How could he have been so wrong? Although he said “the last four years,” the administration tells us that he was referring to a Treasury analysis of a 10-year period from 2002 to 2011 — which includes all eight years of the Bush administration and excludes the 2012 fiscal year, which ends Sept. 30 with a $1.17 trillion deficit.
We’re also told that Obama meant 12 percent, not 10 percent, and that 12 percent figure does not represent a percentage of cumulative deficits ($6 trillion) during those 10 years. It’s 12 percent of $11.9 trillion — which is the difference between the Congressional Budget Office’s rosy 10-year budget projection issued in January 2001 ($5.9 trillion in cumulative surpluses from 2002 to 2011) and what actually happened ($6 trillion in deficits).
The Treasury Department analysis claims that Obama’s polices are responsible for 12 percent of “the changes in deficit projections since January 2001,” but even that figure is too low, as we will explain later.
The federal government will end fiscal year 2012 in a few days (Sept. 30) with a $1.2 trillion deficit — marking the fourth consecutive year of trillion-plus deficits. In a recent “60 Minutes” interview, CBS’ Steve Kroft asked Obama about the sharp increase in the federal debt since he has become president.
Obama, Sept. 23: First of all, Steve, I think it’s important to understand the context here. When I came into office, I inherited the biggest deficit in our history. And 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 . . .
Obama stated it differently in a speech two days earlier to the AARP.
Obama, Sept. 21: I think it’s important for folks to know that 90 percent of the debt and deficits that we’re seeing right now are the result of choices that were made over the course of the last decade — two wars that weren’t paid for; tax cuts skewed towards the wealthy that were not paid for. So we made some decisions, and then when the Great Recession hit, that meant more money was going out and not as much money was coming in, and that has blown up our deficit and our debt.
Obama’s response leaves the false impression that President George W. Bush and the 2008 recession are responsible for a whopping 90 percent of the deficits in the last four years.
It’s true that Obama “inherited the biggest deficit in our history,” as he said on CBS. By the time Obama took office in January 2009, the nonpartisan Congressional Budget Office had already estimated that increased spending and decreased revenues would result in a $1.2 trillion deficit for fiscal year 2009, which began Oct. 1, 2008. In a detailed analysis of fiscal year 2009, we found that Obama was responsible for adding at most $203 billion to the deficit, which in the end topped $1.4 trillion that year.
But that was just the first of four years of trillion-plus deficits. The last three budgets fall squarely under Obama. And, during that time, the federal government ran up deficits of $1.3 trillion in 2010, $1.3 trillion in 2011, and about $1.2 trillion in the fiscal year that ends Sept. 30 — for a total of nearly $5.2 trillion in deficit spending.
Regardless of how you assess blame, this much we can say with certainty: Obama’s policies are responsible for more than 10 percent of the deficits accumulated over the last four years.
The American Recovery and Reinvestment Act of 2009, better known as the stimulus act, will cost $831 billion through 2019, according to the CBO. The administration estimates the stimulus at $800 billion through 2011.
The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 extended the Bush tax cuts and cut the Social Security payroll tax for two years, as well as provided relief to some taxpayers who otherwise would have had to pay the alternative minimum tax. The 2010 tax act cost nearly $800 billion in 2011 and 2012.
The administration does not take responsibility for all of the spending in the 2010 tax act (which we will detail later). But Treasury accepts that the administration is responsible for another $410 billion in additional tax cuts and spending through 2011.
That means at a minimum the Obama administration is responsible for $2 trillion, or 39 percent of the $5.17 trillion in deficits since fiscal year 2009.
Looking ahead, Obama has promised if reelected to allow the Bush-era income tax cuts to expire for upper-income taxpayers, raising the top two tax rates from 33 percent and 35 percent to 36 percent and 39.6 percent. But he would keep the tax rates at the Bush-era levels for everyone else. Obama’s plan would cost the federal government $3 trillion over 10 years compared with $3.7 trillion if he allowed all of the Bush tax cuts to remain in place.
CBO, January 2001: In the absence of significant legislative changes and assuming that the economy follows the path described in this report, the Congressional Budget Office (CBO) projects that the total surplus will reach $281 billion in 2001. Such surpluses are projected to rise in the future, approaching $889 billion in 2011 and accumulating to $5.6 trillion over the 2002-2011 period.
CBO’s assumptions did not factor in two recessions (2001, 2008), two wars and a slew of legislative changes from the Bush tax cuts to the Obama stimulus.
The difference between the projected surpluses and the actual deficits is $11.9 trillion over that 10-year period. Treasury concluded that Bush policies were to blame for 59 percent and Obama’s policies 12 percent. The rest — 29 percent — were what CBO calls “economic and technical changes,” mostly having to do with changing economic forecasts because of the recessions.
Treasury’s analysis was done by reviewing 36 CBO reports issued over the last 12 years: the biannual Budget and Economic Outlook and the CBO’s annual analysis of the president’s budget. Treasury accounted for the changes in CBO’s revenue and outlay projections during that time period to determine how far the original 2001 CBO projections had deviated and where the deviations had occurred.
But even Treasury’s 12 percent figure is misleading given that Obama was talking about deficits “over the last four years” (CBS interview) and “deficits that we’re seeing right now” (AARP speech).
Deficit spending: It covers deficit spending only through 2011, ignoring the $1.17 trillion deficit in fiscal year 2012 that is about to close.
Bush tax cuts: Treasury estimates the Bush tax cuts, plus interest, cost $3 trillion through 2011. All of that is assigned to Bush. However, Obama supported several of the Bush tax cut provisions, and he has continued those policies and even expanded them. Bush doubled the Child Tax Credit from $500 to $1,000 through 2009; Obama campaigned to make it permanent and, as president, extended it to 2012. Bush expanded the Earned Income Tax Credit; Obama expanded it again in 2009 and extended it for 2010 through 2012. The Bush tax cuts patched the alternative minimum tax, and so did Obama’s stimulus and 2010 tax law. Bush raised the standard deduction for couples to provide relief from the so-called “marriage penalty”; candidate Obama promised to make it permanent and extended the tax relief in 2010 through 2012.
Obama tax cut: The 2010 tax cut legislation signed into law by Obama cost $797 billion, but Treasury assigns only $250 billion of that cost to Obama. Why? It excludes the cost of the legislation for fiscal year 2012 ($422.9 billion) because, as we said, the analysis only goes through 2011. In addition, Treasury assigned a portion of the 2011 cost to Bush — specifically $142 billion in tax cuts for taxpayers earning more than $250,000 — on the grounds that Obama opposed extending the tax cuts for the wealthy, even though he signed the legislation into law.
Defense: Treasury assigns the entire cost of the Iraq and Afghanistan wars — $1.4 trillion, including interest, through 2011 — to Bush. The Obama administration was authorized to spend $160 billion in 2010 (Table 1-4, “Defense-war related”) and $159 billion in 2011 (Table 4, “Overseas contingency operations”) on the two wars — each more than the $140 billion that was authorized in 2009, which was Bush’s last budget. Obama significantly increased troop levels in Afghanistan in both years. CBO says budget authority for the Afghanistan war jumped from $38 billion in 2009 to $87 billion in 2010 and $98 billion in 2011. Obama requested $115 billion for both wars in 2012. The cost from 2010 to 2012 is more than $400 billion, excluding interest.
Josh Gordon, policy director of the Concord Coalition, a nonpartisan group that advocates for “responsible fiscal policy,” notes the president wants to exclude spending on continuing Bush-era tax and war policies. “The problem is those pieces of legislation had his signatures,” he added.
CBO and the nonpartisan Pew Fiscal Analysis Initiative each did their own postmortem analyses of what happened from 2002 to 2011. Without apportioning blame, both reports found the accumulation of legislation changes — tax cuts, war spending and stimulus measures under both presidents — was the “main driver,” as Pew put it.
Pew, April 2011: Fiscal projections a decade out, even by the best analysts, are inherently imperfect, and this fact sheet shows that forecasting uncertainty explains a meaningful part of the revisions to CBO’s debt projections. However, the main driver of the difference between the January 2001 projection and the reality a decade later has been legislative changes.
There is no disputing, of course, that President George W. Bush was president for nearly eight of those 10 fiscal years and holds more responsibility for them than Obama.
But Obama bears more responsibility than he is willing to accept, and misrepresents the Treasury analysis to minimize his responsibility.
The finger-pointing also does not advance the debate over how to solve what everyone recognizes is a huge problem for the next president and Congress.