“Remember this, President Obama, when he became president, he said I’m going to cut the deficit in half in four years. He did it in four years and three months.”
— House Minority Leader Nancy Pelosi (D-Calif.), on CNN’s “State of the Union,” Sept. 22, 2013
A reader asked us about this comment by Rep. Pelosi, who made this claim to argue that enough spending has been cut from the federal budget. We were especially interested in her precision about the time — “four years and three months.”
On Feb. 23, 2009, President Obama made this statement at the opening of a “fiscal responsibility” summit:
“This administration has inherited a $1.3 trillion deficit — the largest in our nation’s history — and our investments to rescue our economy will add to that deficit in the short term. … And that’s why today I’m pledging to cut the deficit we inherited in half by the end of my first term in office.”
OK, the benchmark would be $1.3 trillion, and half of that would be $650 billion. That’s obviously still a large number, but half is half.
Now, it’s important to get some terminology straight. The deficit refers to an annual number — how much outlays exceed revenues in a given year. The national debt refers to the total amount a nation has borrowed, over time, to finance these deficits. So reducing the deficit still means the debt increases year after year, as does the cost of paying interest on that debt.
Making things even more confusing, the federal government runs on a fiscal year that ends on Sept. 30. (This is why we have the shutdown crisis this week.) So when Obama said he inherited a deficit, he is referring to the 2009 fiscal year that ended Sept. 30, 2009. His pledge to cut the deficit in half by the end of his term in theory referred to Jan. 20, 2013, but the only fiscal year number we have is for the year that ended Sept. 30, 2012.
According to the Congressional Budget Office, the actual deficit in fiscal year 2009 was a little higher than Obama anticipated: $1.41 trillion. The deficit in fiscal year 2012 was $1.09 trillion. So Obama did not meet his pledge, even though his advisers had probably told him it was a safe bet at the time, as a more rapid recovery from the recession was expected. (Indeed, as Obama was taking office in 2009, CBO predicted the deficit would be $264 billion in fiscal year 2012, which shows why Obama’s pledge was actually relatively modest.)
For the 2013 fiscal year, CBO in May projected that the deficit would shrink to $642 billion, which is obviously a huge drop. That means Obama would meet his pledge four years and eight months after he took office, or essentially a year later than he had promised.
So where does Pelosi come up with four years and three months?
Drew Hammill, her spokesman, said that Pelosi was not focused on the raw deficit numbers, but rather she measured the deficit as a percentage of gross domestic product, which is the broadest measure of the economy. This is actually the best way to measure the size of a deficit, especially if you are looking across a period of many years.
Using Pelosi’s method, the CBO said the deficit was 10.1 percent of GDP in fiscal year 2009, and it was 7 percent of GDP in fiscal year 2012. In February 2013, CBO projected that the fiscal year 2013 deficit would be 5.3 percent, which is still not quite one-half of 10.1 percent. Then in May 2013, it revised the projection for fiscal 2013 to 4 percent of GDP.
“So four years and three months after the president’s projection, we have a CBO projection at less than half,” he said. He noted that in May, the fiscal year was nearing completion, and so there was no doubt the deficit was going to be less than half the level from when Obama took office.
The Pinocchio Test
A projection of a deficit is not the same thing as achieving the deficit itself. Pelosi’s broad point is correct — as of the end of this week, the deficit likely will have been cut in half since Obama took office. (We will update this column if Obama falls short in the official number.) It is also admirable that she was thinking in terms of a percentage of GDP.
But she stumbles when she tries to put such a precise date on reaching the goal —four years and three months.
We might also quibble with the notion that Obama “did it.” As we noted last week, Republicans in Congress also played a role — and CBO’s long-term projections indicate that both sides are cutting the wrong kind of spending.
But laying that issue aside, Pelosi might do better to simply say that Obama has met his 2009 pledge — one year late.
Check out our candidate Pinocchio Tracker