The Deficit Blame Game
meganmcardle.theatlantic.com
...Well, actually, I think there was a Democratic congress involved a couple of times. But who cares?...
No, I mean that seriously. Who cares? The whole debate seems totally weird to me, and highly inflected by an arbitrary choice of endpoints which makes it seem as if George Bush squandered an $800 billion deficit bequeathed to him by Clinton, which was his sacred duty to preserve in amber.
But, just for starters, that $800 billion was not a real number. The budget surplus was $232 billion in 2000, about $292 billion in today's dollars, or about 2.5% of GDP. That is, coincidentally, about what we lost in revenue when the stock market bubble burst and we lost all that lovely capital gains revenue. The imaginary number comes from assuming "current law" as of 2000. Due to some quirky rules, this does not just mean assuming that Bush didn't spend more or tax less than Clinton. It actually means assuming away some things Clinton *did* do, like the $50 billion annual "temporary" AMT fix.
Moreover, even if this had been something like a real number, we would not have arrived in 2008 with an $800 billion surplus. Any president would have done about what Bush did--some combination of spending it, and cutting taxes. The American public was not going to happily pay an extra 6% of its income to Uncle Sam so that we could pile up some massive wad of cash. And if they had, by 2008, we'd simply have been pointlessly imposing deadweight loss on the American public through unnecessary taxes.
The correct assessment, I think, is how much of the change from zero that Bush bequeathed Obama. And there, the picture is more complicated. Bush left a very small structural budget deficit--until the massive financial crisis. The change since then has mostly been either structural (tax declines), things that Obama participated in as president-elect or senator (the bailout) or things he authored (the stimulus).
But more importantly, the deficit now is not what matters. Any Republicans who are using it as a political tool to bash Obama should be ashamed of themselves; whatever you think of the stimulus package, one year of massive borrowing is not going to kill us, and the impact on future generations will be small.
The graphic's equally arbitrary end date obscures the real worry: the years after the current crisis. By then, it will make about as much sense to blame them on Bush's fiscal policy, or Medicare Part D, as it would on FDR's fiscal policy, or Medicare Part A. Social Security and Medicare Parts A-C will be driving far more of Obama's deficits than anything Bush did.
Don't believe me? Iraq is now at $120 billion a year, and scheduled to decline. It seems churlish to blame Bush for Medicare Part D, given that the Democrats' main complaint was that it wasn't expensive enough, but let's go ahead and blame him anyway: $35 billion a year. The tax cuts sunset in 2010; after that, Obama has to affirmatively act to extend them. The structural deficit projected in 2010 was a little over $100 billion.
But what about all the debt he racked up? Net public debt rose less than 4% of GDP during Bush's presidency. Net interest (aka Cash Interest We Pay Bondholders) went from $223 billion in 2000 to $244 billion in 2008; adjusted for inflation, and as a percentage of GDP, it actually fell. If we are entitled to expect Bush to close the budget deficit with those kinds of numbers, then we ought to be able to expect it from Barack Obama. Bush's deficits are not holding him back.
But this is what we have been told to expect:
How is a $118 billion structural deficit, $35 billion in Medicare Part D, and a theoretical end to the Iraq presence forcing Barack Obama to spend nearly $1 trillion in 2018? How is it forcing him to spend roughly $650 trillion more than he takes in in 2012?...
...The problem with the budget deficit is not any particular program, or even any particular tax cuts. It is not that George Bush or Obama is a bad person who does bad things. The problem with the budget deficit is that, unlike the deficits George Bush ran, the deficits projected under Obama (and beyond) are actually large enough to potentially precipitate a fiscal crisis. If our interest rates suddenly spiked up, perhaps because lenders were worried about the size of our budget deficits, we'd find ourselves in the kind of nasty fiscal jam that regularly plagues third-world countries. The difference is, no one has enough money to bail us out.
Obama is the one who will have to prevent this. Yet instead of plans, we're getting fairy numbers from the OMB. That's worrying, and it's sure not George W. Bush's fault. His OMB liked to inflate the deficit projections, so that they could take credit for a mostly imaginary reduction...
meganmcardle.theatlantic.com
(note - $650tril above is obviously supposed to be $650bil) |
