Reason Magazine
- reason.com
- reason.tv
- reason.org
- Donate
- Site Search:
Reason on Facebook
Reason on Twitter
Reason on YouTube
Reason RSSGet Reason E-mail Updates!
Manage your Reason e-mail list subscriptionsadvertisements
Who Caused the Federal Deficit? You & Me, but Mostly Bush and Obama
The New York Times has a long and interesting analysis of the gigantic federal deficits that will be thick upon us like flies to shit for the next coupla hundred years. Before we get to the Times piece, drink in the gathering gloom:
Now here's the Timesman David Leonhardt's take:
There are two basic truths about the enormous deficits that the federal government will run in the coming years.
The first is that President Obama's agenda, ambitious as it may be, is responsible for only a sliver of the deficits, despite what many of his Republican critics are saying. The second is that Mr. Obama does not have a realistic plan for eliminating the deficit, despite what his advisers have suggested.
Leonhardt discusses the ways in which various Bush policies, many of which have either been supported whole hog or extended with a lot of hand waving by Obama, helped the red ink stack up (?). For instance, the Iraq and Afghanistan wars, various sorts of tax cuts and AMT patches, the stimulus and TARP plans, and account for about 2/3 of the deficit growth. The rest is related to business cycle stuff. The 2001 and current recessions, Leonhardt writes, not only decreased federal tax revenues but increased spending on various welfare programs as well.
He also notes that while Medicare spending is one of the great engines of seriously screwed government spending, there's simply no scenario in which Medicare will be reformed with real savings within the next several years. Meaning it can't be seen as a means of trimming the deficit over the next decade. Leonhardt underscores that the GOP isn't serious about cutting spending, either, delivering only a comical $5 billion in specific cuts in a recent plan.
So what will curb the deficit? "The solution," he writes, "will involve some combination of tax increases and spending cuts. And it won't be limited to pay-as-you-go rules, tax increases on somebody else, or a crackdown on waste, fraud and abuse. Your taxes will probably go up, and some government programs you favor will become less generous."
In fact, Obama is pushing pay-as-you-go, meaning the government is supposed to match any new spending with a cut somewhere else. That's a good idea that never seems to get put into play in the end (go ask Ronald Reagan). Based on the Clinton-era climb from deficits to surplus, I'd say the real way out is likely to be minor tinkering with taxes (Clinton raised top marginal rates while cutting capital gains etc.), reduced spending (Clinton trimmed spending more with a Democratic Congress than with a GOP one), and a helluva lot of economic growth (good luck on that one boys!).
Read the full Times piece for a good blow-by-blow of how we got here. And skip over the Obama apologetics built into formulations such as this one: "Mr. Obama's main contribution to the deficit is his extension of several Bush policies." Look, the freaking god-emperor ran on a campaign of, lemme remember now, hope and change. So far, he's only been hoping for a lot more change to fill federal coffers, while planning on a gigantic spending binge far beyond the stimulus and TARP payouts. Indeed, his proposed budget for FY2010 represents a 19 percent increase over FY2008. In a truly unflattering fashion, Obama has harped on all the problems and deficits he inherited from Chimpy McHitler. Well, Mr. President, you're in the big boy seat now and you signed off on every goddamn awful bit of legislation in the past six months or so (remember, you voted for TARP?).
None of the Times story will be news to Reason readers who knew full well that Bush was a budget-buster from Day One. But it's definitely worth a read.
Xeones|6.10.09 @ 9:48AM|#
Goddamn, that is a depressing chart.
Relatedly, i apologize to my kid whenever she accidentally watches
the news anymore.
robc|6.10.09 @ 9:49AM|#
I pointed this out last time, but that graph is still wrong. We didnt have a surplus.
Jay|6.10.09 @ 9:59AM|#
Obama's "pay as you go" of course exempts new health care
spending ($2.5 trillion), Social Security and Medicaid. It also
puts stringent limits on Medicare.
Now that's some financial rigor!
robc|6.10.09 @ 9:59AM|#
Clinton trimmed spending more with a Democratic Congress
than with a GOP one
Umm...I already handled the surplus bullshit, but WTF? Spending was
never trimmed. It grew EVERY SINGLE YEAR of the Clinton era. Not
surprising, it grows every single year of every era.
Im not picking on Clinton, Im picking on Nick.
|6.10.09 @ 10:04AM|#
For instance, the Iraq and Afghanistan wars, various
sorts of tax cuts and AMT patches, the stimulus and TARP
plans, and account for about 2/3 of the deficit growth.
True? Looking at the chart, I see the deficit increasing by about 4
times in 2009, due almost entirely, I believe to stimulus and
TARP.
And I seem to recall that, while TARP is a Bush thing, the stimulus
is 100% Obama. So why are we listing it as a Bush program?
|6.10.09 @ 10:07AM|#
You can't solve the deficits with tax cuts. In case you didn't notice we are in a severe recession. You can't raise taxes in the middle of recession and expect it to produce revenue. Your only hope for fixing the deficit is to grow the economy and stop spending. Growing the economy does two things; increases revenue and decreases the significance of the deficit as a percentage of GNP. Why this is such a difficult concept for most to understand is beyond me.
|6.10.09 @ 10:08AM|#
Clinton's best work came after the republicans took congress.As much as I hate the policies of Bush and Obama,the fact is the blame falls on congress.Not a dime can be spent with out their say.
|6.10.09 @ 10:09AM|#
"And I seem to recall that, while TARP is a Bush thing, the
stimulus is 100% Obama. So why are we listing it as a Bush
program?"
That is not the NYT, that is Gillespie. Gillespie cannot blame
something, even something that was done exclusively by Democrats,
exclusively on Democrats. Republicans must always be to blame in
some way. It is written in both his contract and his character.
|6.10.09 @ 10:24AM|#
Who is "you and me" Kemosabe?
I know I didn't vote for any of these fucks who have spent and
borrowed us into oblivion.
|6.10.09 @ 10:28AM|#
Gillespie cannot blame something, even something that was
done exclusively by Democrats, exclusively on Democrats.
Was he one of the Reasonoids supporting the Obamassiah during the
election?
|6.10.09 @ 10:41AM|#
robc
Actually, it is technically possible to run a surplus and have the
debt increase.
Remember when the Treasury takes that part of FICA which exceeds
what is paid out to SS recipients it issues special bonds. This
shows up on the debt side of the balance sheet.
If you look at it long enough you'll see the paradox that has
happened. Of course, if you look at it long enough you'll see how
bogus government accounting is. You'd go to jail if you were
running a busisness and pulled something like this.
Going to your link, frex, you will see that marketable debt (ie
debt held by the public) went down, while nonmarketable
debt went up.
While some of the nonmarketable debt is various accounting
adjustments, most of it is the Social Security and other Trust
Funds.
In other words in 2000 the FedGov actually did take in more in
revenues than it paid out in outlays. Trouble is that some of that
"surplus" had to be "borrowed" from the Social Security
Administration.
|6.10.09 @ 10:45AM|#
Just a thought, but how about if the President came out and said that we are going broke and in a depression. As a result of this, everyone is going to have to sacrifice. That means that we can't have government funded free healthcare for all. That means that maybe we might not get the same social security check we would have otherwise gotten. That means that maybe there are some government services that we can learn to live without. Wow what an idea.
BeesInTheBrain|6.10.09 @ 10:48AM|#
This CNN article points out that on the flip side of Obama's Pay-As-You-Go is the Tax-As-You-Go, "any tax cut would require a corresponding increase in tax revenue".
|6.10.09 @ 10:48AM|#
I see the deficit increasing by about 4 times in 2009, due almost entirely, I believe to stimulus and TARP.
A pretty significant portion of the larger 2009 deficit is smaller
tax collections due to worse economic performance, and larger
welfare payments, which partially were introduced in the stimulus
and partially automatically happen with a poorer economy.
I also suspect that Nick is counting some
reduced spending (Clinton trimmed spending more with a Democratic Congress than with a GOP one)
The first problem is that that's not true under most definitions of
decreasing spending. Look
at the CBO budget numbers. Even defense spending went down from
1995 to 1996.
The other problem there, of course, is that the only spending
reduced with the Democratic Congress and Clinton was the defense
budget with the Cold War peace dividend. True, those cuts have been
largely (but definitely not entirely) reversed as a percentage of
GDP, but the deficit is so bad currently that eliminating the
defense budget entirely wouldn't even be enough.
Domestic discretionary spending didn't go down at all under the
Democratic Congress and Clinton. When the Republican Congress was
elected, defense spending continued to decline (from 4.1% of GDP to
3.0% of GDP from 1994 to 1999) at a somewhat slower rate as it had
already been cut, and domestic discretionary spending declined as
well (from 3.4% to 3.0%) for the first time. Defense even went down
in absolute dollars from 1994 to 1996.
The only way in which it's slightly true is that there was a
(relatively) big jump in 1999 and 2000 spending compared to
previous years once it was announced that we had our
psuedo-surpluses.
Mike M.|6.10.09 @ 10:49AM|#
Clinton's best work came after the republicans took
congress.
Divided government is pretty much always the best way to go in our
system. That's the main reason why America made a terrible mistake
in picking Obama over McCain, and it's unfortunate that the
Cosmotarians weren't smart enough to figure this out ahead of time.
Nevertheless, the appalling Bush deserves most of the blame for
this.
But deep down inside, even the liberals are as smart enough as
everyone else to understand how totally screwed America is now,
which is why they're still going to blaming Bush for everything
every step of the way, even three and a half years from now.
|6.10.09 @ 10:51AM|#
Whoops, cut something out. I meant to say that I also suspect
that Nick is counting some programs that were started under Bush
and have continued for several years as part of this year's
deficit. Even though there were somewhat affordable during an up
part of the economic cycle, there's a strong case that the deficit
was too large during a boom period anyway, even though the deficit
was reasonable by historic standards.
Certainly a fair amount of this year's deficit is just that the
economy is worse.
That's no excuse for the projected deficits from 2012 to 2019,
where the Administration projects full economic recovery but
deficits dwarfing any of the Bush ones.
|6.10.09 @ 10:53AM|#
Though I don't know how Nick got "accounts for 2/3 of the deficit's growth" for programs that have been going on for several years. Two-thirds of what growth? If we had had the wars, etc. in previous years but stopped all spending on them this year, our deficit without wars, etc. plus TARP would still be one-third larger than our deficit the previous years with wars but without TARP? That doesn't make any sense as a basis for comparison.
|6.10.09 @ 11:01AM|#
"In in previous years but stopped all spending on them this
year, our deficit without wars, etc. plus TARP would still be
one-third larger than our deficit the previous years with wars but
without TARP? That doesn't make any sense as a basis for
comparison."
Even with the wars, the Bush deficit peaked in 2004 and declined
every year until 2008 when we got TARP. Had TARP not happened, the
deficit would not be anywhere near where it is. Saying that Bush's
wars bankrupted us, is a convienent and fullfilling temper tantrum
for anti-war types, but it is just not true. TARP and later the
porkulus and later (God help us) Obamacare is what is and is going
to bankrupt us.
|6.10.09 @ 11:20AM|#
Debating whether Clinton, Obama, Bush, etc. screwed us the most;
is akin to debating who rammed us the most in a prison gang
rape.
We are still f*cked in the end.
js|6.10.09 @ 11:29AM|#
The solution is quite simple. Have you ever heard of the "prescription drug entitlement?" That's right, we are entitled to drugs! Who the f*ck cares about deficits when you're on drugs?
|6.10.09 @ 11:35AM|#
Divided government. Is that when we take all of our government officials and introduce them to Goldfinger's laser? Or to King Solomon's baby solution, if you prefer the Biblical reference.
|6.10.09 @ 11:38AM|#
Realistically, it doesn't matter what Obama or his successors
want to do.
Unless Congress develops the spine to stop putting new programs
into place, stop the pork, make serious cuts, and stick to a
realistic budget based on accepted accounting principles*, there is
no way that the deficit will stop. (I suspect that cows will sprout
wings and fly first.)
*The 2000 deficit/surplus debate that robc and Issac Bartram were
referring to was the result of an accounting trick devised by
Congress in the mid-1990s for the express purpose of fudging the
numbers. Many people (mostly those nasty fiscal conservatives)
noted the trick at the time and were ignored by the MSM and the
voters.
Ian Gilmore|6.10.09 @ 11:42AM|#
Is there a link to the actual NY times article somewhere in this post? If so, I can't find it.
..|6.10.09 @ 11:43AM|#
Obama is pushing pay-as-you-go, meaning the government is
supposed to match any new spending with a cut somewhere
else
In reality, the spending has already been done, which will require
taxes to pay for it.
More smoke and mirrors, more empty rhetoric.
Sam Grove|6.10.09 @ 11:47AM|#
Your only hope for fixing the deficit is to grow the economy
and stop spending. Growing the economy does two things; increases
revenue and decreases the significance of the deficit as a
percentage of GNP.
There's the trick, though, growing the economy. Unfortunately, the
fertilizer coming out of D.C. isn't as nutritious as they would
have us believe.
Chad|6.10.09 @ 11:47AM|#
Question: Would the deficit be much different if McCain had won
the election, or Bush stayed in office?
Answer: No. The economy would have still continued to collapse,
reducing revenues, and a stimulus bill of the same rough size would
have passed, though it would have included more tax cuts and less
spending. The net effect on the deficit would be small.
Given this, it is obvious to conclude the problem isn't Bush or
Obama, but the average American voter, who refuses to act like and
adult and make the sacrifices (BOTH higher taxes and spending cuts)
necessary to solve the problem.
robc|6.10.09 @ 11:49AM|#
Chad,
Wrong question.
Question: Would the deficit be much different if Paul had won the
primary and election?
Answer: Hell yes.
robc|6.10.09 @ 11:52AM|#
Chad,
Of course, your final conclusion is still partly right, the average
voter doesnt want a Ron Paul in the presidency.
Not sure why spending cuts arent enough. Cut spending by 90% and
the debt would be paid off in short time and then tax cuts could
clearly follow. If we are above the peak of the laffer curve (which
I think we are), tax increases provide negative benefit anyway.
|6.10.09 @ 11:59AM|#
"""Divided government is pretty much always the best way to go
in our system. That's the main reason why America made a terrible
mistake in picking Obama over McCain, """
Or Bush over Gore in 2000. That is if you truly believe in divided
government.
""""John, how's he supposed to get reelected if he does that,
huh?""""
He's not. .. has it right. The spending has been done, now we have
to pay for it.
Obamama should have put the painful part up front so the recovery
would happen in his last year or two. Then he would stand a change
of being re-elected. It's what Bloomberg did. His rating sunk to
low 20s shortly after he was elected because he was making a lot of
budget cuts, closing fire houses and such. That turned things
around before re-election time, he was applauded and re-elected,
he's now running for a 3rd term.
creech|6.10.09 @ 12:03PM|#
Yes, let's blame it on the Republicans. They've been running doddering old men and amiable dolts for President for twenty years now.
|6.10.09 @ 12:06PM|#
How about we just roll spending back for all federal, state, and local governments to 2004 levels?
BakedPenguin|6.10.09 @ 12:09PM|#
I still think term limits were the missed political opportunity of the last twenty years. People who know they are only going to have two terms maximum will be less likely to try to buy votes with other people's money.
Mike M.|6.10.09 @ 12:13PM|#
Or Bush over Gore in 2000. That is if you truly believe in
divided government.
It's hard to imagine Gore could possibly have been worse! At a
minimum, it's rather doubtful that the war in Iraq would have taken
place. Alternatively, it would surely have been better had the
Democrats had more power in Congress back then.
Dividing the government certainly isn't a perfect solution to
everything, but if you really want to limit government as much as
possible, then I'm not sure why you would ever want one party to
have near total control over all the branches, especially to the
extent that the Democrats do now.
If McCain were President, I find it hard to believe that he would
ever have conducted an unauthorized and illegal takeover of a
failed car company solely for the purpose of funneling money to
unions as political payback.
The Angry Optimist|6.10.09 @ 12:15PM|#
I would almost think that we'd have to be on the right side of the Laffer Curve. Isn't the combined total tax burden something like 52% of income? Holy Diver, we just need to cut spending and big programs.
alan|6.10.09 @ 12:28PM|#
Xeones | June 10, 2009, 10:49am | #
John, how's he supposed to get reelected if he does that,
huh?
Yeah, and how will he get rated the greatest president ever if he
has to abide by fiscal reality instead of expanding domestic
mandates? He reads the history books, he knows what they want out
of him. John, You are just asking for too great a sacrifice out of
the man.
Chad|6.10.09 @ 12:34PM|#
robc | June 10, 2009, 11:52am | #
Not sure why spending cuts arent enough. Cut spending by
90%
Since our interest payments are 10% of the budget, cutting 90%
would require shutting down the entire federal government,
including Social Security. Get back to me when you have a remotely
realistic plan.
If we are above the peak of the laffer curve (which I think we
are), tax increases provide negative benefit anyway.
You can think what you want, but the evidence (and common sense, if
you understand human behavior) points to the peak of the Laffer
curve being far beyond our current tax rates - something like 70%
or more.
Just THINK for a minute. Imagine a $10 trillion dollar economy with
a 30% net tax rate, which brings in $3 trillion in government
revenue. Let's imagine that the government cuts taxes to 25% net.
For the government to break even, GDP would have to increase from
$10 trillion to $12 trillion - a 20% increase.
Now, is this even remotely realistic? Absolutely not. Changing
peoples' tax rates from 30% to 25% means a 7% increase in their
take-home pay (much of which will be used to buy whatever the
government is no longer buying them due to the tax cuts). Is it at
all plausible that massive numbers of people would decide to get a
job, or those that are current working would decide to work much
harder all of a sudden, so that output would increase 20%?
No.
But imagine dropping a 80% tax rate to 75%. In this case, the
economy would only have to grow by 6.7% for the government to break
even, and people would be getting a 20% take-home pay boost. Could
people boost their output by 6.7%? THAT is plausible.
Claiming that we are anywhere near the top of the Laffer curve
doesn't even pass the smell test. Our tax rates are low compared to
most other developed countries, and guess what - their economies
are fine. Again, this is an issue where the right takes a kernel of
truth and then extrapolates it without even bothering to check if
it makes a whit of sense. It doesn't.
We do, however, need to pay attention to marginal tax rates. There
are two problem areas, the first being right as you come out of the
welfare/EITC area, and the second being around 70000-100000 per
year (for an individual), where far too many tax breaks phase out.
Indeed, the cute $8000 first time home buyer credit this year is
essentially a 40% marginal tax on a potential first-time buyer in
the $75000-$95000 income range. I am very serious when I say that
these people might have a marginal tax rate in excess of 100% this
year (25% federal bracket, 15% FICA, state taxes, local taxes,
other tax credit phase-outs, etc).
|6.10.09 @ 12:35PM|#
I still think term limits were the missed political
opportunity of the last twenty years. People who know they are only
going to have two terms maximum will be less likely to try to buy
votes with other people's money.
California, unfortunately, stands as a refutation of this thesis.
Term-limited legislators and the worst spending record in the
country.
|6.10.09 @ 12:38PM|#
"""Dividing the government certainly isn't a perfect solution to
everything, but if you really want to limit government as much as
possible, then I'm not sure why you would ever want one party to
have near total control over all the branches, especially to the
extent that the Democrats do now."""
I'm a believer in divided government too. The republicans almost
had all three branchs if you count the Alito and Roberts
appointments.
I think in 2010 the dems may lose Congress. Then we'll be back to a
split government.
|6.10.09 @ 12:41PM|#
Mike M. | June 10, 2009, 12:13pm | #
If McCain were President, I find it hard to believe that he would ever have conducted an unauthorized and illegal takeover of a failed car company solely for the purpose of funneling money to unions as political payback.
Of course not. He would ever have conducted an unauthorized and
illegal takeover of a failed car company solely for the purpose of
funneling money to financial institutions and
bondholders as political payback.
I mean, sheesh, can't you see there's a HUGE difference?
Xeones|6.10.09 @ 12:42PM|#
Since our interest payments are 10% of the budget, cutting
90% would require shutting down the entire federal government,
including Social Security.
Now you're talking.
|6.10.09 @ 12:45PM|#
And by reading that chart, even the White House is admitting that our national debt will be $10 Trillion higher sometime during Obama's third term. How does this NOT lead to talks of Zimbabwe?
Mike M.|6.10.09 @ 12:50PM|#
California, unfortunately, stands as a refutation of this
thesis. Term-limited legislators and the worst spending record in
the country.
I'm coming to believe more and more that the real problem isn't
multiple term politicians, but full time "professional"
legislatures.
|6.10.09 @ 1:01PM|#
No, Mike M., the real problem is the ignorance/apathy/stupidity of the majority of the voters. As long as politicians are elected for promising voters more than can be realistically delivered, we're fucked.
JB|6.10.09 @ 1:07PM|#
Obama quadrupled the previous largest budget deficit in one
year.
That makes him 4 times worse than Bush on spending.
If Bush was a chimp, then Obama is a retarded monkey.
|6.10.09 @ 1:50PM|#
He would ever have conducted an unauthorized and illegal
takeover of a failed car company solely for the purpose of
funneling money to financial institutions and bondholders as
political payback.
You may not have noticed that the financial institutions and
bondholders got pennies on the dollar.
But other than that, excellent point!
|6.10.09 @ 1:52PM|#
I'm coming to believe more and more that the real problem
isn't multiple term politicians, but full time "professional"
legislatures.
Probably the only solution is "hard" term limits - once you are
limited out of the legislature or the governor's office, you are
ineligible to serve in any public office whatsoever.
|6.10.09 @ 2:20PM|#
once you are limited out of the legislature or the
governor's office, you are ineligible to serve in any public office
whatsoever.
How about chemical castration?
|6.10.09 @ 2:24PM|#
Stop blaming people in the house. Start blaming your selfs, we
are the ones who are letting these train wreckers carry on. You
know some thing? It's seems to me that people in other countrys are
more activly involved in what goes on in their lives. Look at the
French, they burn tires in city squares, icland riots and America
just sits around an takes it in the ass. You people want change,
help me help you! Get off your asses an fight for what we belive
in, help me stop big government. If it takes burning tires at the
white house then let's fill the sky with black.....
To Arms!!!
Gimlet|6.10.09 @ 2:38PM|#
"Obama quadrupled the previous largest budget deficit in one
year."
In just his first four months, Obama has spent more than the
previous 43 presidents combined.
Gimlet|6.10.09 @ 2:41PM|#
"Look at the French, they burn tires in city squares"
With the right sauce, Michelin flambé is mighty tasty.
Gimlet|6.10.09 @ 3:38PM|#
"Gimlet,
I know. Shocking, isn't it?"
What? The deficit or the baby thing?
Site comments/questions:
Media Inquiries and Reprint Permissions:
(310) 367-6109
Editorial & Production Offices:
3415 S. Sepulveda Blvd.
Suite 400
Los Angeles, CA 90034
(310) 391-2245