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:
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.