Understanding Recent US Deficits
Posted by cann0nba11 on July 6, 2013
A popular talking point from the left lately has been “Deficits are shrinking! Republicans are wrong!” Rachel Maddow’s blog is just one recent example. And, mathematically speaking, yes the deficits are decreasing. And thank God they are. But this story requires some context.
The Maddow blog shows a brief history of the deficit. I prefer a bigger picture view to help people understand how bad things have gotten and why this Democratic rally is not as exciting as they would like you to believe.
I created this using whitehouse.gov historical deficit tables (click on it to see a larger version).
- Presidents are listed at the top, red for Republican, blue for Democrat.
- The tall colored columns indicate Congressional control: red for Republican control of both houses, blue indicates Democratic control of both houses, and purple indicates a split Congress.
- The red arrows show the trend of the deficit for the duration of each president’s tenure.
- The green portion of the bar for 2009 is the $700B Hank Paulson directed TARP bailout.
- Side note: The deficit for 2012 under President Obama, this single year of over spending, was more than the financial cost of ten years of those hated “Bush wars we can’t afford.” Please, let’s remove that last quote from our vocabulary.
To me a couple of things jump out of this chart. First is the magnitude of governmental spending that kicked in after Democrats took over Congress in 2006. Even without TARP, the deficit would have reached $700B, nearly twice the amount of the worst deficit under President Bush. TARP was voodoo, a scare tactic that gave one man (Paulson) incredible power. And, funny thing, the $700 billion TARP figure was not even based on any analysis or facts. A Treasury spokeswoman told Forbes magazine “It”s not based on any particular data point, We just wanted to choose a really large number.” How’s that for a quality decision making methodology? Glad to see our leaders are sticking their wet fingers in the air and making stuff up.
Second, look at the chart under the GW Bush years. After the initial economic effects of the dot-com crash and 9-11 and the start of a new war, the deficit under Bush was trending back toward zero. But an unpopular war ushered in a Democratically controlled Congress in 2006, and the tax & spend festival got underway. And, the housing bubble that was started in the 70s by Jimmy Carter, came crashing down. These are not problems Bush created, he was just in office when they happened. I’m not defending GWB, (I didn’t even vote for him in either election), but the facts are not debatable. He didn’t cause the 9-11 attacks 8 months into his first term (shut up Truthers), he didn’t cause the dot-com bust, and he didn’t create the housing crisis. In fact, Republicans started raising red flags about the Fannie/Freddie crisis as early as 2001, the first year of the hated Bush administration.
Third, the rate of decrease in the deficit under Obama is welcome, but should also be viewed with some perspective. Think of it this way: imagine if you gained 50 pounds for three or four year in a row. Then in year five you only gained 40 pounds, and in year six you only gained 30 pounds. From a short term perspective, “Hooray for you, you are decreasing your physical deficit rate.” But you are still so unhealthy that you have a very long way to go before you get healthy and drastic action needs to be taken. You are so sick right now that you cannot afford to coast for a few more years living your current lifestyle. You need surgery, you need exercise, and you probably need an intervention.
Another way to view this is to look at gas prices. Gas was under $2/gallon when Obama was elected. It spiked to around $4, so today when people see gas dropping to the low $3 range they think “Hooray! Gas prices are coming down.” True, but not great.
So yes, the Obama deficit is decreasing each year. But it is doing so only because of the massive spending at the start of the Democratic control of Congress (rubber stamped by the lame duck Bush,) and then accelerated by the Obama presidency that stomped down on the “free money” gas pedal. Current trends look positive, but they are still slow, just like unemployment numbers. We need real action and real financial change, not this trickle up spending decrease mentality that will take decades to work. We don’t have that kind of time. Perspective matters.