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Who Is Responsible for the Deficit?

June 14, 2009

The New York Times analyzed the Congressional Budget Office’s (“CBO”) reports for the last ten years in order to determine the causes of the $1.2 trillion deficit the United States faces each year from 2009 through 2012. Their findings? There are four causes for the current budget crisis:

the business cycle, President George W. Bush’s policies, policies from the Bush years that are scheduled to expire but that Mr. Obama has chosen to extend, and new policies proposed by Mr. Obama…

The first category — the business cycle — accounts for 37 percent of the $2 trillion swing. It’s a reflection of the fact that both the 2001 recession and the current one reduced tax revenue, required more spending on safety-net programs and changed economists’ assumptions about how much in taxes the government would collect in future years.
About 33 percent of the swing stems from new legislation signed by Mr. Bush. That legislation, like his tax cuts and the Medicare prescription drug benefit, not only continue to cost the government but have also increased interest payments on the national debt.
Mr. Obama’s main contribution to the deficit is his extension of several Bush policies, like the Iraq war and tax cuts for households making less than $250,000. Such policies — together with the Wall Street bailout, which was signed by Mr. Bush and supported by Mr. Obama — account for 20 percent of the swing.
About 7 percent comes from the stimulus bill that Mr. Obama signed in February. And only 3 percent comes from Mr. Obama’s agenda on health care, education, energy and other areas.

In summary, President Bush is directly associated with 53% of the deficit creation and 37% is due to the business cycle that unraveled during the Bush presidency as an indirect result of his policies. Ten percent of the deficit creation is directly linked to President Obama. He also gets some blame for the continuation of economically damaging Bush policies like the war in Iraq and the tax cuts for high earners.

The conclusion? If one accepts these numbers, it is hard to see our current budget crisis as anything but the legacy of George W. Bush. The CBO is generally considered to be authoritative–though its numbers need to be adjusted depending on new revelations and developments (the prediction of $800 billion surpluses for 2009, as an example)–and they are generally non-partisan and considered reliable.

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