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Blame Bush and the Recession

June 10, 2009

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?

 

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4 Comments
  1. June 10, 2009 3:31 pm

    What is interesting in the chart narrative is the lost effect of 9/11 and the continued effect of that event (curious how did defense spending change from pre 9/11 to now?.

  2. c matt permalink
    June 11, 2009 9:45 am

    All rather academically intersting. But inherited or not, it is irrelevant. No one forced O to become president – he took the job voluntarily. The relevant issue is what is O doing/going to do about it now. Are his policies going to alleviate or exacerbate the problems?

  3. June 11, 2009 10:31 am

    Are his policies going to alleviate or exacerbate the problems?

    I believe trying to rein in the deficit would have made the recession worse. I think the stimulus was the right response to teh worset downturn in half a century. It would have been nice had Bush not screwed up so much, but you play the cards you are dealt.

  4. Magdalena permalink
    June 11, 2009 10:57 am

    Here in the rust belt, the stimulus has stimulated nothing but a lot of resentment so far. I don’t know what it’s like in other parts of the country, but here we’ve gotten a lot of promises and zero delivery.

    Bush’s acolytes made these excuses too, post 9/11. That he inherited a decrepit intelligence and anti-terroism program from Clinton and that’s why they didn’t stop the hijackings before they happened. And he did get a lousy system from Clinton. But so what! On 9/11/2001 Bush was about 8 months into his term. Obama is coming up pretty soon to the 6 month mark. At a certain point leadership means owning what’s gone right AND what’s gone wrong.

    The ugly truth is that commerical real estate is on the edge and about to go through what we saw with retail. Absolutely devestating, and I wonder why no one’s talking about it. I wonder what the spin will be on that second disaster? (Here in OH we consider his ineptitude w/ regard to Detroit disaster #1).

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