I'm often astonished at what passes for economic analysis on the right. Media Matters has extensively documented hypocrisy, inaccurate reading of history, confusion about basic terms, misreading of government reports, misleading gimmickry, and downright incompetence on the part of right-wing media outlets. Recently, a new meme has appeared on the right, the claim that President Obama has added $3 trillion dollars of debt during his tenure -- more debt in 21 months in office, according to conservatives, than the United States accumulated in its first 214 years of independence. It would be a dramatic and powerful statement about the recklessness of this administration -- if it weren't ludicrous and hopelessly misleading.
The claims:
On October 18 Terence P. Jeffrey of CNSNews.com reported that "[i]t's official: The Obama administration has now borrowed $3 trillion...." From CNS News:
It took from 1776, when the United States became an independent country, until 1990, the year after the Berlin Wall fell signaling victory in the Cold War, for the federal government to accumulate a total of $3 trillion in debt, according to the Treasury Department. It only took from Jan. 20, 2009, the day President Barack Obama was inaugurated, until Oct. 15, 2010, for the Obama administration to add $3 trillion to the federal debt.
Gateway Pundit's Jim Hoft picked up the story, noting “That didn't take long. The Obama administration has now borrowed $3 trillion, according to the U.S. Treasury Department. But look what we have for it... 9.6% unemployment and a record national deficit.” Similarly, Doug Powers, of MichelleMalkin.com, chimed in, under the headline “Miracle Worker: Obama Matches 214 Years Worth of US Debt in Less Than 24 Months” by writing “President Obama, assisted by his willing accomplices in Congress who have helped swipe the national credit card like giddy teenage girls at the mall with daddy's Visa, have made history.”
The reality:
These bloggers' claims that the total outstanding debt of the U.S. government has increased by slightly more than $3 trillion dollars since Obama's inauguration are completely accurate. The accuracy though, ends there.
First of all, as Media Matters and others have repeatedly documented, the large short-term deficits the nation is facing are emphatically not the fault of the current leadership. Since none of it seems to have sunk in, we'll do point this out again.
Here's what the budget picture looked like a few weeks before Obama took office:
Year
2009
2010
Total
Revenues
2,357
2,533
4,890
Outlays
3,543
3,236
6,779
Deficit
-1,186
-703
-1,889
And here's what it looked like as of August 2010:
Revenues
2,105
2,143
4,248
Outlays
3,518
3,485
7,003
Deficit
-1,413
-1,342
-2,755
Here's the difference:
Change in Revenues
-252
-390
-642
Change in Outlays
-25
249
224
Total Change in Budget Balance
-227
-639
-866
All dollar amounts are in billions. Official data sources use fiscal years instead of the inauguration as a starting point, but the general argument remains the same.
What do these charts show? First, that before Obama took office the United States was projected to run a deficit of nearly $1.9 trillion in this period. Second, they show that between the time Obama took office and the time CBO released their August 2010 update, the total deficit had risen by $866 billion. Finally, the charts shed some light on the source of this expansion. Approximately three-fourths of the increase in the deficit comes from a collapse in revenue -- a direct result of the recession. Paul Krugman, in a recent blog post, noted this point with a handy graph.
Bottom line: Saying that “The Obama administration has now borrowed $3 trillion” is technically true, but unconscionably misleading.
Second, and more significantly, the fact that the nominal amount of debt accumulated in the past 2 years is roughly equal to that of the first 214 years of the United States is absolutely meaningless. There are two main reasons for this: One dollar today is equal to a lot less than a dollar in 1776, and represents a drastically smaller share of the economy.
If this is unclear, consider this example. A billion dollar deficit in a 2 billion dollar economy would be worrisome. A billion dollar deficit in a 200 billion dollar economy is hardly worth blinking over. While Hoft and company point out how much the US government has borrowed, they don't place it into the proper context of how much the US economy currently produces or how much it produced in the 1776-1990 period. Same thing with inflation: If the value of a dollar today is 5 percent of what it was a century ago (which it is, roughly), then the value of a trillion dollars of debt is also 5 percent of what it was a century ago.
Not only is this not an apples-to-apples comparison, it's not even apples to oranges. It's more like comparing an abacus to an iPhone. That's why the points made by Hoft, CNS, and Powers are meaningless. If they had taken the time or effort to put together numbers that match up with reality, maybe we would have something to debate about. But that would require a modicum of competence and intellectual integrity. Too much to ask, I suppose.