I have tended not to involve myself in the finger-pointing over the budget deficit, finding myself more inclined to look forward at the policy changes that will be needed to right our listing fiscal ship of state than to look backward and try to assign blame. Simply stated, I think that trying to take either credit or blame for the policies that brought us to where we are now is an enormous over-simplification.
At the left is a graphic snapshot from the Center for on Budget and Policy Priorities, a progressive think-tank, taken in December of 2009 of the budget deficit and its projected expansion into the future. You can click on it for a larger image. Although the story it tells is one of the Bush era taxcuts taking an ever-growing toll on the deficit, I suspect that, were the snapshot taken based on President Obama’s proposed 2011 budget, it would look somewhat different.
However, that’s not my point. My point is that I see no coherent way to gain partisan political advantage from the argument. President Obama has produced deficits higher than any in the post-war period however you measure them by responding to the economic situation in which he found himself, the product of the actions of the Congress and his predecessors, Republicans and Democrats alike, in the way that he thought was best and as his advisors counselled him, in embarking on a large fiscal stimulus via spending, the complex of grants enacted last spring and referred to as the stimulus package, now known to amount to something over $800 billion.
That was precisely the fix in which President Bush found himself at the start of his presidency. The economy was in recession as a consequence of events and actions that took place before he assumed office. Previous policies put in place and the state of discourse left few alternatives.
He had to do something. That was assured by his father’s loss in 1992. The historically extremely mild 1990-1991 recession was exploited to good effect by the Clinton campaign. It’s the economy, stupid! President George H. W. Bush’s assertion that it’s the business cycle, stupid (or words to that effect), lost him the election.
The alternatives were to embark on an ambitious spending program as President Obama has done or to cut taxes. There’s some empirical evidence (including that produced by Obama economic advisor Christine Romer) that suggests that tax cuts are more effective than spending for economic stimulus (i.e. the multiplier is higher). I, for one, would like to see stronger empirical evidence one way or the other.
The present structure of taxes and state of political discourse ensures that any tax cut will be a tax cut for the rich. The tax that falls on people in the lower two income quintiles most heavily is the payroll tax or FICA. Any cut in FICA reduces the revenue for the Social Security trust fund and that’s invariably pilloried as a frontal assault on Social Security. Cutting business income taxes is lambasted as being in the pockets of the evil corporations.
Willy-nilly presidents must do something and for President George W. Bush something was tax cuts. For President Obama it’s spending. Each has selected the solution with the least political pain (for him) and the most political gain (for him) under comparable circumstances and the result is a country lurching towards insolvency.
So, the answer to the question posed by the title is that they are our deficits and we need to muster the wits and will to deal with them. I am not optimistic.