Posts Tagged ‘ deficit ’

How we got our debt

So if this is how we got our debt problem, why is the only solution to implement massive cuts to Medicare, Medicaid and Social Security?

Center on Budget and Policy Priorities http://www.cbpp.org

Maybe it would make more sense to end the Bush tax cuts and cut the Department of Defense  before we start talking about dismantling our social safety net.

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Is Obama to Blame for our Deficits?

Today I will tackle the question: How much of the debt accumulated since Obama became President can be “blamed” on him? Obviously, one of the harshest criticisms Republicans level against the President is that he is to blame for the large deficits that have characterized our budget under his presidency, but is this deserved? For the moment, we will leave aside the question of whether it was wise to sign into law the tax cuts and spending programs that he did, and just focus on getting a number on the amount of the debt he is responsible for. Rep Michelle Bachmann (who is running for President)  has famously used this chart to pin blame for our recent deficits on Obama:

Its a bit hard to read, but the deficit in 2009 was $1.41 trillion and according to the most recent graph on her website, the deficit in 2010 was $1.29  trillion. The projected deficit for this year is 1.5 trillion and since we’re almost exactly halfway through the year, we’ll call it $.75 trillion for a total of 3.45 trillion in debt accumulated since Obama took office.

What I will count into law are spending programs that Obama signed into law. So, to start we have the stimulus program which, to date has cost $654 billion.

The next big ticket item is the Affordable Care Act, the president’s healthcare reform measure. Contrary to popular belief, It is entirely paid for, and will even give us a surplus of over the next decade. The original bill was supposed to save $138 billion over a decade, but I believe that’s been downgraded to about $114 billion over 10 years. It was signed a little over a year ago so we’ll say that the Affordable Care Act gives a debt surplus of +$11.5 billion. 

Pres. Obama passed a budget for fiscal year 2010 and FY 2011 (fiscal year 2009 was signed into law by President Bush). Using the spending in Bush’s final budget as a baseline, Obama signed an increase in discretionary spending of $168 billion in FY 2010 and the continuing resolutions covering most of FY 2011 followed the same trajectory as FY 2010, so we’ll say he increased the deficit by $126 billion during the first 9 months of this fiscal year. Note: these include the costs of the wars, using Bush’s last budget as a baseline. That gives us a grand total of -$294 billion in spending as part of the normal, discretionary budget process.

Money for the bailouts of Fannie Mae and Freddie Mac as well as for Wall Street and the auto companies was approved and signed by Pres. Bush, though some of  it was disbursed by Pres. Obama. Because we are dealing with money signed into law by Pres. Obama and not money simply spent under his presidency (which would be unfair and would open up a huge can of worms I am not prepared to go into) we will not count their costs against Obama.

There have also been several other measures that were passed in order to aid the economic recovery. These totaled (table 1) $93 billion in 2010 and in 2011 they will total $270 billion. The recovery measures for 2011 were passed as part of a tax cut package extending the Bush tax cuts, which were set to expire at the end of 2010. Now, Obama worked out this deal with the Republican Congressional leaders who provided many of the votes for the package, so its not really fair for Republicans to brandish this package as a weapon against Obama on the deficit, but in looking at the package from a non-partisan stance, its clear that it has Obama’s signature on it, so it will count against him. Extending the Bush tax cuts will cost $375 billion in 2011.  After slicing the appropriations for 2011 in half (the year is half over) Obama signed into law -415.5 billion in tax cuts and government spending to aid the recovery.

In total, the stimulus program has cost -$654 billion, the Affordable Care Act has gained us +$11.5 billion, Obama has raised discretionary spending by -$294 billion and extra measures to aid the recovery have cost us -$415.5 billion to date, for a grand total of $1.352 trillion in spending signed into law by President Obama to date. That means Obama is “responsible” for, at most, 39 percent of the $3.45 trillion in debt accumulated since he took office. So, perhaps the lines on Michelle Bachmann’s famous graph should only be two-fifths as tall as they are.

But, (I’m sure some of you are thinking) how is  this possible? How has our deficit  gone up so much in the past two years, but yet Obama  has signed bills accounting for less than half of the balance? The thing about recessions is that during recessions, people start paying less in taxes because they have less money total, so they have less taxable income. There are also more people who rely on government programs like unemployment checks, food stamps and Medicaid during recessions. (As Paul Krugman explains) Drawing in less in taxes and giving out more in automatic government aid obviously increases the deficit, but since these changes happen automatically (Obama didn’t sign them into law) and we can’t blame the recession on Obama, he cannot be blamed for their effect on the deficit. (Note: All expansions of unemployment assistance beyond the usual 26-week period are counted against Obama, even though in the past all Presidents have expanded unemployment during recessions)

*Fair disclaimer: This analysis does not measure the cost of interest on the borrowing initiated  by Obama, which would tend to raise his total. Nor does it take into account the increased economic activity that undeniably resulted from the spending and tax breaks he signed into law, which would tend to lower his total.*

For a final primer on how our debt happened and what will drive it in the future, here’s Ezra Klein.