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Deficits & Debt

Sep 24, 2012

 

I have seen a number of attempts to show that President Obama has been more fiscally responsible than his Republican predecessors because deficits and debt have grown more slowly under his watch than theirs. If I follow these arguments, they are not without a point but they are also blatant attempts at denying the obvious.

The argument seems to go like this: between 1982 and 1989 (the years for which Reagan produced budgets) the public debt increased by 252%. From 2010 to 2013 (estimated, obviously), the federal debt will increase by 130%. See! Obama increased the debt by a lot less than Reagan.

To see the problem with this argument, consider two businesses. One begins a four-year planning period $100 dollars in debt and ends $150 in the hole. The other begins with a debt of $100 million and ends with a debt of $125 million. Since the former saw an increase in debt of 50% and the latter an increase of only 25%, the former must be doing twice as badly, no? Of course not. The former debt can be wiped out with a successful carwash. The latter will require a lot of carwashes to erase.

In fact, you can tell little or nothing about the financial condition of these two firms by the information given. You would have to know a lot more about their assets and revenues and whether the former is growing faster than their debt. A teenager mowing lawns might be crushed by $150 in debt whereas a large firm might find $25 million in an old coat pocket, metaphorically speaking.

There is a point to the comparison, however. The best way to measure federal debt is by the percentage of the Gross Domestic Product, or GDP, it represents. Federal debt declined from a high of 122% of GDP in 1946 (there was a war on) to a low of 33% in 1981. That’s a little misleading, since in the sixties and seventies government financed unfunded spending by printing money, which led of course to inflation. Reagan, to his credit, broke the inflation cycle; however, and not to his credit, under his watch the debt to GDP ratio began to grow. President Clinton, to his credit, managed to bring the ratio down from the high sixties to a low of 54% in 2001 (Bush 43’s first year in office). It has climbed steadily since, from 59% in 2002 to 70% in 2008.

Now we can evaluate the Obama years. In 2009, as a result of Bush 43’s efforts to combat the recession, the debt to GDP ratio jumped to 85%. In 2010, Obama’s first year of budgeting, it jumped almost 10% more. In 2014, the first year of the next presidential term, the Office of Management and Budget estimates the deficit at 108% of the GDP. We are already at WWII levels of federal debt with no comparable war on.

Of course Obama is not to blame for being in a much more difficult financial position than Reagan, or the Bushes, or Clinton. Likewise, he gets no credit for sophistic statistical comparisons. A 250% increase over a $1.1 trillion debt is a lot less severe than a 130% increase over a $14 trillion debt.

In constant dollars, Obama has piled on more debt in four years than Bush 43 did in eight. As a percentage of GDP, his deficits total more two to one over those of any president from Reagan on. The federal debt to GDP ratio is twice what it was during any Reagan year. In every budget or plan that the President has submitted to scoring by the Congressional Budget Office, the deficits will climb dramatically upward only a few years from now. To suggest that President Obama has been in any conceivable way fiscally responsible is to be in deep denial about our situation.

 

Dr. Ken Blanchard is a professor of Political Science at Northern State University and writes for the Aberdeen American News and the blog South Dakota Politics.



Comments

07:11 am - Mon, September 24 2012
Bernie said:
Not a bad analysis in my opinion, but we should also examine where did the Obama spending come from? Was it from two wars that were started under Bush? A prescription drug plan that wasn't paid for? The worst recession since the '30s? And then tax cuts for the wealthy to boot?

11:57 am - Mon, September 24 2012
floyd r turbo said:
Don't worry. Kristi will fix it.
01:24 pm - Mon, September 24 2012
JUlie Gross said:
"Was it from two wars that were started under Bush? A prescription drug plan that wasn't paid for? The worst recession since the '30s? And then tax cuts for the wealthy to boot?"

Gee, nobody asked the same question when Reagan or GHW Bush or GW Bush were running for re-election!

Reagan and GHW Bush was still paying for the cold war, unfunded SS and Medicare benefits, LBJ's war on poverty and WWII. Reagan's still hounded for his run up of the debt.

Then GHW Bush had to take care of the Democrat mess known as Keating 5/Saving & Loan Debacle--he never grumbled about what his predecessors spent. He probably lost the '92 election because of Republican defections to Perot.

Did GW Bush bitch about the Clinton's "peace dividend" and "CIA can't deal with bad people policies" mess that turned into 9/11? Did GW Bush blame Clinton for having to spend billions on wars (widely supported by Dems and Barry Obama in particular) to stop swatting the flies--flies that multplied like flies while Clinton dropped his drawers in the oval office? ?

It amazes me the extent at which folks who held past presidents accountable for the spending during their terms invent this new "blame the predecessor" standard for Barry Obama.

Fact: the spending on two wars is just shy of a trillion. Barry Obama has spent nearly 2 trillion on bailouts alone since he entered office. And that's beyond what Obamacare will cost. So, let's take out 1 trillion of the 6 trillion debt run up by Obama; that still leaves 5 trillion in 3.5 years.

By Obama's own words, that's unpatriotic and irresponsible.

01:33 pm - Mon, September 24 2012
JUlie Gross said:
"And then tax cuts for the wealthy to boot?"

You mean the same tax cuts for the rich that Barry Obama extended in late 2010, and who justified it by saying that it created economic stability in troubled times? What has changed, except waging class warfare?


In any case, tax cuts DO NOT contribute to "increased spending". That's like saying that since my boss decided to cut my salary, I have to borrow more to pay for the same lifestyle, and then to borrow EVEN MORE to buy myself more stuff because I decided to have three more kids.

My boss does not OWE me any raise. And if my income is cut, I do NOT have to borrow to continue spending as before, or spending EVEN MORE than before! I CUT SPENDING.

This isn't rocket science. But how would we know when Obama outsourced NASA to Russia?
09:42 am - Wed, September 26 2012
JUlie Gross said:
From The Washington Post:

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)


The president said on 60 minutes that 90% of the on-going annual TRILLION dollar deficiits was due to Bush.

Lies, lies, and more lies. Er, bumps in the road.

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