The Truth About the Deficit
Published: February 6, 2010
When the White House released its new budget last week, including more spending to create desperately needed jobs, Republican leaders in Congress denounced President Obama for driving up the deficit and demanded that the Democrats halt their “reckless” ways.
The deficit numbers — a projected $1.3 trillion in fiscal 2011 alone — are breathtaking. What is even more breathtaking is the Republicans’ cynical refusal to acknowledge that the country would never have gotten into so deep a hole if President George W. Bush and the Republican-led Congress had not spent years slashing taxes — mainly on the wealthy — and spending with far too little restraint. Unfortunately, the problem does not stop there.
The Republican amnesia and posturing are playing well on the hustings, where Americans are deeply anxious about the economy and fearful of losing their jobs and homes. Far too many Democratic lawmakers are losing their nerve.
Americans should be anxious, for reasons including the huge deficit. But the cold economic truth is this: At a time of high unemployment and fragile growth, the last thing the government should do is to slash spending. That will only drive the economy into deeper trouble.
None of this means that the politicians — from either party — are off the hook. They will soon need to make hard decisions about how to reduce the deficit. But more posturing and sniping is not going to make the economy better or solve the deficit problem. President Obama has called on the Republicans to join a bipartisan commission to help make those tough decisions, but they have been resistant to the proposal.
•
We fear the demagoguing is not going to stop, especially with Congressional elections this November. As the budget debate plays out, here are some basic facts about the deficit that Americans need to consider:
HOW DID WE GET HERE? When President Bush took office in 2001, the federal budget had been in the black for three years, and continued surpluses were projected for a decade to come.
By the time Mr. Bush left office in early 2009, the government had run big deficits for seven straight years, and the economy was on the brink of another Great Depression. On Jan. 7, 2009 — two weeks before Mr. Obama was inaugurated — the Congressional Budget Office issued new budget estimates showing a fiscal year 2009 deficit of well over $1 trillion.
About half of today’s huge deficits can be chalked up to Bush-era profligacy: mainly cutting taxes deeply while borrowing to wage two wars and to enact the Medicare prescription drug benefit — all of which Republicans supported, virtually in lockstep.
The other half of recent deficits is due to the recession and the financial crisis.
To avoid a meltdown, the government — under President Bush and President Obama — rightly decided it had no choice but to spend hundreds of billions of dollars to bail out banks and car companies and to stimulate the economy. That prevented a very bad situation from becoming much worse, but as the recession dragged on, hundreds of billions in tax revenues have also dried up.
As for why the financial system and the economy imploded, President Bush and Congress deserve much of the blame for their devotion to debt-driven growth and blind deregulatory zeal — although on deregulation, President Clinton and his team (some of whom are back in the White House) were also complicit.
Were it not for those multiple calamities, budget deficits today would be negligible. That does not mean we would be off the hook. An aging population and relentlessly rising health care costs will hit the country with even deeper deficits as the baby boomers retire. Politicians need to pass health care reform now and start thinking seriously about Social Security and tax reform.
So what are the immediate fiscal lessons here? The first lesson is that spending without taxing is a recipe for huge deficits, and that running big deficits when the economy is expanding only sets the country up for bigger deficits when the economy contracts. The second lesson is that once a deep recession takes hold, slashing government spending is not going to solve the problem. It will only make it worse. CONTINUED
Editorial – The Truth About the Deficit – NYTimes.com
Viewers are encouraged to subscribe and join the conversation for more insightful commentary and to support progressive messages. Together, we can populate the internet with progressive messages that represent the true aspirations of most Americans.
