I was talking yesterday about the deficit being largely a result of what Obama inherited, plus the effect of the huge downturn. Coincidentally, David Leonhart does some of the heavy lifting today, tracing the estimated budget deficit in 2009-12 by year, and quantifying the changes over time. The chart comes after the break. It’s eye-opening.
The way to read the chart is to note that at the end of the Clinton administration, the CBO was forecasting an annual $800 billion surplus between 2009-12 — today, they are saying a $1.2 trillion deficit. In large part, this is due to the economy — the business cycle accounts for 37 percent of the change, with recessions in the early 2000s and today. The next biggest chunk, at 33 percent, comes from direct deficit-increasing policies under Bush – chiefly tax cuts and war spending. Everything else is much smaller. 11 percent comes from the continuing cost of Bush era programs that Obama has kept up – that Iraq war again (and also tax cuts). The financial sector bailout accounted for 8 percent.
And then we come to the bottom of the list — new programs introduced by Obama. Wait for it — the stimulus bill accounts for 7 percent of the increase, and the other programs he supports, chiefly on health, education, and energy. account for a mere 3 percent. Some of you might be thinking that it might look far worse for Obama after 2012, but that is also not the case — such an exercise would give Obama “only a slightly higher share of the projected deficits”. Leonhart cite Alan Auerbach, a leading and well-respected fiscal economist: “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.” I think that’s right. One can always criticize Obama for not doing enough to counter the mistakes of the Bush years (remember, all those tax cuts were supposed to pay for themselves!), but that is a fundamentally different kind of argument. Besides, cutting deficits in the midst of deep recessions is not exactly good policy. Oh, and somebody tell John McCain that earmarks don’t account for anything at all…
In conclusion, I’m still wondering why today’s deficit hawks are remarkably silent about the size of military spending (almost a quarter of the federal budget). The Iraq war itself has already cost more than any stimulus plan, and it shows no sign of stopping. Surely a real fiscal hawk would start here?