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Obama and the national debt: The latest Crossroads GPS ad

at 06:02 AM ET, 06/07/2012

“In the seconds it takes to watch this, our national debt will increase $1.4 million…He’s adding $4 billion in debt every day. He’s borrowing from China for his spending.”

— Voiceover from Crossroads GPS ad “Stopwatch”

The newest Crossroads GPS ad gives us yet another opportunity to examine the other side of the spending debate: How much is President Obama responsible for the sharp rise in the national debt during his presidency?

 The Obama campaign has claimed that spending increases under this president are the lowest since the days of Dwight Eisenhower — a claim which we have found problematic for a number of reasons.

There was a sharp increase in spending at the start of the administration, largely in response to the Great Recession, but spending increases have moderated since then, especially after Republicans took control of Congress.

 But the national debt is not just the result of spending; it is also because revenues are not high enough to pay for government outlays. It is that mismatch that creates the national debt.

 

The Facts

 Once again, we will display our handy chart that illustrates this dynamic. The blue line represents spending; the red line shows revenues. The big shaded area at the right shows the recession.


(research.stlouisfed.org)

The recession not only boosted spending — because of automatic stabilizers, bailouts and such — but it absolutely killed government revenues. The slow pace of the recovery has meant that revenues still have not reached pre-recession levels.

 For an experiment, try to mentally extend the blue line on the same pre-recession path. You will see that it essentially ends up where spending is today. Now try doing the same for the red line. The result is that revenue is far below where it should have been under pre-recession trend lines.

 Some might argue that spending should be cut to match revenues. That’s certainly a policy choice, but probably not a realistic one when the economy is still so shaky. Dramatic cuts in government spending would reduce jobs and likely economic growth.

 Meanwhile, Obama has failed to convince Congress to enact some of his proposed policies — such as higher taxes on the wealthy — that likely would have reduced the deficit and thus kept the debt growing more slowly. (Critics of Obama note that he did not embrace the recommendations of the Bowles-Simpson deficit commission but that also included about $1 billion in revenue increases over a decade.)

 Of course, foes of tax increases argue that would also harm economic growth, just as cuts in government spending would. So it is a policy conundrum.

As the for the specific claims in the ad, Crossroads provided this explanation for how it figured this claim:

·    January 20, 2009: The National Debt Was $10,626,877,048,913.08 (Obama Takes Office). (Treasury Department, accessed 5/23/12)
·    May 22, 2012: The National Debt Was $15,721,218,607,447.09 (Most Recent). (Treasury Department, accessed 5/23/12)
 Obama Has Been In Office For 1,219 Days (1/20/09-5/22/12). (Convert Units, accessed 5/17/12)
 $5,094,341,558,534.01 ÷ 1,219 Days = $4,179,115,306/Day

 Crossroads is using gross debt, which includes bonds the government owes to itself (such as Social Security trust funds), which results in a debt gain slightly higher than the figures for publicly-held debt. And while this calculation looks to the past, the numbers are not much different if you recalculate them for the past year.

 Still, some $600 billion of the deficit during Obama’s presidency comes from making interest payments on debt issued before he became president. Those interest payments have added to the debt (especially in the gross debt category, because interest payments are paid with more bonds), and it does not seem entirely fair to blame Obama for all of that.

 For the record, Crossroads GPS opposes what it calls “President Obama’s insistence on raising taxes on families, businesses, and consumers.” Obama has proposed eliminating the Bush tax cuts on taxpayers making more than $250,000 as a way to reduce the deficit.

  A spokesman for Crossroads said: “He should absolutely be held accountable for the debt added since he took office because he promised to do something about it and failed. We have a revenue problem because we have a job creation problem, not because of Crossroads’ opposition to Obama’s class-warfare tax hikes.”

 The ad also asserts that Obama is “borrowing from China for his spending.” Since 2009, China has increased its holdings of U.S. Treasury bonds, but in the past nine months, China has reduced its holdings by nearly $150 billion. So it is not correct to suggest China’s purchases are still climbing — though recently Reuters revealed that the administration is allowing China to bypass Wall Street and buy directly from the U.S. Treasury.

 

The Pinocchio Test

 As with a previous Crossroad GPS ad, this ad exaggerates Obama’s impact on the rise of the debt, as it was not just spending, but a decline in revenue that is responsible for the sharp rise in federal budget deficits. Obama has proposed policies to help reduce the deficit — which Crossroads opposes. That’s their right, but it seems strange to suggest he has done nothing about it.

 Two Pinocchios

 


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    About the Blogger

    Glenn Kessler has covered foreign policy, economic policy, the White House, Congress, politics, airline safety and Wall Street.

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