Fox's Kilmeade Spins Daniels' Deficit Record As Head Of Bush's OMB

Kilmeade Pushes The “Different Reality” To The Claim That Daniels “Drove Up The Deficit.” On the May 22 edition of Fox News' Fox & Friends, co-host Brian Kilmeade interviewed Indiana Gov. Mitch Daniels. During the interview, Kilmeade attacked Austan Goolsbee, former chair of President Obama's Council of Economic Advisers, who recently cited policies enacted under Daniels' tenure as Bush's OMB chief as evidence that Daniels and the Bush administration “drove up the deficit.” From Fox & Friends:

KILMEADE: A former White House chief economist getting defensive about President Obama's failure to get the deficit under control.

GOOLSBEE [video]: Look, I don't dispute that the deficit has increased. I think for the Republicans who set in place the policies that led to the economic crisis that exploded the deficit to now be saying, well, look, why is the deficit so big is a bit -- you know, they lit the back half of the house on fire, now they're complaining the air conditioning doesn't work.

KILMEADE: Well, you heard what Paul Ryan said to that. Let's find out what somebody else says to that. The budget chief under President Bush begs to differ. We're joined right now by now governor of Indiana, Mitch Daniels. Governor, welcome back to the show. Can you answer Austan Goolsbee - you, in terms of driving up deficit? It was your policy that drove up the deficit?

DANIELS: I understand why he's defensive. You know, doubling the deficit on this watch in the terrible economy, which is the biggest problem of all, even bigger than overspending, is the really anemic recovery we've got and that's all on the policies of this administration. No, I mean, they've tried this a long time, but it's very lame. You know, the deficit in 2007 was 1.2 percent of GDP, one of the lowest post-war. So, you know, a lot went into getting us in the fix we are in now, but it really won't wash for them to keep looking back, back, back, trying to blame it on someone else.

KILMEADE: They're trying to blame it on someone else, but it keeps coming back to you -- your Office of Management and Budget, and people know what you've done as governor and Democrats are praising you as well. But they keep saying, “Well, you drove up the deficit.” But in reality -- there's a different reality to what you actually inherited, correct?

DANIELS: Yeah, sure. There was a bubble breaking back then, too, and all the revenue that people imagined was coming, everyone thought was coming. [Fox News, Fox & Friends, 5/22/12]

But Policies Enacted While Daniels Led Bush's OMB Added “Trillions” To The Federal Deficit

NYT's Leonhardt: Policies Passed While Daniels Was OMB Chief “Erased ... $673 Billion” Of An $850 Billion Surplus. In a January 8, 2011, post on his Economix blog, New York Times economics writer David Leonhardt reacted to Daniels' claim that the budget deficit of the Bush administration was due to the stock-market bubble of the early 2000s by noting that while the bubble “erased a little less than $300 billion” of the $850 billion surplus forecasted by the Congressional Budget Office, but Bush policies “erased another $673 billion.” From The New York Times:

When President Bill Clinton left office in 2001, the Congressional Budget Office was forecasting an average annual budget surplus of $850 billion for 2009 through 2012, according to an analysis I did in 2009.

The bursting stock-market bubble and recession that Mr. Daniels mentions erased a little less than $300 billion of the surplus. The Bush administration's policies -- including the tax cuts, the wars in Afghanistan and Iraq and the Medicare prescription-drug program -- erased another $673 billion.

Mr. Daniels is certainly correct that the bursting bubble of 2000 and beyond helped cause a recession -- and that the recession, in turn, shrank the federal surplus. But it is not true that “it wouldn't have mattered what policies you tried to implement.” The Bush administration's policies did more than twice as much damage to the budget as the recession did. [The New York Times, 1/8/11]

Ezra Klein: Daniels “Held A Command Post” While Bush Passed Policies That Added “Trillions ... To The Deficit.” In an August 25, 2011, post on The Washington Post'sWonkblog, Ezra Klein pointed out that while Bush's policies “cannot all be laid at Daniels' feet,” he “held a command post” in the Bush administration “during many of [the] mistakes” that led to high deficits. From The Washington Post:

“When President Obama claims that the state of our union is anything but grave,” Daniels said, “he must know in his heart that this is not true.” And the reason for Daniels' gloom was debt. We have too much of it. Much too much of it. And over and again, Daniels signaled that Republicans were not blameless in the rise of red ink. “The President did not cause the economic and fiscal crises that continue in America tonight,” he said. “To make such action happen, we also must work, in ways we Republicans have not always practiced, to bring Americans together,” he admitted.

What Daniels didn't say is that he, Mitch Daniels, held a command post during many of these mistakes.

Daniels was George W. Bush's first budget director. He served from 2001 to mid-2003. That is to say, he oversaw the first round of tax cuts, and the initial cost estimates of the war in Iraq, and the development of the deficit-financed Medicare Prescription Drug Benefit. During his time as Bush's budget director, the deficit increased by almost $200 billion. After he left, the policies he helped pass would add trillions more to the deficit. They are still adding to the deficit today.

These policies cannot all be laid at Daniels' feet. It is unlikely that Bush's budget director was heavily involved in the decision to enter Iraq -- though Daniels did produce short-term cost estimates that helped reassure Congress, quite wrongly, that the war would be swift and affordable. But the same cannot be said for the Medicare expansion, or the tax cuts. And as the New York Times has pointed out, these policies, together, have done more damage to the deficit than any legislation signed into law under President Obama. [The Washington Post, 8/25/11]

TPM: Daniels “Was One Of The Men In Charge Of The Bush Budget That ... Helped Create The Gigantic Federal Deficit.” In a January 5, 2011, post on Talking Points Memo, Evan McMorris-Santoro pointed out that Daniels “was one of the men in charge of the Bush budget” that “helped create the gigantic federal deficit.” From TPM:

Indiana Gov. Mitch Daniels (R) -- on the short list of contenders for the GOP's presidential nomination in 2012 -- has an explanation for why the deficit exploded under George W. Bush. And it's not the massive Bush tax cuts, which Daniels helped shepherd as Bush's director of the OMB.

“The nation went into a deficit then because the bubble burst and we had a recession,” Daniels told CNN this afternoon. “It wouldn't have mattered what policies you tried to implement, we were going to have a great big reversal.”

Daniels' presidential ambitions could be hampered by the fact that he was one of the men in charge of the Bush budget that dramatically increased the size of federal government spending and slashed revenues thanks to the tax cuts. That helped create the gigantic federal deficit that Republicans used as a rhetorical cudgel to bludgeon the Democratic House majority to death in November. Tea partiers also like to use the deficit cudgel on Republicans, especially those that voted for Bush's budgets. (Daniels has other problems with the GOP base, too, such as his suggestion that it's time for a "truce" on social issues, which ticked off the values voters something fierce.) [Talking Points Memo, 1/5/11]

Economic Policy Institute: “Bush Administration's Policies” Under Daniels “Ensured A Mediocre Economic Recovery.” In a January 24 post on the Economic Policy Institute's (EPI) Working Economics blog, Andrew Fieldhouse noted that tax cuts passed under Daniels' tenure as OMB chief “are responsible for roughly half of today's structural budget deficit and half the public debt accumulated last decade.” Fieldhouse further pointed out:

Daniels ran OMB from Jan. 2001 to June 2003; during his tenure, he helped craft the 2001 and 2003 Bush tax cuts. (Later tax acts accelerated implementation of some of these tax cuts, but this is when the real fiscal malfeasance occurred.) When Daniels took charge of OMB, the Congressional Budget Office (CBO) was projecting a $5.0 trillion (4.0 percent of GDP) budget surplus over the next decade. When he left office, CBO was projecting a $1.4 trillion (-1.0 percent of GDP) budget deficit over the next decade. Roughly $4.8 trillion of the fiscal deterioration resulted from legislation enacted over 2001-2003; the tax cuts alone added $2.6 trillion to the public debt over 2001-2010. (The other major drivers of this fiscal deterioration were the wars in Afghanistan and Iraq, which Daniels didn't bother to pay for or even put on budget.) The 2001 recession certainly contributed to the emerging deficits--just as half of this year's deficit can be chalked up to economic weakness--but the Bush administration's economic policies ensured a mediocre economic recovery. [EPI, 1/24/12]

Many Policies Passed Under Daniels And Throughout The Bush Administration Continue To Be The Primary Cause Of The Deficit

Ezra Klein: Bush Policies Responsible For Vast Majority Of Debt Increase Under Obama Administration. In a January 31 Washington Post column, Klein estimated that Obama's policies are responsible for $983 billion of the nearly $5 trillion increase in public debt over the course of his administration, while the remainder of the debt increase is attributable to Bush-era policies - many of which were enacted during Daniels' tenure at OMB. From The Washington Post:

[I]f you're a deficit-obsessed voter, the clock doesn't answer the key question: How much has Obama added to the debt, anyway?

There are two answers: more than $4 trillion, or about $983 billion. The first answer is simple and wrong. The second answer is more complicated but a lot closer to being right.

When Obama took office, the national debt was about $10.5 trillion. Today, it's about $15.2 trillion. Simple subtraction gets you the answer preferred by most of Obama's opponents: $4.7 trillion.

But ask yourself: Which of Obama's policies added $4.7 trillion to the debt? The stimulus? That was just a bit more than $800 billion. TARP? That passed under George W. Bush, and most of it has been repaid.

There is a way to tally the effects Obama has had on the deficit. Look at every piece of legislation he has signed into law. Every time Congress passes a bill, either the Congressional Budget Office or the Joint Committee on Taxation estimates the effect it will have on the budget over the next 10 years. And then they continue to estimate changes to those bills. If you know how to read their numbers, you can come up with an estimate that zeros in on the laws Obama has had a hand in.

A chart accompanying the column made in conjunction with the Center on Budget and Policy Priorities (CBPP) illustrated the debt impact of Bush's policies versus Obama's:

[The Washington Post, 1/31/12; The Washington Post, 1/31/12]

For more on the impact that Bush's policies have had on the federal debt, click here.

Kilmeade: Surplus Inherited By The Bush Administration “Was On Paper, It Wasn't In The Bank”

Kilmeade To Daniels: The Surplus Inherited By The Bush Administration “Was On Paper, It Wasn't In The Bank.” From Fox & Friends:

KILMEADE: They're trying to blame it on someone else, but it keeps coming back to you. Your Office of Management and Budget and people know what you've done as governor and Democrats are praising you as well. But they keep saying, “Well, you drove up the deficit.” But in reality -- there's a different reality to what you actually inherited, correct?

DANIELS: Yeah, sure. There was a bubble breaking back then, too, and all the revenue that people imagined was coming, everyone thought was coming --

KILMEADE: The surplus was on paper, it wasn't in the bank.

DANIELS: Yeah, it never happened and wasn't going to, given the, again, the economic recession that took place then. But, you know, it's really not worth arguing about at this point. We're in a very bad place, and the question is -- as it always is - is what do we do now? And what this administration is doing with regard to economic growth and spending discipline is simply not going to get the job done. [Fox News, Fox & Friends, 5/22/12]

But The Bush Administration Inherited A Real Budget Surplus From The Clinton Administration

FactCheck.org: “Any Way You Count It, The Federal Budget Was Balanced And The Deficit Was Erased” Under Clinton. In a February 3, 2008, post, FactCheck.org pointed out that, even after removing Social Security surpluses, “there was a surplus of $1.9 billion in fiscal 1999 and $86.4 billion in fiscal 2000. So any way you count it, the federal budget was balanced and the deficit was erased, if only for a while.” From FactCheck.org:

The Clinton years showed the effects of a large tax increase that Clinton pushed through in his first year, and that Republicans incorrectly claim is the “largest tax increase in history.” It fell almost exclusively on upper-income taxpayers. Clinton's fiscal 1994 budget also contained some spending restraints. An equally if not more powerful influence was the booming economy and huge gains in the stock markets, the so-called dot-com bubble, which brought in hundreds of millions in unanticipated tax revenue from taxes on capital gains and rising salaries.

Clinton's large budget surpluses also owe much to the Social Security tax on payrolls. Social Security taxes now bring in more than the cost of current benefits, and the “Social Security surplus” makes the total deficit or surplus figures look better than they would if Social Security wasn't counted. But even if we remove Social Security from the equation, there was a surplus of $1.9 billion in fiscal 1999 and $86.4 billion in fiscal 2000. So any way you count it, the federal budget was balanced and the deficit was erased, if only for a while.

The post further noted that even under a different accounting process called “accrual accounting,” the “annual reports showed surpluses of $69.2 billion in fiscal 1998, $76.9 billion in fiscal 1999, and $46 billion for fiscal year 2000. So even if the government had been using that form of accounting the deficit would have been erased for those three years.”

FactCheck also included the following chart:

[FactCheck.org, 2/3/08]

The Economist: “The Clinton Administration Delivered A Couple Of Years Of Real Verifiable Budget Surpluses In The Late 1990s.” A July 27, 2011, post on The Economist's Democracy in America blog noted that, while the long-term debt projections of the late 1990s may not have materialized, “The Clinton administration delivered a couple of years of real verifiable budget surpluses in the late 1990s, and if Clintonian levels of taxation and spending had continued, they likely would have generated annual surpluses that would have shrunk the debt by over $2 billion over the decade thereafter.” From The Economist:

The Clinton administration's calculations in 2000 that the government would pay off its debt and accumulate savings of $2.3 trillion over the following ten years were wrong. And they were wrong not because of any stupid error or dramatically incorrect theory about the economic world, but simply because they failed to predict that the American economy would experience a financial crisis in 2008, followed by the worst recession since the Great Depression and a historically anaemic recovery. (I assume they failed to predict the 2001 tech-crash recession as well.) The Clinton administration delivered a couple of years of real verifiable budget surpluses in the late 1990s, and if Clintonian levels of taxation and spending had continued, they likely would have generated annual surpluses that would have shrunk the debt by over $2 billion over the decade thereafter. But the forecast that they would have eliminated the debt entirely and replaced it with trillions of dollars in sovereign wealth was a mirage. [The Economist, 7/27/11]

NYT: Bush Administration Went “From Healthy Surpluses At The End Of The Clinton Era ... To Nine Straight Years Of Deficits.” A July 23, 2011, New York Times editorial blamed “largely the Bush-era tax cuts, war spending in Iraq and Afghanistan, and recessions” for taking the federal budget “from healthy surpluses at the end of the Clinton era, and the promise of future surpluses, to nine straight years of deficits.” From The New York Times:

With President Obama and Republican leaders calling for cutting the budget by trillions over the next 10 years, it is worth asking how we got here -- from healthy surpluses at the end of the Clinton era, and the promise of future surpluses, to nine straight years of deficits, including the $1.3 trillion shortfall in 2010. The answer is largely the Bush-era tax cuts, war spending in Iraq and Afghanistan, and recessions.

[...]

In 2001, President George W. Bush inherited a surplus, with projections by the Congressional Budget Office for ever-increasing surpluses, assuming continuation of the good economy and President Bill Clinton's policies. But every year starting in 2002, the budget fell into deficit. In January 2009, just before President Obama took office, the budget office projected a $1.2 trillion deficit for 2009 and deficits in subsequent years, based on continuing Mr. Bush's policies and the effects of recession. Mr. Obama's policies in 2009 and 2010, including the stimulus package, added to the deficits in those years but are largely temporary. [The New York Times, 7/24/11]

Daniels Is A Fox News Star

“A Star Is Born”: Fox Figures Lauded Daniels For His Response To The State Of The Union. In January, Fox figures gushed over Daniels' Republican response to the State of the Union, with Chris Wallace claiming that “a star is born.” Others praised Daniels' address as “poetic,” “funny,” “strong,” and “quite impressive.” [Media Matters, 1/25/12]

And Fox Similarly Whitewashed GOP Sen. Rob Portman's Fiscal Record As Bush OMB Chief

Fox Whitewashed Portman's “Interesting Background” As Bush OMB Director. In August 2011, reporting on the lawmakers selected to negotiate deficit reduction, Fox News' Mike Emanuel touted Sen. Rob Portman's (R-OH) “interesting background,” saying that not only does he have legislative experience, but “he's done the budget from the administration side of things.” But Portman's “interesting background” was serving as OMB during the Bush administration when federal deficits more than doubled. [Media Matters, 8/10/11]