Star Spangled Staggers

US politics from outside the beltway

Who ran up the US deficit? Clue: it's not Obama

Republicans are demanding deficit reduction through spending cuts alone - but the Bush-era tax cuts

By Samira Shackle Published 26 July 2011 18:06

As the political deadlock over the US debt ceiling continues, it is worth taking a moment to remind ourselves the source of America's current economic woes. The New York Times published the following chart last weekend:

Obama deficit chart

George Bush inherited a surplus. This chart shows that the main causes for the swing from surplus to deficit were his tax cuts, and the billions spent on war. This was compounded by unexpected recessions in 2001 and 2008/9. Obama's policies do add to deficits, but by a comparatively negligible amount.

If those tax cuts -- which have had a hugely detrimental effect, as the chart shows -- ended as planned in 2012, future deficits would instantly be cut by half. These are the same tax cuts which Obama agreed to extend back in December 2010, in one of the first bruising battles with Republicans since their mid-term gains in November.

This makes frustrating reading -- as we speak, Republicans are steadfastly refusing to accept any tax increases. Conversely, Democrats do not want to add further cuts already limited social programmes for the poor and the elderly, and a public pension scheme. However, the basic figures are on the side of the Democrats, as the chart shows that these cuts would not be sufficient to fill the shortfalls created by these tax cuts are too large to be filled with spending cuts alone.

Obama has called for a combination of spending cuts and tax rises for the rich. While it is clear that the Republicans are motivated by politicking -- delaying any rise in the debt ceiling to the run-up to the presidential race -- nor is Obama making his case clearly enough. The clock is ticking, but as all too often in American politics, the loudest voices are those of small-state, pro-elite conservatives.

Hat-tip: Marbury

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13 comments

Thu, 2011-08-04 18:56 — anonymous (not verified)

Dear Hayward,

What good are high taxes if nobody pays them. Reagan lowered the taxes to boost the economy. More spending= more taxes. Whether or not the national debt increased does not mean that he collected less taxes. It means that he still did not have enough money to pay for the defense of the country. Furthermore, you neglected to mention that unemployment was 7.1% at the start of his first term (Thanks to Carter)and 5.5% by the end of his second term. G. H. W. Bush was not as successful in that area. I would think he pleased you more by lowering U.S. deficit than Reagan, since you seem to be only concerned about deficit. But you still blamed Bush! It's all Bush and Reagan's fault, to paraphrase. Actually, it's Reagan's fault in his quest for higher employment. By the way, Jimmy Carter dids not do this. His unemployment ratings were lower at times, but ultimately stayed at 7.5% when he started and when he finished. What about Bill Clinton? Let's give him a round of applause, seriously. He took it from 7.3% to 4.2%. Good job Clinton. Also, I give a nod to Carter, Bush Sr., and Reagan for serving in our armed forces. By the way, even though I don't agree with Carter's policies, I think he is a great man. Anyway, Let's go back to Reagan. Inflation started at 11.83 in his first term. (from 5.2 at the start of Carter's first term.) G. H. W. Bush's term beagn at 4.67 and ended at 3.26. Clinton's ended with 3.39. Good job, all except Carter. Well, okay job for Clinton. It looks pretty good during Bush's term until 9/11 and the began of a series of U.S. led wars in the Middle East. Now, how do you fight a war without spending a lot of money. Are we supposed to give our men swords and shields and tell them to charge until out of breath. Or do we let 2,000 Americans die and ignore them as they launch attack after attack on us. Ignoring them might work when a schoolboy threatens you with a black eye, but this is the "Big Boy" world. We sent our troops out there with the best equipment we had to minimize casualties. I am assuming that you bahsh the government for war casualties, yet you have openly whined about the cost of the war. Safety costs money. So which do you want, lower costs with no safety for our troops or no costs and no safety for our civilians. You've obviously rejected the third choice. By the way, how many of the presidents that I have mentioned before havemn't had a major crisis to deal with.

Thank you to these Presidents for fulfilling their obligations in the way that they thought best, even if it may have not been THE best way.
Thank God for our armed forces and the brave sacrifices of our men and women in arms.
Finally, God Bless America

Sat, 2011-07-30 15:18 — Hayward (not verified)

It was the Republicans under their hero Reagan with the so called Reaganomics when the US economy started down ever increasing slippery slope from creditor to debtor nation.

In 1981, shortly after taking office,The Gipper complained of "runaway deficits" that were then approaching US$80 billion, or about 2.5% GDP. But within only two years his policies had succeeded in enlarging the deficit to more than US$200 billion, or 6 % GDP.

At the end of the Reagan/Bush era it was down to US$150 billion, still almost double what it had been under Carter. However the National Debt had climbed from US$995 billion, when Reagan took office, to $4 trillion by the end of Bush1's presidency. Reagan and Bush Administrations increased it as a % GDP from 26% to 42%.,

Clinton managed hold/wind back both of them in returning the budget to a surplus of some US$280 billion and reducing the National Debt to 35%
GDP..

But George, The Faux Texan and late encumbrance in the White House, even managed to outdo "The Gipper" and his own Dad.

He set another unenviable record. The deficit was to be $482 billion in the 2009 budget moving from black to red ink in the order of US$750 billion from the end of Clinton's term.

Partly caused by the Iraq Fiasco and the Afghan Imbroglio, The Three Trillion Dollar War. This the only conflict since the War of Independence to be fought on credit. Next came the Wall Street Tsunami which washe over the world and led to the GFC, the Global Financial Chicken that came home to roost.

It was also under The Faux Texan that the US debt limit was raised seven times.

All of which left a huge and noisome pile of financial and fiscal chicken ordure for any incoming Administration, Democrat or Republican.

So much so that currently the USA needs to borrow about 40% of the funds needed to keep the it running.

It is interesting to note that from 1978-2005 with 2 Democratic and 5 Republican Administrations these figures.

Democratic Federal Spending up by 9.9%. Federal Debt by 4.2%, GDP by 12.6%.

Republican Federal Spending up 12.1%, Federal Debt by 36.4% , GDP by 10.7%

Fri, 2011-08-12 14:08 — Tommy (not verified)

Try publishing something that is true for a change...In February 2011, Barak Obama's deficit exceeded the deficit incurred during the entire year of 2007!!! Once again, you have proven yourself ignorant!!!

Thu, 2011-08-11 07:10 — Jake Lockley (not verified)

Clearly leaving out critical facts.

http://www.kpcb.com/usainc/

Tue, 2011-08-09 16:16 — John (not verified)

this is absurd propaganda, made more absurd by its factual presentation.
mr obama like mr bush before him is wasting huge amounts of money in overseas adventures. the US national debt nearly doubled under bush increasing ~5trillion from end of 2000 to end of 2008. mr obama has increased the deficit by nearly 4 trillion in less than 3 years and will quite likely squander more money in 4 years than mr bush did in 8.

Sun, 2011-07-31 03:33 — Allen Scott (not verified)

So what happened to OBAMACARE on Obama's side of the graph? And why does he get a pass on the Iraq and Afghanistans wars when our troops are still in the arena? Oh what happened to LYBIA? What about the stimulus money being added into the budget every year forward? Seems to me there is a lot missing from your comparative graph.

Wed, 2011-07-27 09:00 — Eddy S (not verified)

it's not just bush era tax cuts it's reckless spending, the plain fact is that during unprecedented booms in finance and property - tax revenue was rolling in but this was getting spent just as quick, that is the real problem. this is the same issue with the UK economy.

david miliband understands this, ed does not and balls certainly does not - he wouldn't either as he would have to take some blame.

Wed, 2011-07-27 09:02 — REPAY

Spot on it was mainly Bush...State spending on wars, pork, and expensive homeland defense really hurts the US. The fantasy that you can borrow your way to salvation is not a one-party phenomenom - it is shared by the whole western world.

Wed, 2011-07-27 09:19 — REPAY

Eddy - I assume Balls is banking on the ruse that if the recovery is poor he will sound the plausible alternative and if not he will claim his approach would have made it happen earlier. The truth is that: 1. The cuts have not resulted in any decrease in expenditure/borrowing. 2. Borrowing more money to spend on our unreformed public services is a huge gamble. Luckily the gold price has gone up 600% so what little is left of our gold is looking good! Balls & Brown ignored advice and sold our biggest financial asset having driven down the price by announcing their intention to a sniggering financial market.

I am now listening to Tessa Jowell talking about the Olympics as a UK regeneration project! Our children will curse the last government!

Thu, 2012-02-02 05:15 — John Cheese (not verified)

Since Jan 20, 2009-start of The Won's regime: Unemplyd up 2mil, to 14 million, gas prices up 85% to $3.40/gal, Fed Debt up 39% to $14.7 Trillion, Food Stamps up 41% to 45 million recipients, Health insur premiums up 23% to $4,129 avg, Home values down 11% to $172,600 avg, Americans in poverty up 6.4 million, to 46.2 million people. This is Carter on steroids...

Wed, 2011-07-27 10:35 — swatantra

Just hearing Seb talk about how Regeneration has improved the toxic polluted wasteland in that neglected part of London. And its thanks to Labour for the Dome/O2, Canary Wharf, and the Olympics and the Jubilee Line. Well done Labour!

Fri, 2011-07-29 13:11 — John Taylor (not verified)

The big banks have a pattern of getting small countries into an extreme debt condition then pulling the plug and plunging the population into poverty. Money goes from the poor to the ultra rich.
We see a similar plan now in America with demands that the debt be levied onto the backs of the poorest while the ultra rich get more.