In today’s New York Times, David Leonhardt reflects on the dismal outlook for the federal budget, sorting out how we got to such a sorry state–and wrestling with a question a lot of us are struggling with these days: how much of this can we blame on a new president who’s inherited such a mess from the former president?
David first lays out these facts (based on CBO numbers, emphasis added):
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.
The first category — the business cycle — accounts for 37 percent of the $2 trillion swing. It’s a reflection of the fact that both the 2001 recession and the current one reduced tax revenue, required more spending on safety-net programs and changed economists’ assumptions about how much in taxes the government would collect in future years.
About 33 percent of the swing stems from new legislation signed by Mr. Bush. That legislation, like his tax cuts and the Medicare prescription drug benefit, not only continue to cost the government but have also increased interest payments on the national debt.
Mr. 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. Such policies — together with the Wall Street bailout, which was signed by Mr. Bush and supported by Mr. Obama — account for 20 percent of the swing.
About 7 percent comes from the stimulus bill that Mr. Obama signed in February. And only 3 percent comes from Mr. Obama’s agenda on health care, education, energy and other areas.
That President Obama’s “contribution” accounts for only about 20+7+3 = 30 percent of the fiscal deterioration–less than either the effects of the weak economy or the policies that President Bush signed into law–makes it sound as if we should get off President Obama’s case and stop accusing him of being a (too-)big spender, or as David puts it:
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.
On the other hand, David acknowledges that:
Mr. Obama does not have a realistic plan for eliminating the deficit, despite what his advisers have suggested.
One could look at President Obama’s 30-percent share of the fiscal blame and say “damn that cursed recession” and “damn that profligate Bush Administration” and “stop picking on our new President–he’s doing the best he can with the mess he inherited and the economy he’s got to work with.” (I myself say some of those things some of the time.) Or one could stop dwelling on the past–which we cannot change–and look ahead to what we can change, or rather, what President Obama can change.
Of the 30 percent “Obama share” of the fiscal blame, already 7 percent is a thing of the past–the stimulus/recovery package already passed. That leaves only 23 percent that’s not yet given away and at least to a large extent (if not completely) within our new president’s control. We can look at that as a glass 77 percent empty (100-23), or a glass 23 percent full. I prefer the latter, because 23 percent of trillions of dollars is a lot of money.
So of the 23 percent within President Obama’s control, it’s significant that only 3 percent comes from his “agenda on health care, education, energy and other areas.” In contrast, 20 percent–or 20/23= 87 percent of what’s under President Obama’s control–is comprised of President Obama’s proposals to continue President Bush’s policies (almost entirely the Bush tax cuts). The new president is not just proposing to extend the old president’s policies; he’s also proposing to continue to entirely deficit-finance the old president’s policies even though he’s willing to pay for his own. (That’s the big reason why 20 percent is Bush policy extended and only 3 percent is new Obama policy, in terms of the contribution to the fiscal deterioration.)
I like how Alan Auerbach puts it (later in David’s article), emphasis added:
Alan Auerbach, an economist at the University of California, Berkeley, and an author of a widely cited study [with Bill Gale of Brookings] on the dangers of the current deficits, describes the situation like so: “Bush behaved incredibly irresponsibly for eight years. On the one hand, it might seem unfair for people to blame Obama for not fixing it. On the other hand, he’s not fixing it.”
“And,” he added, “not fixing it is, in a sense, making it worse.”
The Obama Administration can’t change the past and in particular cannot go back in time to 2001 before the Bush tax cuts were passed when we were facing ten years worth of surpluses of $5.6 trillion. Instead, here we are today facing ten years worth of deficits of $4.4 trillion under current law. But with CBO projecting that the ten-year deficit under President Obama’s budget proposals would be $9.3 trillion (more than double that under current law), it’s clear that there’s still a lot that’s the Obama Administration’s “call” and that there are many different places we can “get to from here”–even if one of them isn’t “back to 2001.”
The glass is 23 percent and trillions of dollars full, so let’s try to make the most of it going forward and stop living in the past!