||11-13-2012 04:15 PM
Obama and the national debt
Obama and the National Debt: President Misleads Public on His Role In Exploding the National Debt
Not surprisingly, President Obama is blaming the Bush administration for the debt racked up under his own presidency. Recently, on 60 Minutes, the president was asked to respond to critics who point out that the deficit has gone up $5.2 trillion since he took office. In response, Obama claimed:
“Over the last four years, the deficit has gone up, but 90 percent of that is as a consequence of two wars that weren’t paid for, as a consequence of tax cuts that weren’t paid for, a prescription drug plan that was not paid for, and then the worst economic crisis since the Great Depression. Now we took some emergency actions, but that accounts for about 10 percent of this increase in the deficit, and we have actually seen the federal government grow at a slower pace than at any time since Dwight Eisenhower, in fact, substantially lower than the federal government grew under either Ronald Reagan or George Bush.”
Fact checkers from the Washington Post, Factcheck.org, and Politifact.com all agreed these claims are simply false. Obama’s assertion is based upon a Congressional Budget Office projection from January of 2001. The CBO had projected $5.6 trillion in surpluses from 2001-2011. As is so often the case, the government agency grossly overestimated revenue and underestimated costs. By 2002, the CBO was projecting a surplus of $313 billion. Instead, there was a deficit of $158 billion, a net change of $471 billion. Considering the 2001 CBO projection was so wildly off just a year later, it is striking how often it is cited by Obama and his allies.
So why was the CBO’s 2001 projection so horrendously misguided? When the CBO put out their budget projection in 2002, they explained, “[I]nvestment plunged beginning late 2000. A sharp drop in profit margins, probably tied to excess capacity stemming from over-optimism ... worsened that fall ... the contraction in the share of GDP claimed by corporate profits is expected to be one of the worst since World War II.” The economy entered a recession in mid-2001; then came September 11, 2001. “Investors, consumers, and businesses lost confidence. As a result, stock prices fell, consumers bought less, and firms sharply reduced orders for new equipment. Lower demand in turn led business to reduce their workforces.” Also, “[C]apital gains realizations in calendar year 2001 fell by nearly 20%.” Corporate tax receipts fell from 2.1% of GDP in 2000 to 1.7% in 2001, and were projected to fall to 1.5% by 2002.
The CBO also grossly underestimated outlays in their 2001 projection. As a result of the recession and September 11, spending increased significantly. By 2002, the CBO was projecting unemployment compensation to soar 67%, and those on food stamps to increase 19%. Of course, there was also the war in Afghanistan. Authorization for the use of force in Afghanistan was bi-partisan and virtually unanimous.
As we are all too aware, that $5.6 trillion in surpluses never materialized. The increased spending, tax cuts, wars, economic downturn, interest payments, and September 11 all contributed. As indicated above, we have added $5.2 trillion to the national debt since Obama took office. For the president’s claim to be accurate, only $520 billion of that amount would be attributable to his policies.
Obama attributes all of the war spending to Bush. Since taking office, President Obama has actually increased spending on the war in Afghanistan, sending more troops to the country.Spending in Afghanistan went from $38 billion in 2009 to $87 billion in 2010 and $98 billion in 2011. Obama requested $115 billion for both wars in 2012. “The cost from 2010 to 2012 is more than $400 billion, excluding interest.”
Obama extended the Bush tax cuts for everyone in January of 2011, and cut payroll taxes, reducing projected revenues by nearly $800 billion. He also proposes to continue the Bush/Obama tax cuts for everyone making less than $250,000 in 2013. The Recovery Act cost $800 billion through 2011, and his health care reform actually increased funding for Medicare Part D, closing the “doughnut hole.”
In these measures alone, Obama’s policies account for more than $2 trillion in deficit spending. Meanwhile, the Bush tax cuts reduced expected revenues by an estimated $369 billion from 2009 to 2010. Medicare Part D cost $150 billion from 2009 to 2011. Secondary to the recession, “economic and technical changes” accounted for $1.96 trillion in reduced revenue from 2009 to 2011.
As such, Bush's policies amounted to a total of $519 billion (reduced tax revenue + Medicare Part D) in added deficit spending, together with some portion of the Iraq war spending, which was essentially wound down by the time Obama took office.
In his claim, Obama had the 10% part right. However, that 10% was more properly attributed to his predecessor’s role in creating the deficits from 2009-2012. The remainder is attributable to Obama’s policies (~40%), the recession (~40%), and other (~10%).
Similarly, the president’s claim that federal government grew at a slower pace than at any time since the Eisenhower administration has been widely debunked. The Washington Post, Associated Press, and Factcheck.org all agreed the statement is patently false.