profit or control for the elite: inequality to divide people; unemployment to make them afraid; crime to justify more police; an environment raped for profit. The rulers won't solve these problems. Their power depends on them. The deficit is a false problem designed to cover-up the real problem of government by the rich and for the rich.

The problems in our society are not inevitable. They are caused by the lack of real democracy. They can only be solved by democratic revolution, to put society in the hands of ordinary working people.

Please copy this flyer and pass it on.

New Democracy works for democratic revolution. Call John Spritzler (617)566-9637. For free literature: New Democracy, P. O. Box 427, Boston, MA 02130, USA. E-mail:


Subject Headings

Connexions Links    -    Connexions Directory A-Z Index    -    Connexions Library

    Periodicals & Broadcasters Online    -    Volunteer Opportunities    -    Publicity & media relations resources