EconomistMom.com

CQ’s Richard Rubin recently fact-checked something Senator McCain claimed on CNN’s Larry King Live; McCain said “Spending increases, not tax cuts, are the major cause of the federal budget deficit.”

The claim seems dubious at first blush, particularly among those of us who have characterized the Bush Administration’s fiscal policy agenda as “all tax cuts, all the time, no matter what the reason” (or something like that), who have also noticed that the federal budget outlook has gone from a 10-year surplus of $5.6 trillion, to a deficit over the same period of $3.2 trillion–a deterioration of nearly $9 trillion.

Yet, perhaps surprisingly, it turns out the Bush Administration has been just as profligate with their spending as with their tax cuts.  (Remind me to explain next week why I think most tax cuts–as commonly ‘practiced”–are just ”spending in disguise” anyway.)  Richard highlights the recent breakdown:

…the bottom line is McCain is right. For fiscal year 2007, 58 percent of the legislatively caused deterioration came from spending and 42 percent came from tax cuts. This year, taxes make up 52 percent of the change, because of those tax-rebate checks. But that’s a temporary blip. In 2009, according to the projections, tax cuts’ share of the blame will drop to 44 percent while spending’s portion will rise to 56 percent.

So fiscal irresponsibility has been an “equal opportunity employer” throughout the federal budget since 2001–recruiting from the spending side as well as the tax side of the budget.  But Richard also points out that when you lump the sum total of “spending” together, you’re implicitly comparing the tax cuts, which were concentrated in just a couple pieces of legislation (the 2001 and 2003 legislation), with the entire remainder of fiscal policy actions–and that remainder covers a lot of diverse territory:

…all spending isn’t equal. The Center on Budget and Policy Priorities [CBPP] analysis found that most of the spending increase didn’t come from the earmarks or domestic programs that McCain complains about. It was defense and homeland security.

This CBPP-produced chart (based on CBO data), contained in this CBPP analysis, shows that the tax cuts have contributed slightly less than half to the deterioration in the budget outlook since 2001, considering the costs through fiscal year 2007:

But does that say to you that the tax cuts “dug half of the much deeper hole,” or that they “dug just half of the (deeper) hole”?  (This is the budget policy version of ”is the glass half full or half empty?”)  To me it shows that the tax cuts are the single largest legislative factor contributing to the deterioration in the budget outlook–larger than any of those other (very broadly defined) spending categories.  And although gone are the days when with a budget deficit of less than $200 billion (just last fiscal year) we could say that were it not for the tax cuts, there would be no budget deficit (see this CBO analysis), we probably should be just as dismayed that the cost of the tax cuts will account for half of an expected $500 billion deficit in fiscal year 2009.

Now, whatever the “equal opportunity” in the budget that got us deeper in the hole up to now, that doesn’t necessarily guide us as to where we’re headed, or how to come out of the hole (or how to stop digging), from this point forward.  Circumstances and priorities will change over time (we can hope the war will not go on forever), and current law commits us to varying degrees to the different legislative changes made since 2001–the largest examples being that the Medicare prescription drug program goes on forever, while the tax cuts expire at the end of 2010.  Whatever the past, going forward, we’ll have to hope we can return to fiscal responsibility in an “equal opportunity” kind of way.