The Obama administration is taking all kinds of heat these days for the one and a quarter TRILLION dollar budget deficit it has just proposed for fiscal year 2011. (Actually the projected deficit is a tad higher than that, but what’s a trifling 17 billion or so among friends?)
Figures accompanying the budget that were released from the Office of Management and Budget provide a more significant and meaningful point of departure for any serious discussion about the deficit and how difficult it will be to get it under control.
Here are a few “savings” that would be realized by taking steps variously proposed/demanded by the president’s staunchest political foes (to include the “tea baggers,” even though most of their rhetoric is of the know-nothing variety).
Cutting the National Endowment for the Arts to zero funding, i.e., closing it down completely, would save less than $500 million dollars. Remaining deficit – $1.267 trillion, exactly where we started.
Completely disallowing Congressional earmarks, meaning absolutely no special projects (such as road improvements or research grants for any of the 435 Congressional districts in the country) would save $10 billion, reducing the deficit to $1.257 trillion.
Eliminating all welfare payments of any kind (a big talking point from the right) would cut the deficit by all of $29 billion, reducing it to $1.238 trillion.
Cutting all foreign aid (another point some on the right push) would save $41 billion.
What about the big bugaboo that Republicans have long hated, the Department of Education? Closing it down would save $94 billion, less than eight percent of the total deficit.
Stopping both wars (Iraq and Afghanistan), a favorite idea from the left, would cut the budget by $135 billion, a little over ten percent of the total deficit.
Halting the Recovery Act (a.k.a. the stimulus bill) in its tracks and returning all unspent money and all unrewarded tax cuts to the federal treasury would net $258 billion, not quite 20 percent of the total deficit.
Ceasing all Medicaid benefits (thereby leaving those living in poverty without healthcare) would save $271 billion.
And so it goes. The bottom line of this little review of the nation’s fiscal plight is that there is no easy solution. In fact, even if all domestic spending, other than entitlement programs (Social Security and Medicare being the principal ones), was eliminated, the result would only cut the deficit by $530 billion, not even half of the total.
But the shocks keep coming, especially for those on the right, because let’s remember what the fiscal state of the country was when George W. Bush became president, just nine years ago. At the time, the federal budget had been in the black for three straight years. Sound unbelievable? You betcha, especially when you add in the fact that the economic boom that created that very nice condition had occurred in the wake of the 1993 Clinton tax increases that were enacted with every Republican member of Congress kicking and screaming about how they would destroy the economy and lead to absolute ruin.
Turns out, business enterprises still function with higher tax rates imposed on them, and individuals still seek ways to improve their personal income situation even when they are taxed at higher rates. And it also turns out (as witness the results of the Bush tax cuts) that those same business enterprises don’t necessarily function as well even when allowed to keep more of what they make, and individuals don’t necessarily make the wisest decisions even when they are taxed at lower rates.
In other words, throw all that supply side economic theory in the trash. It isn’t worth the paper napkin Arthur Laffer wrote it on.
Instead, let’s consider what Obama inherited and how the spending decisions he has made were essentially dictated by the disastrous fiscal management of his predecessor. Or, put another way, how did we get from there (fiscal year 2000, with the entire national debt projected to be paid off in ten years) to here (fiscal year 2010, with a national debt that has grown by over eight trillion dollars in a single decade)?
Two things happened under the Bush presidency to explode the national debt. The first was his signature economic initiative, the massive tax cuts he pushed through Congress in his first year in office. That decision immediately reversed the annual budget surpluses (of approximately $250 billion) that had been occurring and were projected to continue and created budget deficits of a similar amount.
The second thing was the Bush decision to go to war in Afghanistan (arguably justified) and, shortly thereafter, Iraq (essentially unjustified) without seeking increased revenues from any source to pay for either or both (completely unjustified and wholly irrational). In fact, in addition to not paying for the wars, Mr. Bush and his cadre of advisors insisted on keeping the funding of the wars “off the books,” meaning they didn’t even account for them in annual budget requests to Congress. (Congress didn’t object, since having to deal with the funding sources for the wars would have led to talk of tax increases, heaven forbid!).
Those decisions (the tax cuts and the unfunded wars) account for approximately half of the current deficit as well as much of the buildup of the national debt.
The rest is directly attributable to the recession/financial crisis that Mr. Obama inherited and that was the result of the laissez-faire economic policies championed by Mr. Bush. In other words, in case you haven’t been keeping score, the current deficit is due entirely to Bush policies and mismanagement.
Ah, you say, but it’s Obama’s budget that is so heavily in the red. True, and Obama alone pushed for the $787 billion stimulus bill and supported the Bush administration’s Trouble Asset Relief Program (TARP) to save the nation’s financial industry. Those measures can be legitimately debated, but any debate on either must honestly factor the likely consequences of having enacted neither.
Yes, the deficit would have been smaller without that infusion of federal spending, but so, ultimately, would the nation.