The emerging narrative in political circles is that the White House has a deficit problem. Glenn Beck, over at Fox News,
insists that Obama is "spending us into oblivion."
Politico called the recent round of job-stimulus appropriations a "spending binge."
Sen. Judd Gregg (R-N.H.)
deemed this an era of "fiscal recklessness and irresponsibility," the extent of which is "shocking to the American taxpayer."
The drumbeat is loud enough to put Democrats on notice.
The
president has increasingly discussed the need to get the deficit under
control in recent speeches. And in Congress,
a proposal to set up a bipartisan commission to force deficit reduction is gaining steam among the party's more conservative members.
All of which may be vital, say budget analysts say. But the hysteria
over the deficit misses a fundamental point:
the country's fiscal
problems largely aren't due to Obama but rather his predecessor.
A forthcoming study by the Center on Budget and Policy Priorities
concludes that the $1.4 trillion annual deficit run by the government
has little to do with current White House policies and much to do with
George W. Bush's actions.
"What we have looked at were several major contributors to the
deficit: the tax cuts between 2001 and 2003 (on the assumption they get
extended in 2010), the cost of the wars in Iraq and Afghanistan and the
effects of the recession as well as the legislative response to the
recession," James Horney, director of federal fiscal policy at the
Center, told the Huffington Post.
"When you take those things into
account -- in other words, if we hadn't enacted the tax cuts, had the
wars, if we hadn't had the recession and needed the legislation to deal
with those problems -- the deficits are much, much lower. And basically
none of those represent Obama's policies. He didn't run saying he
wanted to pass a stimulus to deal with the recession or that he wanted
to continue the war in Iraq or escalate [to this extent] in
Afghanistan. He inherited these issues once he took office."
"Now we still have a big budget problem in the long run," Horney
added. "It is not inappropriate for people to say we have to deal with
that. And it is not inappropriate for them to say Obama is president
and has the responsibility to deal with this. But it is not appropriate
to say that Obama's policies have contributed to the deficit problem."
Horney said that the Center on Budget and Policy Priorities'
analysis will be released in the next few weeks. But already, there is
data available to supplement its findings. In mid-November, the
Democratic-leaning Center for American Progress
put together an analysis
of its own, in which it concluded that the so-called "Obama spending
spree" paled in comparison to the checks written by Bush (see a graph
from CAP's report below).
"It's true that spending in 2009 was much higher than it was the
previous fiscal year, by about $602 billion, excluding payments on the
national debt (which actually declined in 2009 because of low interest
rates)," wrote Michael Linden, an associate director for tax and budget
policy at the Center. "But it turns out that a huge chunk of that
increase actually happened before President Obama took office.
In fact,
fully 41 percent, or $245 billion, came in the form of the Troubled
Asset Relief Program and the rescues of Fannie Mae and Freddie Mac,
actions taken in the fall of 2008 under President George W. Bush.
As for the deficit that conservatives decried, Linden concluded that
it was the recession, not Obama, that was to blame. In 2009, federal
tax receipts were $419 billion below 2008 levels -- the largest decline
from one year to the next in seven decades. "The overall cost of the
decline in tax revenues was four times larger than the cost of Obama's
initiatives," wrote Linden.
The decline of tax revenues due to the recession may not be a
development tied to Obama. But it has become a perplexing problem for
this administration.
The White House has raised spending levels by roughly $600 billion
in FY2009 -- almost exclusively through temporary programs such as the
stimulus -- in order to spur economic growth and increase that revenue
base.
But spending money to make money can be a costly venture in the
short run, especially as the recession is prolonged. Unemployment
benefits that used to expire after six months, for instance, have been
extended by Congress at a heavy but morally defensible cost. And even
when GDP rises, the government is still operating off a largely reduced
revenue stream, complicating its efforts to pass pieces of domestic
legislation.
Rightardia comment:
Once the Affordable helath care Act of 2009 passes, the Obama administration needs to bolster employment and change the tax code to pay down the budget deficit. A Keep It Simple Stupid (KISS) approach would be to rescind all of the tax cuts form the Bush administration that affect people making more than $250,000 per year.
Bloomberg notes:
Americans want their government to create jobs through spending on
public works, investments in alternative energy or skills training for
the jobless.
They also want the deficit to come down. And most are ready to hand the bill to the wealthy.
A Bloomberg National Poll conducted Dec. 3-7 shows two- thirds of Americans favor taxing the rich to reduce the deficit.
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