Whose Deficit Is It, Anyway?

June 11, 2010 at 12:57 pm

A number of policymakers and pundits — most recently House Minority Leader John Boehner — blame Obama Administration policies for the large deficits we confront.  But the numbers tell a very different story.

As my colleague Jim Horney and I have explained, the causes of today’s large deficits lie largely outside the Administration’s control.  Two weeks before President Obama took office, the Congressional Budget Office (CBO) projected that the 2009 deficit would exceed $1 trillion.  CBO also warned that if we continued the policies the Obama Administration inherited, including the Bush tax cuts and funding for operations in Iraq and Afghanistan, deficits would average over $1 trillion a year in 2010-2019.

As the chart shows, the recession and the federal government’s responses to it under President Bush (e.g., the financial rescues) and President Obama (e.g., the Recovery Act) have certainly boosted deficits.  But those factors are temporary and will fade in importance.

For example, the Recovery Act and related economic-recovery measures will add $1.1 trillion in deficits over the 2009-2019 period (including increased interest payments on the national debt).  But most of that cost will occur in 2009-2011 — just when the economy is weakest.  Running large deficits when the economy is weak is the right policy.

In contrast, key policies enacted in the Bush Administration will continue to harm the budget outlook throughout the next decade. For instance, the Bush tax cuts and the wars in Iraq and Afghanistan will account for nearly $7 trillion in deficits in 2009-2019.

Rep. Boehner and others are wrong to let the Bush Administration off the hook.  If we hadn’t enacted unaffordable tax cuts, fought two wars on borrowed money, and created an expensive new drug benefit as part of Medicare without paying for it, we’d be in much better shape.

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More About Kathy Ruffing

Kathy Ruffing

Kathy Ruffing is a Senior Fellow at the Center on Budget and Policy Priorities, specializing in federal budget issues.

Full bio | Blog Archive | Research archive at CBPP.org

16 Comments Add Yours ↓

Comments are listed in reverse chronological order.

  1. 1

    It is true that the CBO projected a 2009 budget deficit of more than $1 trillion just before Obama took office… The TARP bill had just been signed into law… A big chunk of that $750 billion went into the 2009 deficit.The same pre-Obama CBO projection had the post-TARP deficit dropping rapidly.

    Here’s a comparison of the CBO’s January deficit projections from 2009 and 2011…

    CBO Deficit Projections (Billions)
    Jan-09 Jan-11
    2008 ($455.00) ——–
    2009 ($1,186.00) ——–
    2010 ($703.00) ($1,294.00)
    2011 ($498.00) ($1,480.00)
    2012 ($264.00) ($1,100.00)
    2013 ($257.00) ($704.00)
    2014 ($250.00) ($533.00)
    2015 ($234.00) ($551.00)
    2016 ($272.00) ($659.00)
    2017 ($234.00) ($617.00)
    2018 ($188.00) ($610.00)
    2019 ($235.00) ($696.00)
    2020 ——– ($739.00)
    2021 ——– ($653.00)

    http://www.cbo.gov/ftpdocs/120xx/doc12039/BudgetTables.pdf

  2. Mark #
    2

    I find it funny that this site produces this link, ignores all the spending below the line and places allt he blame squarely on Bush. And when people ask what its like if the Bush cuts expire, you have to privately get the info (because they want Bush to look as bad as possible to the public). Ridiculous article. I’d love to see this graph with Social Security/Medicare/Aid/Safety net/etc/Obamacare/etc represented because itd dwarf EVERYTHING else. Should we all be blaming FDR for ballooning SS costs? If you say no, then you must also be unable to blame Bush for his policies after his presidency. Consistent logic is stubborn, especially when you are blinded by a Bush-bashing agenda.

  3. Darren #
    3

    This chart is incredibly well done. I would love to see a post detailing the scenario of tax cut expiration as well. It is assumed that the tax cuts will not fully expire, and so I also would love to see a post using this visualization detailing a plan that lets the tax cuts expire only for the demographics that Obama tended to stump on (e.g. households > 300K).

  4. 4

    Thank you for this excellent — and timely — resource.
    A humble thought:
    Based on my experience in both business and teaching, for every complaint / question / challenge articulated, there are between 10 and 20 others that are not voiced. (In percentage terms, much higher, if the student body / clientele you’re dealing with at any given moment are in 2-digit range, as mine have usually been.)
    We’ve got two people in this thread asking for an equivalent projection chart showing what happens if the Bush cuts aren’t extended. This suggests there might be a sufficient number of people not asking, but happy to see such results.
    And since it was indicated that somebody would get back to these folks with a reply, if the work is to be done anyway (or has already been), is there any downside to posting the results here for everyone to see?
    (And if that’s already happened, would it be possible to provide either an update for this post, or a link to the followup?)
    Many thanks to you and all yr colleagues for doing this crucial work.
    cheers
    smartalek

    ps: found my way here by following a link at Washington Monthly’s “Political Animal” blog — but not from a Steve Benen post there. It was a link provided by one of the regular commenters there, in a comment posted in a thread on 7/12.
    It would of course have gotten much wider exposure had it been mentioned by Mr Benen in his front-page post. Benen’s generally seemed to be pretty good about giving credit where it’s due. (Of course this could be completely untrue; he could be giving credit to only one in every eight-hundred cases. How would I know?)
    But on the assumption that he would have, is he on an e-mail distribution list for all your postings and/or the work of CBPP?
    And, while I’m at it, HuffPo, DailyKos, atrios, digby, FDL, pandagon, DU, Salon, and all the other usual suspects?
    If there’s anything the lefty blogosphere needs, it’s good, verifiable facts, from 1st-hand researchers and w/reference to primary sources, clearly presented and explained, with which to support their various posts, arguments, responses to trolls, etcetc

  5. Paul B #
    5

    I would also like to see a version of this that assumes the Bush era cuts expire. Thanks.

    • CBPP #
      6

      One of our experts will get in touch with you.

  6. James T. Clark #
    7

    Good info (got here through Kos). I don’t understand this, though:

    >the Bush tax cuts and the wars in Iraq and Afghanistan will account for nearly $7 trillion in deficits in 2009-2019.

    Aren’t the tax cuts expiring? Does this assume the cuts don’t expire?

    • 8

      In fact, as explained in the report, we developed our “current-policy” projection using CBO’s latest ten-year projections, published in March 2010, with several adjustments to reflect what will happen if we continue current tax and spending policies. Notably, we included the budgetary effects of continuing the 2001 and 2003 tax cuts that are scheduled to expire after 2010, renewing certain other so-called “tax extenders” such as the research and development tax credit, and continuing relief from the Alternative Minimum Tax (AMT). (We also assumed that the Congress would cancel scheduled cuts in Medicare physician payments and would continue to fund operations in Iraq and Afghanistan during an orderly phasedown.) Please see the technical note for a very clear explanation of these adjustments. It begins on page 6 of http://www.cbpp.org/files/12-16-09bud.pdf.

      We’re in good company. See the box on page 5 entitled “Many Analysts and Institutions Adjust CBO Baseline to Present More Realistic Picture” in http://www.cbpp.org/files/4-5-10bud.pdf.

      We don’t advocate extending the tax cuts, especially those that benefit upper-income taxpayers; but we think it’s important to show the consequences of continuing these and other current budgetary policies.

  7. Jonathan White #
    9

    @Jake Rau,

    There’s a difference between the National Debt (your point) and the Budget Deficit (this article). I’m Just Sayin!!!

    jw.

  8. Barry #
    10

    Jake, debt and deficit are two totally different things. Just say’n.

  9. Jake Rau #
    11

    News Flash: http://www.usdebtclock.org/

    That large red number in the top left corner may in fact be larger than 1.5 trillion.

    Just say’n.

    • Mr. Price #
      12

      The large red number in the top left of the page mentioned by Mr. Rau ($13 trillion) is U.S. Debt, which is a different value than the Federal Deficit ($1.4 trillion), which is the value the article was addressing.
      I’m not saying that any of these numbers are pocket change, I’m not insinuating that you don’t know the difference between deficit and debt or anything like that — I’m just pointing out for the sake of clarification that the article is, in fact, correct when it lists $1.5T as a ballpark peak deficit value.

  10. Charles gerut #
    13

    What does this chart look like if the Bush tax cuts for those above $250K are eliminated in 2011?

    • CBPP #
      14

      Thanks for your question, Charles. We will send you some information over email.

      • Dave Shopiro #
        15

        Please provide me with this information as well.

        Thank You,
        Dave

        • CBPP #
          16

          Dave, we’ll send you something.



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