Conservative media have compared the federal budget deficit for the month of February to that of fiscal year 2007 in order to dishonestly attack President Obama for the rising national debt. However, critics are comparing current deficits to the year before the recession with record federal revenue, and experts agree that Bush policies are largely to blame for the growing deficit.
Conservatives Blame Obama For Current Deficit
Hannity: "In Three Years Obama Accumulating Nearly Five Trillion Dollars In Debt Is A Lot Of Money." From the March 7 edition of Fox News' Hannity:
HANNITY: Let me see if I can give some perspective -- and maybe I'm wrong, but I think Americans are getting lost in millions, billions and trillions. Three-point-seven trillion is a lot. In three years Obama accumulating nearly five trillion dollars in debt is a lot of money. At the end of fiscal year 2007 -- not that long ago, right? -- our budget deficit was $161 billion for the year. For the month of February, this past month, the budget deficit for the month was $223 billion. Not quite twice, but almost twice what it was for the entire year in 2007. It seems to me that Americans now want, and those conservative governors are being rewarded for, fiscal responsibility. So why wouldn't the next presidential candidate for the Republicans get the same benefit? [Fox News, Hannity, 3/7/11]
Hoft: "Barack Obama Tripled The National Deficit In His First Year In Office. In His Second Year The Deficit Was Again A Record $1.29 Trillion. This Year The Deficit Will Be Even Higher." From a March 7 post Gateway Pundit post by Jim Hoft:
Worst. President. Ever.
Barack Obama told Americans Saturday in his Weekly Address,
"We need a government that lives within its means."
But, that was Saturday.
Today we found out that Obama's February deficit topped Bush's Deficit for all of 2007.
Barack Obama tripled the national deficit in his first year in office. In his second year the deficit was again a record $1.29 Trillion. This year the deficit will be even higher. [Gateway Pundit, 3/7/11]
Ace of Spades: "Bush's 2007 Yearly Deficit Was A Mere $161 Billion." From a March 7 post on Ace of Spades HQ:
Via Drudge, the prelude to hyperinflation. $223 billion in deficit for the shortest month of the year.
Bush's 2007 yearly deficit was a mere $161 billion. [Ace of Spades HQ, 3/7/11]
2007 Deficit Is A Cherry-Picked Comparison
2007 Was A Pre-Recession Year Of Record-High Federal Revenue, Declining Deficit. From historical tables of federal receipts and outlays, prepared by the Office of Management and Budget:
[Office of Management and Budget, Budget of the US Government FY2011, Historical Tables, Table 1.3, accessed 3/8/11]
$1.2 Trillion Deficit Projected Before Obama Took Office
Before Obama Took Office, CBO Projected $1.2 Trillion Deficit In January 2009 Based On Spending Bush Authorized. From a report prepared by the Congressional Budget Office:
The Budget Outlook
The ongoing turmoil in the housing and financial markets has taken a major toll on the federal budget. CBO currently projects that the deficit this year will total $1.2 trillion, or 8.3 percent of GDP. That total, however, does not include the effects of any future legislation. Enactment of an economic stimulus package, for example, would add to the 2009 deficit. In any event, as a percentage of GDP, the deficit will most likely shatter the previous post-World War II record high of 6.0 percent posted in 1983 (see Figure 11).
A drop in tax revenues and increased federal spending (much of it related to the government's actions to address the crisis in the housing and financial markets) both contribute to the robust growth in this year's deficit. Compared with receipts last year, collections from corporate income taxes are anticipated to decline by 27 percent and individual income taxes by 8 percent; in normal economic conditions, they would both grow by several percentage points. In addition, the estimated deficit includes outlays of more than $180 billion to reflect the cost of transactions of the TARP. [Congressional Budget Office, The Budget and Economic Outlook: Fiscal Years 2009 to 2019, 1/09, footnotes removed]
Actual Deficit In 2009 Was $1.4 Trillion. From a report by Congressional Budget Office:
The Congressional Budget Office (CBO) projects that if current laws and policies remained unchanged, the federal budget would show a deficit of about $1.3 trillion for fiscal year 2010 (see Summary Table 1). At 9.2 percent of gross domestic product (GDP), that deficit would be slightly smaller than the shortfall of 9.9 percent of GDP ($1.4 trillion) posted in 2009. [Congressional Budget Office, The Budget and Economic Outlook: Fiscal Years 2010 to 2020, 2010]
Experts: Deficit Result Of Bush-Era Policies, Wars, Economic Downturn
CBPP: "[V]irtually The Entire Deficit Over The Next Ten Years" Due To Bush Policies, Economic Downturn. The Center on Budget and Policy Priorities (CBPP) published an analysis of federal deficits in December 2009, most recently updated on June 28, 2010, titled, "Critics Still Wrong on What's Driving Deficits in Coming Years: Economic Downturn, Financial Rescues, and Bush-Era Policies Drive the Numbers." The report noted:
Some critics continue to assert that President George W. Bush's policies bear little responsibility for the deficits the nation faces over the coming decade -- that, instead, the new policies of President Barack Obama and the 111th Congress are to blame. Most recently, a Heritage Foundation paper downplayed the role of Bush-era policies (for more on that paper, see p. 4). Nevertheless, the fact remains: Together with the economic downturn, the Bush tax cuts and the wars in Afghanistan and Iraq explain virtually the entire deficit over the next ten years. [CBPP, updated 6/28/10, emphasis in original]
Harvard Business Review Group Director: "[T]he Giant Deficit Is Mainly The Result Of The Collapse In Tax Receipts Brought On By The Recession." In an October 2010 post on his Reuters blog, Justin Fox, editorial director of the Harvard Business Review Group, analyzed the deficit and concluded that it was "mainly the result of the collapse in tax receipts brought on by the recession":
The Treasury Department reported on Oct. 15 that the deficit in fiscal 2010, which ended Sept. 30, was $1.294 trillion. That's less than FY 2009's $1.416 trillion, but it's still really really big. Why is it so big, though? Is it because of all that stimulus and bailout spending? Or is something else going on?
To find out, I created a fantasy world. I figured out how fast federal spending and revenue grew over the last business cycle, from 2000 through 2007, and calculated where we'd be today if those growth rates had continued through 2010. I was originally motivated to do this for a commentary that's supposed to air tomorrow night on Nightly Business Report. But I'm thinking there's not a huge overlap between Felix Salmon readers and Nightly Business Report viewers, so I'll go ahead and share what I learned.
In my no-financial-crisis, no-bailout, no-recession, no-stimulus scenario, spending kept growing at 6.22% a year, and revenue kept growing at 3.45%. You can see from the difference between the two numbers that this was an unsustainable path. But it clearly could have been sustained for a few more years.
Where would it have left us in fiscal 2010? With $2.843 trillion in federal revenue and $3.270 trillion in spending, leaving a deficit of $427 billion. The actual revenue and spending totals for 2010 were $2.162 trillion and $3.456 trillion. So spending was $186 billion higher than if we'd stuck to the trend, and revenue was $681 billion lower. In other words, the giant deficit is mainly the result of the collapse in tax receipts brought on by the recession, not the increase in spending. Nice to know, huh? [Justin Fox, blogs.reuters.com, 10/25/10, emphasis added]