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[kentay]

The Truth About Who's Responsible For Our Massive Budget Deficit
Henry Blodget on |July 11, 2011|
   
 
Image:

Say the words "budget deficit," and Republicans and Democrats begin screaming at each other about who's to blame.
Republicans howl that the deficit is President Obama's fault, because he has exploded government spending and failed to fix the economy.

Democrats roar that President Obama inherited a catastrophic economic mess, that this mess will take time to clean up, and that our massive deficit is therefore President Bush's fault.

So, who's right?

Let's start by looking at the deficits under Presidents Bush and Obama. Then we'll figure out what has caused them. Finally, we'll assign some blame.
 
First, the chart below shows the progress of the annual deficits under Presidents Bush and Obama.

President Bush, you will recall, inherited a budget surplus (the first in decades). Then, hit with a recession, he took the budget into deficit. Then he cut taxes, growing the deficit to $400 billion a year. Then, the economy boomed between 2005 and 2008, reducing the deficit to $200 billion a year. Then, the financial crisis hit, and the Bush deficit ballooned to $400 billion again.

In early 2009, President Obama took over, amid the worst recession since the Great Depression. President Obama signed an $800 billion spending increase at the same time that GDP and tax collections tanked. The combination of these two factors--growth in spending and a drop in revenue--exploded the deficit to $1.4 trillion. In 2010, the economy and tax collections improved modestly, and the deficit shrank to $1.3 trillion annualized.

So, what actually caused these deficits?

The chart below provides a look at federal receipts (taxes) and spending during the same period. (The deficit is the difference between them).

Republicans howl that President Obama has exploded the size of federal government spending in his short tenure as President, and it is true that he has increased it. But President Bush actually increased federal spending by more than 2X as much as Obama has. So it is unfair to lay the explosion in spending at the feet of President Obama: Both presidents are responsible.

The increase in government spending, meanwhile, is actually NOT the only factor that has caused the deficit. The other factor--equally if not more important--is the fall-off in government revenue (tax receipts).

This second and larger factor can be blamed on two things: First, the Bush tax cuts, which reduced revenue, and, second, the weak economy, which has reduced the incomes and capital gains upon which most federal taxes are based.
 
In the chart below, you can see what happened to both federal receipts (red line) and spending (blue line) over the past decade.

President Bush cut taxes in 2001 and 2003. These tax cuts hit federal revenue, while federal spending growth continued apace. This combination ballooned the deficit in the early years of the Bush presidency.

By the middle years of the Bush presidency, however, on the strength of the housing boom and strong economic growth (much of which now looks like a debt-fueled mirage), federal revenues began to grow rapidly. By 2007, in fact, the gap had almost closed.

But then the bottom fell out. The housing bubble burst, the financial crisis hit, and the economy plunged into recession. And then President Bush handed President Obama the worst recession in more than 70 years and left Obama to clean up the mess.

This recession clobbered federal revenues (tax receipts--red line), which still have not regained their 2007 bubble highs. President Obama's stimulus, meanwhile, helped add about $600 billion to federal spending (blue line). The combination of these two factors ballooned the deficit from $400 billion when President Bush left office to ~$1.3 trillion now.
 
Image:      St. Louis Fed

So, who's responsible for the massive deficit?

This is a tougher question.

We know WHAT is responsible: The combination of weak government revenues (tax receipts) and a vast increase in government spending.

But figuring out WHO to blame is a more subjective exercise.

If you believe that the growth during the "Bush Boom" was a debt-fueled mirage--a theory that is certainly supported by the evidence--then you can lay the blame squarely at the feet of President Bush. His combination of reduced taxes and increased spending took the US from a surplus to a deficit, and even the economic boom from a massive housing bubble and enormous borrowing couldn't close the gap.

Even if you think the "Bush Boom" was real, moreover, the recession and financial crisis began on his watch, and the deficit was already exploding when President Obama took office. So it's very hard to escape the conclusion that President Bush bears a lot of the responsibility for our current mess.

http://articles.businessinsider.com/2011-07-11/news/30013193_1_budget-deficit-government-spending-tax-collections

[Woody]

Ok kentay, you have identified what you feel, or have been told, is a problem.  What is your solution?

[RWE]

It's pretty obvious that when you look at the bottom chart that it was really irresponsible for obama to spend so much more than the tax revenues that were coming in. But the dumbshit still hasn't slowed spending. Of course he doesn't want to stop the gravy train for his rich friends. More debt means more middle class money goes to the wealthy.

[Woody]

It's pretty obvious that when you look at the bottom chart that it was really irresponsible for obama to spend so much more than the tax revenues that were coming in. But the dumbshit still hasn't slowed spending. Of course he doesn't want to stop the gravy train for his rich friends. More debt means more middle class money goes to the wealthy.

Obama did say that running up that much debt was unpatriotic.

[RWE]

It's pretty obvious that when you look at the bottom chart that it was really irresponsible for obama to spend so much more than the tax revenues that were coming in. But the dumbshit still hasn't slowed spending. Of course he doesn't want to stop the gravy train for his rich friends. More debt means more middle class money goes to the wealthy.

Obama did say that running up that much debt was unpatriotic.

[kentay]

It's pretty obvious that when you look at the bottom chart that it was really irresponsible for obama to spend so much more than the tax revenues that were coming in. But the dumbshit still hasn't slowed spending. Of course he doesn't want to stop the gravy train for his rich friends. More debt means more middle class money goes to the wealthy.

Obama did say that running up that much debt was unpatriotic.

RWE, what have you done for your country? Are you unpatriotic? kentay

[Woody]

It's pretty obvious that when you look at the bottom chart that it was really irresponsible for obama to spend so much more than the tax revenues that were coming in. But the dumbshit still hasn't slowed spending. Of course he doesn't want to stop the gravy train for his rich friends. More debt means more middle class money goes to the wealthy.

Obama did say that running up that much debt was unpatriotic.

RWE, what have you done for your country? Are you unpatriotic? kentay

And away he one's...


Kentay, you don't remember this: