There’s a reason Bill Clinton is on the stage tonight. When he was president, America enjoyed a booming economy and surpluses (here are some charts). Since he left the White House, things haven’t been quite as good.
But the story of why they haven’t been quite as good is more complicated than “Clinton isn’t around now.” Here are three of the best analyses of what’s happened to the federal budget since 2001. I’ve included the key paragraph and chart from each of them.
The Pew Fiscal Analysis Initiative: “Between 2001 and 2011, about two-thirds (68 percent) of the $12.7 trillion growth in federal debt has been due to new legislation. Forty percent of this legislative growth was the result of tax cuts enacted after January 2001, and 60 percent resulted from spending increases. Technical and economic revisions combined caused about one quarter (27 percent) of the growth, and changes in other means of financing accounted for 6 percent.
E21: “Roughly half of the reason the surpluses never materialized is that federal spending was subsequently increased (over half of this total increase was concentrated in the three years of 2009-11). A little over one-quarter disappeared because of subsequent corrections to the 2001 projections. Less than one-quarter was due to tax relief of any kind – and only a little more than half of that small fraction is directly attributable to the 2001 and 2003 tax relief packages.”
The Center on Budget and Policy Priorities: “If not for the Bush tax cuts, the deficit-financed wars in Iraq and Afghanistan, and the effects of the worst recession since the Great Depression (including the cost of policymakers’ actions to combat it), we would not be facing these huge deficits in the near term. By themselves, in fact, the Bush tax cuts and the wars in Iraq and Afghanistan will account for almost half of the $20 trillion in debt that, under current policies, the nation will owe by 2019. The stimulus law and financial rescues will account for less than 10 percent of the debt at that time.”
All of these analyses are using data from the Congressional Budget Office, and all of them are telling the same basic story. But they explain it in slightly different ways.
All agree that the projections in 2001 were simply wrong. They didn’t see that the tech bubble was about to pop, and they definitely didn’t foresee the economy falling off a cliff in 2008. That alone accounts, in all the papers, for about a quarter of the deterioration.
The place where you see real differences is in how the papers account for the role of legislation and policy in piling up the debt.
Writing for E21, Charles Blahous ends by grouping all spending together and all tax cuts together. That deemphasizes the role of tax cuts.
At CBPP, Kathy Ruffing and Jim Horney break the spending apart, showing how much went to the wars in Iraq and Afghanistan, how much went to the stimulus, and so on. When built that way, the Bush tax cuts appear to be the single largest policy contributor the current deficits.
CBPP also projects the numbers forward into the next decade. Because the tax cuts continue to grow in size, but the stimulus and the wars in Iraq and Afghanistan end, that further enlarges the role the tax cuts play in the expected deterioration of the budget.
All these analyses tell the same story in one key respect, however. The primary drivers of the debt predate Barack Obama. The post-9/11 wars and security build-up, the Bush tax cuts, and the 2001 and 2008 recessions simply began before Obama became president. You can blame him for extending the Bush tax cuts till 2012, or for the stimulus (though the stimulus would never have happened without the 2008 financial crisis), but the structural of deterioration came in the Bush years.
Of course, the real question in this election isn’t who caused the deficits, but who has the best plan to retire them. For more on that, here’s Obama’s plan, and here’s what Romney has promised. I say “has promised,” as Romney’s plan still lacks key details we need in order to say what he’s actually going to do, and whether it’s credible. Given what we know now, I’m skeptical.