The (Amazing) Race has begun
(Carolyn Kaster/AP)
“Over the last four years, the deficit has gone up, but 90 percent of that is as a consequence of two wars that weren’t paid for, as a consequence of tax cuts that weren’t paid for, a prescription drug plan that was not paid for, and then the worst economic crisis since the Great Depression. Now we took some emergency actions, but that accounts for about 10 percent of this increase in the deficit, and we have actually seen the federal government grow at a slower pace than at any time since Dwight Eisenhower, in fact, substantially lower than the federal government grew under either Ronald Reagan or George Bush.”
“Taxes are lower on families than they’ve been probably in the last 50 years. So I haven’t raised taxes.”
— President Obama, interview on CBS’s “60 Minutes,” recorded on Sept. 12, 2012, and aired on Sept. 23
There are a lot of numbers and assertions in these statements by the president. We will primarily focus on the first statement, since it raises interesting questions of presidential responsibility.
But we do want to note the tax statement, since we seem to have a rare moment when Obama and GOP rival Mitt Romney appear to agree. Here’s what Romney said on Tuesday: “I admit this, he has one thing he did not do in his first four years, he’s said he’s going to do in his next four years, which is to raise taxes.”
Generally, Republicans have argued (and the Supreme Court agreed) that Obama’s health-insurance mandate is a tax. The health-care law also included a number of taxes aimed mostly at the wealthy. But broadly speaking, Obama has reduced taxes for most Americans, so much so that the Congressional Budget Office says that effective tax rates are at their lowest point in three decades.
In any case, let’s examine more closely Obama’s two key assertions during 60 Minutes — that only 10 percent of the current deficit comes from his policies and that the federal government has grown under his watch at a “a slower pace than at any time since Dwight Eisenhower.” Are those claims correct?
The Facts
In support of the first statement, the Obama campaign pointed us to a chart made by the Treasury Department.
This chart looks backward, to the reasons why the projected $5.6 trillion surplus from 2001 disappeared. It is based on these CBO data, which the Fact Checker column first brought to public view in early 2011. So we are quite familiar with it. This is how we broke down the numbers then in explaining the reasons for the disappearance of the surplus and the rise of monster deficits:
Increased spending (discretionary and mandatory): $4.3 trillion (36.5 percent)
Incorrect CBO estimates (economic/technical reasons): $3.3 trillion (28 percent)
Tax cuts: $2.8 trillion (24 percent)
Higher interest costs: $1.4 trillion (12 percent)
Obama, in his remarks, doesn’t really say he is talking about the disappearance of the surplus. In fact, he prefaces his statement with a misleading phrase — “over the last four years” — which suggests he is only talking about the period in which he was president.
Because of compounding, however, the Treasury Department chart overemphasizes the impact of the events that happened early in the process (such as the Bush tax cuts) and minimizes more recent events (such as Obama’s policies.)
Under this theory, one could go back to the Lyndon Johnson administration and blame him for a huge chunk of the deficit, since he signed Medicare and Medicaid into law. In other words, every “old” policy will almost by definition appear to contribute much more to current deficits than recent policies.
Using the same CBO data, former Bush administration official Charles Blahous portrayed it another way, which gives an entirely different picture. This chart, drawn from a much longer study by Blahous, tries to place the tax cuts into context. (He also does not break down the spending into categories, such as the wars.)
As can be seen above, CBO’s errors in forecasting played a large role in the demise of the projected surpluses. CBO had kept counting on a gusher of capital gains revenue — and then obviously failed to predict the recession of 2008.
But Obama’s policies also played a big role during his presidency. Using the CBO data for the years 2009-2011, here’s a very rough calculation of the contribution to the deficit. To keep things simple, we did not try to allocate interest expense, and we did not include categories of spending or taxes that were difficult to allocate.
The 2009 fiscal year is especially hard because that budget year is so much of an amalgam of Bush and Obama policies; we essentially split the cost of the Troubled Asset Relief Program between the two of them. Since this is not intended to be exact, but illustrative, we have rounded numbers and percentages:
2009:
Economic/technical differences: $570 billion (46 percent)
Bush policies: $330 billion (27 percent)
Obama policies: $325 billion (27 percent)
2010:
Economic/technical: $815 billion (51 percent)
Bush: $225 billion (14 percent)
Obama: $565 billion (35 percent)
2011:
Economic/technical: $720 billion (46 percent)
Bush: $160 billion (10 percent)
Obama: $685 billion (44 percent)
Clearly, a huge part of the deficit problem — about half — stems from the recession and forecasting errors. But Obama’s policies represent a big chunk as well. (We would welcome suggestions for fine-tuning these numbers.)
Now one could argue, as Obama’s defenders do, that his policies to combat the recession were intended to be temporary. But he has also supported permanently extending the Bush tax cuts for Americans making less than $250,000, which by itself will shrink federal revenues for years to come. That means these are no longer Bush’s tax cuts, but Obama’s.
Moreover, an important part of Obama’s legacy — the health-care law — has not even taken full effect yet. The CBO calculated virtually no impact on the deficit in the first 10 years after enactment, but all bets are off after that.
Finally, Obama claims that “we have actually seen the federal government grow at a slower pace than at any time since Dwight Eisenhower.” We regret to say that the president is repeating a widely debunked column that appeared on MarketWatch earlier this year. We devoted three columns to the column’s faulty logic, and FactCheck.org and the Associated Press also said it was bunk. (PolitiFact said it was “half true.”)
Not to get too deep in the weeds again, but the claim is based on treating 2009 (as we said, an amalgam of Bush and Obama policies) as actually Bush’s year, and then ignoring Obama’s proposed spending increases in the future. Such calculations help to dramatically shrink the growth of spending under Obama relative to other presidents.
The Pinocchio Test
We are not trying to make excuses for the fiscal excesses of the Bush administration — and Congress — in the last decade. But at some point, a president has to take ownership of his own actions.
Obama certainly inherited an economic mess, and that accounts for a large part of the deficit. But Obama pushed for spending increases and tax cuts that also have contributed in important ways to the nation’s fiscal deterioration. He certainly could argue that these were necessary and important steps to take, but he can’t blithely suggest that 90 percent of the current deficit “is as a consequence” of his predecessor’s policies — and not his own.
As for the citing of the discredited MarketWatch column, we have repeatedly urged the administration to rely on estimates from official government agencies, such as the White House budget office. It is astonishing to see the president repeat this faulty claim once again, as if it were an established fact.
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Nick Wagoner Senior Writer
