The President’s Trillion-Dollar Deficits
By Veronique de Rugy @ National Review (September 26, 2012)
Who remembers President Obama’s first budget? I do. It was called “A New Era of Responsibility.” Back then, the president promised that he would cut the deficit to $912 billion in 2011 and to $581 billion by 2012. But that’s another of the president’s promises that never come to pass. As Fiscal Year 2012 nears to an end, the data shows that the deficit for 2012 will surpass a trillion dollars for the fourth straight year in a row.
But according to the president, he has almost no responsibility in this sad state of affairs. In fact, he claims that “90 percent” of the deficit is due to President Bush’s policy:
‘Over the last four years, the deficit has gone up, but 90 percent of that is as a consequence of two wars that weren’t paid for, as a consequence of tax cuts that weren’t paid for, a prescription drug plan that was not paid for, and then the worst economic crisis since the Great Depression.’
That’s a remarkably bold statement considering that President Obama has been in office for four years, and that he has engaged in seriously expansive policies of his own. I am always happy to remind conservatives about the incredible fiscal irresponsibility that reigned during the Bush years, but for Obama to claim that he shares almost no responsibility (10 percent, to be precise) in this fourth trillion-dollar deficit is ridiculous.
In fact, Washington Post’s Glenn Kessler looked at the claim this morning and concludes that the president deserves four Pinocchios for it. Using data from my colleague Chuck Blahous, he breaks down the numbers for us:
- Economic/technical differences: $570 billion (46 percent)
- Bush policies: $330 billion (27 percent)
- Obama policies: $325 billion (27 percent)
- Economic/technical: $815 billion (51 percent)
- Bush: $225 billion (14 percent)
- Obama: $565 billion (35 percent)
- Economic/technical: $720 billion (46 percent)
- Bush: $160 billion (10 percent)
- Obama: $685 billion (44 percent)
Now Obama’s solution for cutting the deficit is simple: Blame the deficit on the Bush tax cuts and raise taxes on the rich. While we can commend the president for his persistence in repeating the same thing over and over again, it doesn’t make it true and it certainly won’t fill our budget gaps.
It is simply incorrect to blame the deficit mostly on tax cuts. In fact, a few weeks ago, the CBO released a report that looks into the cause of the disappearing surpluses at the end of the 1990s and show that half of the blame goes to increased spending. Here is a chart:
As you can see, according to the CBO estimates, tax cuts contributed to 24 percent of the surplus’s disappearance (and some of these tax cuts were extended by Obama). Projection inaccuracy alone contributed even more than tax relief.
It is really unfortunate that President Bush’s 2003 tax cuts were not followed by serious spending cuts. I do believe that well-designed tax cuts have a very positive impact on the economy. However, no tax cuts can compensate for the damage caused by the dramatic increase in spending that we experienced during the Bush years (a 60 percent increase in spending above inflation over eight years, compared to Clinton’s 12.5 percent; two Keynesian stimuli in 2001 and 2008; bailouts; and more.)
And if spending is mainly responsible for our current deficit, it should play a large role in addressing the problem — there aren’t many other ways to go about it. Congress must cut spending and cut it fast. More important, it must reform Medicare, Social Security, and Medicaid, since they are the drivers of our debt crisis. The rule is simple: Reform the entitlements, save the world. Ignore them, and you can count on many more $1 trillion dollar deficits in our future. And please, don’t get fooled by the doomsday predictions that the world will end if sequestration – across-the-board spending cuts — is allowed to go into effect on January 2.