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Posted Oct 1, 2012, 9:44 am
President Obama is falsely claiming that his administration's policies are responsible for "about 10 percent" of the deficits "over the last four years." The cumulative deficit during that time is nearly $5.2 trillion. Obama signed two bills — the 2009 stimulus and the 2010 tax cut — that alone cost $1.6 trillion during that time, or nearly a third of the cumulative four-year deficit.
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.
Obama on deficits
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.
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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.
Now, affixing responsibility (i.e., blame) for mega-deficits and the ballooning federal debt is filled with ideological landmines. Obama doesn't take responsibility for war spending, for example, even though he continued the spending and, in fact, increased U.S. troop levels in Afghanistan. He also doesn't want to take the blame for the expense of creating the Medicare prescription drug program — although his federal health care law increased funding for it. (The law will gradually close the notorious doughnut hole that caused some seniors to pay nearly $2,000 in prescription drug costs because of a gap in coverage.)
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.
Consider that just two pieces of legislation he signed account for nearly a third of the $5.2 trillion in deficits since 2009:
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.
Treasury on deficits
When we asked the Obama campaign about the president's comments on "60 Minutes," we were referred to a Treasury analysis of federal revenues and outlays from 2002 to 2011. The Treasury analysis is an exercise in fixing blame for how the U.S. ended up with $6 trillion in deficits over the 10-year period instead of amassing $5.9 trillion in surpluses — as originally projected by the CBO in its report "The Budget and Economic Outlook: Fiscal Years 2002-2011."
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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).
Here are some examples of what the Treasury report includes — and excludes:
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.
"This whole debate really is missing the point," Gordon said. "The point is where do we go forward from where we are, and who has a plan to reduce the deficits over the long term."