On debt and deficits

The costs of two presidencies, juxtaposedJames Fallows of The Atlantic calls it, “The Chart That Should Accompany All Discussions of the Debt Ceiling“:

It’s based on data from the Congressional Budget Office and the Center on Budget and Policy Priorities. Its significance is not partisan (who’s “to blame” for the deficit) but intellectual. It demonstrates the utter incoherence of being very concerned about a structural federal deficit but ruling out of consideration the policy that was largest single contributor to that deficit, namely the Bush-era tax cuts.

An additional significance of the chart: it identifies policy changes, the things over which Congress and Administration have some control, as opposed to largely external shocks — like the repercussions of the 9/11 attacks or the deep worldwide recession following the 2008 financial crisis. Those external events make a big difference in the deficit, and they are the major reason why deficits have increased faster in absolute terms during Obama’s first two years than during the last two under Bush. (In a recession, tax revenues plunge, and government spending goes up – partly because of automatic programs like unemployment insurance, and partly in a deliberate attempt to keep the recession from getting worse.) If you want, you could even put the spending for wars in Iraq and Afghanistan in this category: those were policy choices, but right or wrong they came in response to an external shock.

The chart comes from Teresa Tritch‘s editorial for The New York Times:

A few lessons can be drawn from the numbers. First, the Bush tax cuts have had a huge damaging effect. If all of them expired as scheduled at the end of 2012, future deficits would be cut by about half, to sustainable levels. Second, a healthy budget requires a healthy economy; recessions wreak havoc by reducing tax revenue. Government has to spur demand and create jobs in a deep downturn, even though doing so worsens the deficit in the short run. Third, spending cuts alone will not close the gap. The chronic revenue shortfalls from serial tax cuts are simply too deep to fill with spending cuts alone. Taxes have to go up.

The Obvious Point of the Day: Remember this chart whenever you hear Republicans complaining about President Obama and the deficit.

The thing is that we hear this in cycles. What is good for the Republican ought to be forbidden the Democrat. Over and over again, when Democrats have power, we hear the Republican lament about the deficit, debt, and whether or not we can afford to do something—usually, the question is whether or not the government can and should be useful to its citizens.

In that sense, the chart recalls the old punch line that the Republicans will tell you what’s wrong with government, get elected, and then prove it.

Between the Bush-era tax cuts, which stripped any hope of actually paying off the national debt and demonstrated that the GOP has no real intent of doing so. They need this demon to raise, else they have nothing else.

But we should always remember just how the U.S. got into this mess, and between Bush’s tax cuts and two wars fought essentially with borrowed money, there really isn’t much question.

And if we want to add in the fruits of capitalism—i.e., meltdown and TARP, the need for economic stimulus, &c.—the indictment only resolves more clearly.

A tip of the hat and many thanks to Polly for pointing out the chart.

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