Jon's Soapbox
Some Relevant Facts on Annual Federal Deficits
(posted 10/16/2012) - I've been biting my tongue trying not to comment here on the presidential race. The deficit reduction issue, while tangential, is the single metric for which Mitt Romney/Paul Ryan poll well ahead of the Obama administraton.
My problem with the majority opinion that Republicans are more fiscally conservative is that there is no data over the last 40+ years that clearly justifies this polling -- other than the oft repeated Republican mantra that "we are fiscally conservative, as opposed to Tax and Spend Democrats." People grab onto historical memes which are no longer true and I think this is what is being reflected in the polls.
Here is an excerpt from Rachael Maddow's (TRMS) that I believe is factually correct - and yes I realize Maddow is a progressive, liberal partisan. That does not diminish the quality of her opposition research however. As they say, facts are facts; it is only one's interpretation of reality that is variable.
Not all federal budget deficits are equal in their long term impacts. By definition, a deficit occurs when expenditures exceed revenues in a budget period.
The Obama administration has actually decreased total federal spending trends over the last 4 years. The reason for continued deficits is two-fold; state and federal revenue streams have fallen by double digits due to the recession and follow-on stagnation, and the costs of safety net services are up (eg. unemployment insurance payouts, and food-stamp eligibility ).
The Obama administration inherited a 2009 federal budget plan (which went into effect October 2008, 4 months before Obama took office) with an anticipated $1.4 trillion annual budget overrun. Note that Bush ended his 2008 (previous) budget year with an overrun of $460 billion, but his unfunded (off-budget) war expenses for Iraq and Afghanistan added another $190 billion to the total, for an actual $650 billion deficit.
The fiscal 2009 budget contained bailout and stimulus expenditures largely engineered by the Bush administration. Obama owns significantly less than 2/3rds of the 2009 budget overrun (think TARP).
The table above demonstrates that the current administration has reduced the cost of government in each budget year since 2009 - the last budget established by Bush and the Republican controlled congress. But this has still resulted in deficit spending totaling over $4 trillion during Obama's first term - which is what the Republicans have focused upon. According to Republicans Obama owns the fastest net run-up of absolute debt of any administration (true). What Republicans will not acknowledge is that the biggest deficit budget in history was of their making (2009).
Mitt says he won't run an annual deficit, because as a Republican he is fiscally conservative. But when we look back over the last 40 years (ref to the chart above) we see Republican administrations with a history of increasing deficit spending relative to their democratic counterparts. Note the increase in federal debt (deficit spending) during these Republican presidents:
- Ronald Reagan (Jan '81 - Dec '88),
- George Bush I (Jan '89 - Dec '92),
- George Bush II (Jan '2000 - Dec '2008),
Here's a link to a very good synopsis of our national debt history with detailed metrics that provide an overall picture of the two parties' performance with regard to using deficit spending.
All republican presidents have run as fiscal conservatives -- yet the only two presidents since Ike to actually reduce the rate of debt growth during their tenure are Clinton and Obama!
Here's a wikipedia link documenting our national debt. Our total federal debt is near 16 trillion dollars, and our current president is responsible for 3.5 trillion of that amount - in response to the 2nd worse recession in the history of our nation, and the enormous costs of two foreign land wars started by his predecessor!
I think Mitt Romney has a lot of chutzpah when he says Obama's administration is recklessly spending our nation's future; there is a very real ongoing debate about whether it is wise to curtail government funding of programs while the private sector is stagnating with virtually zero demand growth (and when by the way government can borrow money at historically low interest rates).
I don't buy the argument that Mitt Romney and Paul Ryan are fiscal conservatives based on the information they have provided to date about how they would modify our economy and the administration of our federal services.
post-script: Here's the full excerpted text from Tim Fernholz' article at Quartz.com . titled "The US budget deficit is shrinking faster than at any time since World War II" -- keep this in mind when you hear dooms-day predictions about budget deficits and total debt ...
With the fiscal cliff spurring all this talk of deficit reduction in the US, you might think the government hasn't been reducing the deficits it accumulated fighting the 2008 recession, not to mention the two wars of the last decade and the costs incurred by the country's structural imbalance between revenue and spending. But you'd be wrong.
The chart above shows the yearly change in the federal budget balance since 1950. In 2008, the deficit ballooned to nearly $300 billion, and nearly $1 trillion after that in 2009 with the introduction of the fiscal stimulus bill. That year the deficit hit its crisis peak of $1.4 trillion, as the chart below shows. Since then, however, deficit reduction has been the norm. In 2010, the deficit shrank by $120 billion, held steady the next year at $1.2 trillion, and will shrink by another $210 billion this year, for a forecast deficit of $1 trillion.
Now, of course, a $1 trillion deficit is still huge. And because the deficit is huge, America's overall debt is still growing. (We were going to include yet another chart to show that too, but you get the point.)
It's also worth acknowledging that the main reason the deficit is now currently shrinking exceptionally fast is that, before this, it was growing exceptionally fast. The stimulus at a time of economic contraction made the deficit explode. Now the economy is growing, there's less stimulus spending, and some of what was spent to prop up banks got paid back.
Nonetheless, the fact remains that this year's $210 billion reduction in the deficit represents the fastest year-over-year fiscal consolidation since World War II. And as Investor's Business Daily points out, the deficit has shrunk by 3% of GDP over the last three years, slightly more than it did between 1995 and 1998, when the economy was growing much faster than it is now.
The main point to draw from this, though, is a reminder that the fiscal cliff is something of a manufactured crisis. It was designed to solve a disagreement about how fiscal consolidation-shrinking the deficit by means of either tax hikes or spending cuts-should occur, not to enforce debt reduction as a priority. If anything, the challenge before Washington now is not to cut the deficit faster; it's to do it more slowly than the fiscal cliff would, to avoid the risk of hurting economic growth.