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The Current Debt Is Inherited, But Future Deficits Are Chosen

December 17th, 2009 . by economistmom

cbpp-chart-on-bush-deficit-legacy-121609

The Center on Budget and Policy Priorities issued this report this week, which claims that “President Obama Largely Inherited Today’s Huge Deficits.”  The headline chart is shown above, which proves the point that President Bush’s deficit financed tax cuts and deficit-financed wars account for most of the projected deficits.  But the chart also demonstrates CBPP’s generous definition of what “today” is in “today’s huge deficits”–and that’s apparently the ten-year budget window of 2010-19, I guess another version of how “the future is now.”

Pretty much everyone understands–even without the Obama Administration’s constant reminders–that President Obama inherited the debt left behind by President Bush’s fiscal irresponsibility and record deficits; in fact, President Obama inherited the cumulative fiscal legacy (cumulative deficits) of all past presidents.  But President Obama didn’t “inherit” the projected deficits over the next ten years; those deficits are largely in President Obama’s control, as the chart shows.  Sure, the economic conditions might be largely out of the Administration’s control, but the choice to deficit-finance the cost of the wars and to extend and continue to deficit-finance most of the tax cuts “formerly known as Bush tax cuts” are President Obama’s own–as President Obama laid out in his very own budget.

That’s why this passage in the CBPP report has it exactly right (emphasis added):

While President Obama inherited a bad fiscal legacy, that does not diminish his responsibility to propose policies to address our fiscal imbalance and put the weight of his office behind them. Although policymakers should not tighten fiscal policy in the near term while the economy remains fragile, they and the nation at large must come to grips with the nation’s deficit problem. But we should all recognize how we got where we are today.

…and why the concluding passage is way too easy on President Obama–too kind to the Administration in falling under their “policy-extended baseline is what matters” spell (emphasis added):

[W]e estimate that President Obama’s proposals would lead to deficits of about $10.2 trillion over the 2010-2019 period, which is about $750 billion below the [Bush-policy-extended] baseline [but at the same time is more than $3 trillion above current-law baseline deficits]. For various reasons, CBPP believes that  estimate is conservative, but the conclusion is clear: the President’s budget would reduce deficits compared with a continuation of current policies.

If I had written the concluding passage of the CBPP paper, it would have instead read:

the conclusion is clear:  the President’s budget chooses to continue most of the Bush legacy of deficits and debt by choosing to continue the most costly of President Bush’s deficit-financed policies.

President Obama can’t change the past, but he can change the future–at least a lot more than he seems to be (yet) trying.  It strikes me that blasting the irresponsibility of President Bush’s fiscal policies, and then praising President Obama for doing “a little better” than President Bush, isn’t the way to get President Obama to live up to his potential and his promise as an agent of “change.”  So I’m not sure what CBPP hoped to accomplish in writing their piece–other than trying to comfort President Obama and tell him it’s “ok” for him to be running big budget deficits and behaving like a slightly-better version of President Bush.

4 Responses to “The Current Debt Is Inherited, But Future Deficits Are Chosen”

  1. comment number 1 by: AMTbuff

    The CBPP advocates higher government spending. I don’t believe they care very much what the money is spent on, because they realize that in the long run the major benefit programs will squeeze out other types of spending. The important thing is to grow federal spending, adding to pressure for tax increases. This is the diametric opposite of the “starve the beast” strategy.

  2. comment number 2 by: Lawrence Indyk

    I wonder why the current economic downturn has attributed to it an apparently permanent (extending smoothly for the entire decade charted) $300 Billion per year contribution to the deficit. That’s a huge amount of money over a very lengthy term - it doesn’t seem quite right to me.

  3. comment number 3 by: SteveinCH

    Lawrence,

    I haven’t read the report, but I imagine it’s comparing tax receipts under the baseline (no recession ever) with the actual receipts. That would explain a constant downward revision. Of course, it’s silly math because eventually there is always a recession.

    But the whole exercise is silly. The Federal budget under Bush increased by approximately $1.5 trillion between the 2001 baseline and 2009. So, arguably, that entire 1.5 trillion or the maybe 750 billion of it that exceeded inflation during the period could be considered to be a driver of the current deficit problem.

    With due deference, any exercise like the one above is a policy driven exercise where one focuses on the factors that one likes and not a economics driven one where one focuses on all the factors.

    Just to take a silly example, where is Medicare Part D in the chart. How about NCLB? How about increased funding for AIDS research and prevention?

    The part of the chart that looks odd to me is stimulus? I really do wonder how that line was arrived at. Does it include currently contemplated further extension of UI and COBRA?

    As I said above, this is an agenda driven analysis by a group that has a point to make. A real analysis would take the accounts (revenue and spending in 2001), hold revenue constant as a percent of GDP and spending with inflation. Any reduction in revenue from that baseline would be attributable to Bush and any increase in spending from that baseline as well.

    Sorry for the diatribe but as frequent readers here no, analysis done with your thumb on the scales makes me really annoyed.

  4. comment number 4 by: murf

    Not to mention the (I would argue) immorality of plopping an increasingly difficult financial burden on the shoulders of our children (thus ensuring they have a lower standard of living) in order to keep ourselves from having to bear the burden of our spendthrift ways.