As Lori writes, “The nation’s unnerving descent into debt began a decade ago with a choice, not a crisis.” A series of choices, actually. No policy contributed more to the deficit than the two rounds of tax cuts passed in 2001 and 2003. The wars were also major contributors. The Medicare Prescription Drug Benefit, though its costs will build over time, was not a particularly large part of the story over the last decade.
But then our unfortunate choices were compounded by an unexpected crisis. The financial crisis crushed our economic outlook. Revenues plummeted and spending grew. Then there was the stimulus package, which though smaller and much shorter-lived than either the tax cuts or the wars, was nevertheless significant. And as all this debt begins to mount, our interest payments begin to expand, until they’re actually significant as well. You can see a great chart breaking down the changes that drove the CBO’s outlook from surpluses by 2011 to deficits as far as the eye can see:
There are two major takeaways from this report. The first is that the current deficit is primarily, though not exclusively, the result of policy decisions made during the Bush years. Insofar as Obama deserves blame for current deficits, it’s mainly because he hasn’t shut down Bush-era policies like the tax cuts. All the stimulus spending combined accounts for a relatively small portion of the deficit. Conversely, the financial crisis began before Obama was in office, but is unquestionably the single largest contributor to the deficit while he’s been in office.
The second is that economic projections are uncertain at best. Without the financial crisis, our current deficits, though significant, would be much more modest. Conversely, if economic growth takes off in the coming years, or if a series of disruptive innovations and policy reforms substantially slow the growth of health-care costs, our future deficits will be much smaller than we currently project. What we control are our choices. And with the exception of the health-care reform law, few of our post-Clinton choices have been good for the deficit.