Fox News contributor Dick Morris claimed that President Obama "will be defeated" in 2012 because "he's causing the second housing crisis by cutting out the mortgage interest deduction" and "causing the deficit with this gigantic government spending." In fact, proposed changes in the mortgage deduction for the wealthy have not been implemented, and the primary drivers of the deficit are the wars in Iraq and Afghanistan, the economic downturn, and the tax cuts implemented in the Bush administration.
Morris Claims Obama To "Blame For" Deficit
Morris: "Doesn't [Obama] Understand That He's Causing The Deficit With This Gigantic Government Spending?" On the June 2 edition of Fox News' Fox & Friends, Fox News contributor Dick Morris claimed: "I think that Obama definitely can be defeated and will be defeated. I think that the - it is impossible for him to avoid blame for this economy." Morris later asked of Obama, "Doesn't he understand that he's causing the deficit with this gigantic government spending? I mean, at some point he just has to look in the mirror and say, 'Everything I've been doing is wrong.' " Morris later claimed Obama will be "running for re-election ... in the middle of a recession and this time it will be called the Obama recession." [Fox News, Fox & Friends, 6/2/11]
In Fact, Experts Agree That Bush Policies, Economic Downturn Are Largely To Blame For The Growing Deficit
CBO Projected $1.2T Deficit In January 2009 Based On Spending Bush Authorized; Actual Deficit Was $1.4T. In a January 7, 2009, report, the Congressional Budget Office (CBO) projected, based on spending authorized under the Bush administration, that the federal deficit in FY2009 would total $1.2 trillion. According to the CBO, the actual federal deficit for FY2009, which began during the Bush's last year in office, was $1.4 trillion. [CBO, January 2009, January 2010]
CAP: "Single Most Important [Cause Of The Deficit] Is The Legacy Of President George W. Bush's Legislative Agenda." In an August 2009 analysis, the Center for American Progress (CAP) concluded that about two-thirds of the then-projected budget deterioration for 2009 and 2010 could be attributed to either Bush's policies or the economic downturn:
The report explained:
As for the deficit's cause, the single most important factor is the legacy of President George W. Bush's legislative agenda. Overall, changes in federal law during the Bush administration are responsible for 40 percent of the short-term fiscal problem. For example, we estimate that the tax cuts passed during the Bush presidency are reducing government revenue collections by $231 billion in 2009. Also, because of the additions to the federal debt due to Bush administration policies, the government will be paying $218 billion more in interest payments in 2009.
Had President Bush not cut taxes while simultaneously prosecuting two foreign wars and adopting other programs without paying for them, the current deficit would be only 4.7 percent of gross domestic product this year, instead of the eye-catching 11.2 percent--despite the weak economy and the costly efforts taken to restore it. In 2010, the deficit would be 3.2 percent instead of 9.6 percent.
The weak economy also plays a major role in the deficit picture. The failure of Bush economic policies--fiscal irresponsibility, regulatory indifference, fueling of an asset and credit bubble, a failure to focus on jobs and incomes, and inaction as the economy started slipping--contributed mightily to the nation's current economic situation. When the economy contracts, tax revenues decline and outlays increase for programs designed to keep people from falling deep into poverty (with the tax impact much larger than the spending impact). All told, the weak economy is responsible for 20 percent of the fiscal problems we face in 2009 and 2010.
President Obama's policies have also contributed to the federal deficit--but only 16 percent of the projected budget deterioration for 2009 and 2010 are attributable to those policies. The American Recovery and Reinvestment Act, designed to help bring the economy out of the recession is, by far, the largest single additional public spending under this administration. [CAP, 8/25/09]
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, which was 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.
The report also graphed the effects of Bush's policies and the wars in Iraq and Afghanistan on the deficit. From the report:
[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]
Morris Claimed Obama Is "Causing...Second Housing Crisis" By Eliminating "Mortgage Interest Deduction"
Morris: Obama Is "Causing The Second Housing Crisis By Cutting Out The Mortgage Interest Deduction." Morris further claimed on Fox & Friends that Obama is "causing the second housing crisis by cutting out the mortgage interest deduction." [Fox News, Fox & Friends, 6/2/11]
But No Changes To Mortgage Interest Deduction Have Been Implemented
CNN Money: Proposals To Limit Mortgage Interest Deduction "Have Gone Nowhere And The Same Outcome Is Expected This Year." According to a February 15 article on CNN Money, the mortgage interest deduction proposal is not implemented and is expected to "hit a wall of resistance from entrenched special interests." The article pointed out that the "Obama administration, as well as several tax and deficit commissions, have called for limiting or eliminating the deductions in the past. But the proposals have gone nowhere and the same outcome is expected this year." [CNN Money, 2/15/11]
Obama's Proposal Would Only "Affect Those With Taxable Income Of $250,000 And Up." CNN Money further reported that the proposal would "curtail high-income earners' tax deduction for mortgage interest payments." From CNN Money:
The president once again proposed in his budget to curtail high-income earners' tax deduction for mortgage interest payments and charitable contributions.
Under his proposal, taxpayers in the 33% and 35% tax brackets would only be able to deduct their contributions and mortgage interest payments at the 28% rate. It would affect those with taxable income of $250,000 and up and bring in $321 billion over 10 years, according to the White House. [CNN Money, 2/15/11]