Placing Blame For The Deficit

As someone who is fairly fiscally conservative this has not been a good time. I spent the last several years criticizing the Bush administration for running up deficits and corporate welfare only to see similar policies from Obama. Of course in Obama’s case I understand that this is a response to an unusual financial crisis, rather than a reflection of his underlying policy goals. Many conservatives have developed a unique amnesia, seeing everything as coming from Obama. David Leonhardt puts this into perspective:

The story of today’s deficits starts in January 2001, as President Bill Clinton was leaving office. The Congressional Budget Office estimated then that the government would run an average annual surplus of more than $800 billion a year from 2009 to 2012. Today, the government is expected to run a $1.2 trillion annual deficit in those years.

You can think of that roughly $2 trillion swing as coming from four broad categories: the business cycle, President George W. Bush’s policies, policies from the Bush years that are scheduled to expire but that Mr. Obama has chosen to extend, and new policies proposed by Mr. Obama.

It is well worth reading through the specifics. For those who prefer a quick visual summary, Matthew Yglesias has produced a handy chart to show where to place the blame:

deficit

— “The first category — the business cycle — accounts for 37 percent of the $2 trillion swing.”

— Second, Bush-era legislation “like his tax cuts and the Medicare prescription drug benefit, [that] not only continue to cost the government but have also increased interest payments on the national debt.”

— Third, “Obama’s main contribution to the deficit is his extension of several Bush policies, like the Iraq war and tax cuts for households making less than $250,000 [...] 20 percent of the swing.”

— Fourth, “About 7 percent comes from the stimulus bill that Mr. Obama signed in February.”

— Fifth, “only 3 percent comes from Mr. Obama’s agenda on health care, education, energy and other areas.”

I remain an agnostic as to whether Obama’s economic policies will work, preferring to see the facts over time as opposed to falling into ideological certaintude, but I certainly do not buy the attacks from the right that Obama is responsible for bankrupting the country.

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12 Comments

  1. 1
    Fritz says:

    For how many years will Democrats have to have a majority in Congress before they will acknowledge having control of the purse strings?

  2. 2
    Ron Chusid says:

    Considering how the federal government is structured, the Republicans remained the dominant party through 2008. Majority control of Congress does not really give a party control of the government as long as the other party holds the White House and over 40 seats in the Senate. Bush’s policies dominated the budget even after the Democrats took control of Congress.

  3. 3
    Fritz says:

    All spending bills originate in the House.  There is no filibuster in the House and the majority party pretty much rules.  But they do need to be willing to take risks and, well, lead.

  4. 4
    b-psycho says:

    Simpler explanation: It’s only been six f**king months, people…
    The 24-hour news cycle must be wearing down our ability to comprehend time.

  5. 5
    Ron Chusid says:

    Fritz,

    On paper all spending bills originate in the House but in reality spending is largely driven by the Executive Branch.

    As b-psycho says, it has only been six months that the Democrats have really been in power. Considering how poor their record was, it is understandable that many Republicans like to push the meme that the Democrats have been in control longer than they really have, but why are you bothering to spread their ridiculous talking point on this?

  6. 6
    Fritz says:

    It just seems a little excessive to decide that the Republicans are in power unless the Democrats have the Presidency, the House, and 60+ votes in the Senate.  Oh, and I suppose a majority of appointments to the Supreme Court also.
    If spending is largely driven by the Executive Branch, that is because Congress is failing their Constitutional obligations.
     

  7. 7
    Ron Chusid says:

    Congress has certainly given up too much power to the Executive Branch.

    I did not say that the Republicans are in power ” unless the Democrats have the Presidency, the House, and 60+ votes in the Senate.”   They are in effectively power when they have the Presidency and the Senate is split.

  8. 8
    TRUECRISTIAN says:

    don’t see what George Bush has done wrong, he’s destroying a bunch of people who shouldn’t be in the 1st place. I say the Iraqis are just here to take up space on this planet. They’re not doing anything to benifit us. George Bush is doing a great job where he is. I hope he sends a nuke to Iraq and just wipe that country out of the map. The only thing the Iraqis know how to do is terrorize countries, they’re all terrorists.Ok, I’m going to say it, I think George Bush is good. He’s one of the greatest president ever.. Yeah! Yeah! Yeah! he attack Iraq and many Iraqis died.. so what? I hope he bombs Iraq again, I seriously don’t give a crap if the Iraqis die, I hope bush kills them all, bomb the hell out of Iraq. serioulsy I think the Iraqis are nothing but terrorist and George Bush is doing the world a favour by bombing them and killing them. they just like to bomb the hell out of each other, so the Americans attacking Iraq doesn’t really make that much of a difference, they’re just speeding up the process. So I solute George Bush I say,

  9. 9
    Christoher Skyi says:

    Well, I think you need to have a little more faith in team Obama and just give him some time, i.e., it took GWB about 7 years to run up a deficit of $162 billion (1.2% of gross domestic product). For 2009, the budget deficit is projected to be 11 times larger: $1.752 trillion. This is due, again, mostly to GWB’s spending the (mis-)handle the financial crisis.
     
    However, it’s not over yet. The Congressional Budget Office released figures Friday forecasting that President Barack Obama’s budget will produce $9.3 trillion worth of red ink over 2010-2019 and that the deficit for this fiscal year will rise to a record $1.8 trillion.
    Right now, we’re in the red for 12.3% of current GDP.  Let’s see — 9.3T is greater than 1.8T by about a factor of 5. Applying that factor to the current percent GDP deficits means 9.3T will be  about 60% of current GDP.
     
    Well, the GDP is going to grow over the next 10 years, right?  Right, but by how much?
     
    Team Obama predicts that U.S. GDP will increase significantly faster over the 10 years than over the last 10 years . . . that’s an incredible claim.
     
    Consider this from the Brookings Institute:
     
    The budget outlook at every horizon is troubling: the fiscal-year 2009 budget is enormous; the ten-year projection is clearly unsustainable; and the long-term outlook is dire and increasingly urgent. These general trends are punctuated by a number of specific highlights that illustrate the United States fiscal problem. The Medicare Trust Fund is now projected to be exhausted by 2017. Credit default swap markets now imply a non-negligible probability of default on senior U.S. Treasury debt in the next five years. A top Chinese official has publicly questioned the security of U.S. Treasury obligations.
     
    Where is team Obama getting this prediction?  Did they forget about this?
     
    The federal government is not alone in its fiscal troubles. The individual states face daunting fiscal prospects. Most European countries will experience significant fiscal deterioration over the next few years. Standard and Poor’s recently warned the United Kingdom that it could lose its triple-A credit rating on account of its projected debt-to-GDP ratio. The U.K. trajectory, however, is similar to that of several other countries, notably including the United States.
     
    In short, we’re gripped in one of the worse global financial and economic crises that any of us have ever seen, or will likely see again.
     
    Let us pray that team Obama somehow knows something that most experts don’t, that flies in the face of common sense, that would be a miracle if  true.
     
    Let us re-convene here at this post every year — time will tell. If team Obama is wrong,  the deficits over the next 10 years will blow all previous records way Way WAY out of the water.

  10. 10
    Fritz says:

    And now Congress is putting on a heavy energy tax.  That should do some interesting things.

  11. 11
    Christoher Skyi says:

    Yes, this is definitely a huge step-up in big-government central planning to help create new energy markets (the rational being to help global warming).
     
    But it’s  going to do just about zip for climate change (because it only applies to us, obviously).
     
    So, that’s the problem for team Obama and the Democrats: if it’s going to do almost nothing for climate change and at the same time raise energy prices immediately (in global recessionary and slow grow times by the way).
     
    What’s a progressive to do?
     
    Why add a provision which imposes stiff tariffs on our trading partners if they don’t adopt aggressive carbon restrictions of their own of course.
    Yup: progressives have authored a bill that raise the cost of  domestic energy for all consumers PLUS! earns the mortal enmity of our most crucial trading partners at the same time — again, during a global recessionary and slow grow times.
    But progressives are pro-market, pro-growth, right?  This is help both the economy and global warming, right?
    Well, not really:  World Trade Organization rules make fairly clear that trade-limiting measures imposed to protect the environment should have the purpose of protecting the environment, and not to address any adverse competitiveness effects on domestic industry.
     
    Pray this stupid bill doesn’t pass the Senate. If it does, get ready for very slow economic growth for the next 10 years, after a recovery, and higher cost to run your A/C as the summers continue to get warmer.
     

  12. 12
    Christoher Skyi says:

    By the way, eight Republicans voted with Democrats to pass the bill; 44 House Democrats voted against it.
     
    8 GOP morons verses 44 very smart Democrats. What a crazy world this has become! :)
     
    Further, officials with the House GOP’s campaign arm, the National Republican Congressional Committee, confirm that they will run with paid media over recess in districts of conservative Dems who voted for the bill. The official would not reveal details on the ad buys at this time.
     

    One Democrat was upset that his leaders would needlessly force vulnerable Dems to vote for a bill that will come back to haunt them. Mississippi Rep. Gene Taylor (D) voted against the measure that he says will die in the Senate.
     

    “A lot of people walked the plank on a bill that will never become law,” Taylor told The Hill after the gavel came down.
     
     
    Let’s hope Taylor is correct about it dying in the Senate:  It took the neo-cons about two years or so for their political self-destructiveness to shift into high gear (i.e., Iraq and spending).  The new liberal team seems bound and determined to break that record.
     
     

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