With all the hollering about the latest deficit projection — a very scary $9 trillion over 10 years — it’s instructive to think what led to the gap.
There’s plenty of blame to pass around, but just seven months into his first term, it’s hard to fault Barack Obama.
Yesterday, we noted that a John McCain presidency would have likely produced a deficit this year only 7% less than Obama.
But might we have been in a better position if we’d had a President Gore?
Today, Paul Krugman looks at the eight-year Bush fiscal legacy, saying that we’d be in much better shape without $2 trillion in tax cuts and the $700 billion Iraq war.
NYT: Without these gratuitous drains on the budget, it seems fair to assert that we’d be coming into this economic crisis with a federal debt around 20 per cent of GDP ($2.8 trillion) smaller than we are. And that, in turn, means that we’d be looking at projected net debt in 2019 of around 50 per cent of GDP, not 70.
And that would definitely not be a scary number. Net federal debt was 49 per cent of GDP in 1993, at the end of the Reagan-Bush years; Bill Clinton did move to reduce that number, and succeeded, but the nation wasn’t facing imminent crisis.
The bottom line, then, is this: the irresponsibility of the Bush years has left us poorly positioned to deal with the current crisis, turning what should have been an easily financed economic rescue into a more difficult, anxiety-producing process.
Derek Thompson of The Atlantic adds this analysis:
Atlantic: Part of this is unfair — with the government running a surplus in the late 90s, it was inevitable that the next administration would offer some kind of tax break. But the vast majority of Krugman’s calculus is spot on, and he doesn’t even mention other expensive policies like Medicare D. It’s been well-reported that the nearly $2 trillion deficit under Obama this year really has very little to do with Obama’s policies (see this essential David Leonhardt piece). In fact, Obama’s most criminal contribution to our deficit is his continuation of Bush policies, including tax cuts for households making under $250K and the ongoing wars in the Middle East.
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