A Water Carrier Too Far

Here is some “wisdom” for you courtesy of Jonathan Chait: What Caused The Deficit? A Reply To Megan McArdle

One of the most effective Republican themes of the last two years has been blaming President Obama for the explosive growth in the budget deficit since 2009. The accusation that "Obama's spending binge" has blown up the deficit has discredited any further fiscal stimulus, and helped encourage Republicans to use the debt ceiling as a hostage. The White House fought back with a chart showing that its policy changes contributed only a small fraction to the worsening deficit picture:

The chart the White House provides shows that, indeed, when you add up the seven years worth of deficits from the Bush years it is a larger number than the deficits Obama has racked up in three years.

OK, lets look at the deficits from 2001 to 2011.

 

And here are the raw numbers:

Federal Deficit
Fiscal Years 2001 to 2011

Year	GDP-US $ billion	Federal Deficit -fed $ billion
2001	10286.2	-127.89	a
2002	10642.3	158.01	a
2003	11142.1	377.81	a
2004	11867.8	412.90	a
2005	12638.4	318.59	a
2006	13398.9	248.57	a
2007	14077.6	160.96	a
2008	14369.1	458.55	a
2009	14258.2	1412.69	a
2010	14660.4	1293.49	a
2011	15079.6	1645.12	b
Legend: a - actual reported b - budgeted estimate in US fy12 budget

The average yearly deficit for this entire time period is $578bn. 

The average yearly deficit for the Bush years (2001-2008) is $251bn.

The average yearly budget deficit for the Obama years (2009-2011) is $1450bn.

OK, lets try and screw over the Bush numbers. Let’s throw out 2001’s budget surplus saying that was Clinton’s doing and, while we are at it, let’s take 2009 out of the Obama column and give it to Bush (since everything bad on God’s green earth is Bush’s fault anyway.) What do the numbers look like then?

The average yearly deficits for the Bush years (2002-2009) is $433bn.

The average yearly deficits for the Obama years (2010-2011) is $1469bn.

OK, but maybe that doesn’t tell the whole story. Maybe it was all those Bush tax cuts which acted like a poison pill which is only being felt now!

Alright, the Bush tax cuts were implemented between 2001 and 2003, and the Obama administration claims it cost the country $3000bn added to the deficit, or a yearly average of $375bn between 2004-2011.

Let’s see if such a story seems likely (data here.)

From 1996-2000 (the second Clinton term, when all was right with the world and everyone ate rainbows for dinner!) the federal government’s take via income taxes increased at the average yearly rate of  $73bn. Between 2001 and 2003 (when the Bush tax cuts were still in process) the average yearly tax decreased by an average of $73bn, as the recession took its toll. Between 2004 and 2008 after all of the tax cuts had been fully implemented, the average yearly take of the federal government increased by $90bn a year.

Remember, the Obama administration is claiming without the Bush tax cuts the yearly increase for the feds would have averaged not $90bn but instead $375bn. I’m sorry, but on what planet does that seem plausible?

Let’s do an experiment here. Let us pretend there are no such things as recessions, and let us further stipulate the increase in revenues of the Clinton years are a constant of economic reality. So, we will compare this fictional “Clinton number” with the real Bush numbers and see how close we can get to the $3000bn number uncritically accepted by Chait.

Before Bush tax cuts:

2001: C# - $1284bn  B# - $1145bn (+139)

2002: C# - $1357bn B# - $1006bn (+351)

2003: C# - $1430bn B# - $925bn (+506)

After Bush tax cuts:

2004: C# - $1503bn B# - $998bn (+505)

2005: C# - $1576bn B# - $1205bn (+371)

2006: C# - $1649bn B# - $1397bn (+252)

2007: C# - $1722bn B# -  $1533bn (+189)

2008: C# - $1795bn B# -  $1450bn (+345)

Do, in this completely unrealistic scenario where recessions do not exist and revenue growth is as constant a force as gravity, Bush comes up only $2658bn short all together.  The Obama administration and, evidently, the water carrying Jonathan Chait want you to believe the “realistic” number should be $3000bn.

That’s nuts.

Look, the recession has been bad and the recovery not so hot. Obama has every right to say, “Hey, we are really working under some economic constraints here.”  He has the right to say it because it’s true. However, the budgets he has submitted are not examples of constraints placed upon him by George Bush, they are his policy choices. To claim otherwise is simply dishonest.

(Post written using Windows Live Writer. I’m curious to see how this works!)