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.
Your broad brush once again obfuscates and your straw conservatives are not worth the huff and puff that blows them away. (How’s that for metaphorical prelude?) Well, seriously, your rhetoric presupposes that President Obama’ opponents are supporters of George W. Bush, who was consistently berated by conservatives for his failure to control domestic spending, just as he was berated by a wide array of Americans (including a number of conservatives) for the explosion of military spending in Iraq. By the end of Bush’s administration, almost everyone was glad to see him go. And hardly anyone–even among the Tea Partiers you detest–would deny that President Obama inherited a dreadful economic mess. Duh. But President Obama is hardly cleaning it up by adding in 15 months more debt than Bush added in 8 years. Mr. Obama has raised the debt burden–the ratio of the national debt to GDP–by more that Ronald Reagan did during his 8 years in office. His ten-year budget projects a gross debt exceeding 100 percent of GDP. The higher the debt burden, the slower the economic growth. Sure, businesses still function under the weight of heavy taxes. Individuals make the best of things. Geez, since we all make such poor choices when the government allows us to keep more of what we earn, why not take it all away? This is close to what will be required if the present anti-growth policies continue. (Balancing the projected budget in 2015 would require a 43 percent increase in everyone’s income tax.) Your straw conservatives might believe that everything would be fine if their most disliked government agency would vanish. I do not know any actual conservative who thinks such a thing–though I do not doubt that one exists somewhere. As much as you pooh-pooh supply side economics and dismiss Tea Partiers as bumpkins, you should listen to them once in a while. Do you think the economy would be in better shape–now or in 2015 or in 2020–if Obamacare, that monster of social engineering, had actually made it through Congress? Party on, I say.
I’m not sure why you choose to call them straw conservatives, Joel. They’re the gang that dominate the Fox News and talk radio scene, so you must be familiar with them.
I interpret your use of that term to mean I’m not really in touch with the true conservatives out there. But if you equate true conservatives with the Tea Baggers, we really have a disconnect. Most tea baggers would be shocked by the facts contained in my column, because they don’t know what they’re ranting about.
As for the Obama deficit, I understand your angst/anger. But I still claim it’s misdirected. We were in good shape before Bush; we’re in lousy shape now because of Bush. You may disagree with Obama’s medicine, but he did what basic Keynesian economics demanded, to wit: infuse the economy with capital in the form of tax breaks and government spending. It’s the same plan FDR used to fight the Great Depression and the same essential method that Nixon used in the early 1970s, so I think we can call it a traditionally non-partisan approach.
As for the healthcare plan, what is it exactly that you so hate about it? It isn’t a government-run plan, it doesn’t contain a government option, and it mandates private insurance coverage for another 30 million customers. Sounds pretty capitalistic to me. Please tell me what I’m missing, and please be specific. Otherwise, I’ll have to put you down as a “straw conservative” or, worse yet, a tea bagger. But, to answer your question, I definitely think the economy would be in better shape in 2015 if we reformed our health care/health insurance along the lines of the House bill. (The Senate bill is pretty much a wash in my opinion.)
Oh, and one final point: don’t make light of my observations about the results of the Clinton tax increase and the Bush tax cuts. Those results aren’t just a casual little detail to slough off as if they don’t mean much. They put the lie to supply-side economics and Bushonomics, which for a true conservative should be pretty important evidence.
Ed,
Your assertion that Bush 43’s tax cuts caused a deficit are simply untrue. It is an oft repeated claim, taken as gospel by the the gullible left. After George Bush Jr.’s 2003 tax cuts, federal revenue increased each year thereafter peaking in 2007 at the highest amount of federal tax receipts ever recorded. These are numbers easily found from the OMB.
To make it simple for you, the $2.568 Billion collected by the U.S. Government in 2007 was an all time record, and it was the 4th straight year of revenue increases AFTER the tax cut was enacted. Yet we still had a deficit of $162 Billion that year. Why? Think for a moment. Give it some time… here it comes…. SPENDING.
So when someone says that George Bush’s tax cuts contributed to the deficit, that’s not true in any possible way. When our President says it, and he knows the actual truth, then he’s lying. Why would he do that?
Another important point. You refer to Obama’s predecessor’s “disastrous fiscal management”. By 2008, the mortgage meltdown was taking effect and hit the Federal government. George Bush’s last fiscal year, (2008) therefore, was -$467 Billion. For 4 straight years prior to that, federal revenues grew and peaked at a record $2.5 Trillion leaving a deficit of $162 Billion. This is a number that would be nirvana now.
The 50 year avg. deficit as a % of GDP is 2.044%. In 2007 it was 1.7%
That is what you call disastrous?
The facts contradict your shallow talking points.
Even if you blame the mortgage meltdown on George Bush (which would be dishonest on it’s face), and blame the current deficits on him (once again dishonest), wouldn’t you ask “how are Obama and the Democrats going to get us back to the good old days when we enjoyed record revenues and deficits of only $162 Billion?