@Theaetetus,
That's just not true. The government has increased spending far more than it has cut taxes, and the difference has been made up with the printing press or by borrowing.
(1) There has been steadily rising inflation since 1913, but especially since 1971, due to government policies founded on keynesian 'demand-side' economics. Inflation is a regressive tax, both because newly printed money always starts its life in the hands of the rich and powerful, and also because the poor do not have enough disposable income to invest in something that will let them keep up with that inflation; they spend most of their money on consumer goods, which are constantly increasing in price.
(2) Wages have not bene keeping up with inflation, yet people have had access to easy credit and thus made up the difference. Inevitably, this has led to a huge increase in the amount of debt that the average american has to bear.
(3) Inflation and keynesian stimulus both favor consumption and punish savings, hence our low savings rate and consumer based economy, which is currently collapsing. Had the government not maintained their keynesian faith all these years, and done everything it could do to keep americans spending, all of our manufacturing wouldn't have moved overseas. Not only does inflation/demand stimulation destory domestic industry, it prevents innovation and the development of new production by stripping the economy of savings. Any savings that there are go toward financing government debt.
(4) Much of the money taken via the inflation tax from middle america has trickled upwards into the hands of the private owners of the federal reserve system. The banks are far more exploitative than the corperations, because the banks have been given a legal monopoly by the federal government.
Tax cuts are not the problem. Excessive government is the problem, and also the government's owners at the central bank.
Let's talk about the current crisis in particular. I love to hear how the Bush tax cuts are responsible...
The immediate cause of our problems today is the ongoing collapse of the housing market. This occured because the Fed, via low interest rates, and the government, via various social programs, but especially Fannie Mae and Freddie Mac, created a speculative bubble in the economy, which burst as do all such bubbles. The other markets collapsed and are collapsing because of default on debt (both mortgages and other consumer debt), or their securitized derivatives, which were widely adopted at the reccomendation of Greenspan and genuinly needed to keep the economy going in the last few years precisely because of the inflationairy regime the government imposes on us, which prevents real savings and encourages lending. In other words, if the Fed offers the banks money at virtually no interest, they'll lend it out to almost anyone, regardless of risk. They did, the loans defaulted, but are the banks surprised, dissapointed? No, the business model is to take as much risk as possible because in the end, the government will support them if things go awry. That is the prime role of the Federal Reserve, lender of last resort. The government ensured this outcome. Neither the false prosperiy of the bubble, nor the bursting of the bubble, nor all the loss of efficiency associated with government interventions via moral hazard, would exist without manipulation of the money supply, and keynsian fiscal policy.
