Politico's Allen says $1 trillion deficit "awesome issue for Republicans," ignoring role they played in creating it

During an appearance on the July 14 edition of MSNBC's Morning Joe, Politico's Mike Allen asserted of the claim that the current budget deficit had "passed the magic $1 trillion number": "[T]his is an awesome issue for Republicans, that by pointing to this, it's the maybe one way they have to stop momentum for some of these other Obama programs." However, Allen's claim assumes that the Obama administration is to blame for the deficit. In fact, as numerous economists have noted, Bush administration policies are responsible for a large portion of the current deficit.

In a February 2009 analysis of federal deficits, University of California-Berkeley economist Alan Auerbach and Brookings Institution economist William Gale stated, "The stunning shift to deficits from the budget surpluses of a decade ago has accelerated in the past year as the recession took hold, but the transition began many years ago." Moreover, in a March 14 American Prospect blog post, Dean Baker, co-director of the Center for Economic and Policy Research, stated that "the overwhelming majority of the budget deficit that the Republicans are now complaining about is directly attributable to President Bush's policies. The additional deficit for 2009 that it is attributable to President Obama's efforts to fix the disastrous economy that he was handed by President Bush is trivial in comparison, as can be clearly seen."

Baker included the following graph:

By contrast to Allen's claim that the deficit could benefit conservatives, a June 9 New York Times article reported that 33 percent of the "$2 trillion swing" from surplus to deficits "stems from" legislation signed by President Bush. The Times added: "That legislation, like his tax cuts and the Medicare prescription drug benefit, not only continue to cost the government but have also increased interest payments on the national debt.

Media Matters for America has previously noted media figures failing to ask Republican elected officials who have expressed concern about Obama's budget proposals about their own support for various laws and actions that contributed to the more than $2 trillion increase in the publicly held national debt under President Bush. These laws and actions include:

• The tax-cut bills of 2001 and 2003 -- the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA), respectively.

• The budget resolutions for fiscal years 2002 and 2004, which provided for consideration of the 2001 and 2003 tax-cut bills under the budget reconciliation process.

• The 2003 Medicare prescription-drug benefit.

From the June 9 Times article:

The story of today's deficits starts in January 2001, as President Bill Clinton was leaving office. The Congressional Budget Office estimated then that the government would run an average annual surplus of more than $800 billion a year from 2009 to 2012. Today, the government is expected to run a $1.2 trillion annual deficit in those years.

You can think of that roughly $2 trillion swing as coming from four broad categories: the business cycle, President George W. Bush's policies, policies from the Bush years that are scheduled to expire but that Mr. Obama has chosen to extend, and new policies proposed by Mr. Obama.

The first category -- the business cycle -- accounts for 37 percent of the $2 trillion swing. It's a reflection of the fact that both the 2001 recession and the current one reduced tax revenue, required more spending on safety-net programs and changed economists' assumptions about how much in taxes the government would collect in future years.

About 33 percent of the swing stems from new legislation signed by Mr. Bush. That legislation, like his tax cuts and the Medicare prescription drug benefit, not only continue to cost the government but have also increased interest payments on the national debt.

Mr. Obama's main contribution to the deficit is his extension of several Bush policies, like the Iraq war and tax cuts for households making less than $250,000. Such policies -- together with the Wall Street bailout, which was signed by Mr. Bush and supported by Mr. Obama -- account for 20 percent of the swing.

About 7 percent comes from the stimulus bill that Mr. Obama signed in February. And only 3 percent comes from Mr. Obama's agenda on health care, education, energy and other areas.

From Auerbach's and Gale's February 2009 analysis:

The projected 2009 deficit of $1,186 billion ($1,371 billion including the stimulus package) represents a sharp increase from the 2008 fiscal year deficit of $455 billion and an even more startling increase from the $438 billion deficit for fiscal year 2009 projected by CBO as recently as September, 2008. According to CBO (2009a, Table 8), of the deterioration in the 2009 forecast since September 2008, $106 billion is associated with the traditional factors of economic weakness, i.e., the automatic stabilizers of declining revenues and increasing expenditures that accompany economic slowdowns. The remainder is due to legislative and "technical" changes, a residual group that includes such items as declining tax revenues due to deteriorating asset prices but also the government takeover of Fannie Mae and Freddie Mac, the accounting treatment of which we just discussed.

The stunning shift to deficits from the budget surpluses of a decade ago has accelerated in the past year as the recession took hold, but the transition began many years ago, as Figure 5 illustrates. The top line in the figure shows the CBO baseline projections made in January 2001; the bottom line shows the deficits we have actually experienced since then, along with the projected value for 2009. The two recessions during this period (covering parts of fiscal years 2001, 2002 and 2008) had an impact, but so too have policy decisions, leaving a huge gap between the projected and actual deficit even in 2007, prior to the onset of the current recession.

Specifically, Figure 5 shows that the January 2001 baseline projection for 2009 was a surplus of $710 billion and that the January 2009 baseline projection for 2009 is a deficit of $1,371 billion. Of this $2,080 billion difference in projections for 2009, roughly two-thirds, or $1,370 billion, is due to various policy changes - tax cuts and spending increases - that have been enacted since January 2001. The remaining portion, $710 billion, is due to changes in the economic and technical aspects of CBO's projections since 2001. Appendix Table 1 provides more detail on the sources of these changes. The direct effect of tax cuts and spending increases since 2001 was to raise the deficit by add 4.3 percent of GDP in 2007 and 5.9 percent of GDP in 2008. (Including the debt service costs, the new policies raised deficits even more.) Given the way the long-term fiscal gap is calculated (in section IV), the direct effects of the tax and spending changes enacted during this period imply increases in the long-term fiscal gap. As a result, policies enacted during the past eight years have a large impact on the magnitude of the long-term fiscal gap.

From the July 14 edition of MSNBC's Morning Joe:

WILLIE GEIST (co-host): Mike, let's get to the deficit. Mika reported to us in news yesterday that it passed the magic $1 trillion number, on its way up to much, much more than that. How are Republicans using this?

ALLEN: Well, Willie, this is just to show Joe that we miss him. I had to do this for Joe.

I cannot believe that this is not on a single front page, and I know that Mark Halperin will share my outrage about this because Mark Halperin, too, recognizes the importance of this issue. The Wall Street Journal has a good story saying that this is going to crimp Obama's agenda. The point is, this is an awesome issue for Republicans, that by pointing to this, it's the maybe one way they have to stop momentum for some of these other Obama programs.

The president has sold health care and climate by saying they will fix our economy, but if Republicans are able to make the case that in fact they're further endangering the economy -- as we look at these crazy numbers -- a trillion dollars with three months left in the fiscal year.

So one Republican consultant, Alex Castellanos, is out with a new phrase that he's gonna popularize about the Obama health plan. He's calling it the "Obama experiment," and it's designed to inject the idea of risk at a time when people are beginning to worry about the country's long-term finances.