The Center on Budget and Policy Priorities has been tracking the growth of our deficit since 2002. Last week they released a “sneak peek” at the final analysis due at the completion of the long range study on national debt in 2011. What’d they find?
For both 2009 and the ten-year period, this massive deterioration is partly due to weaker-than-expected performance of the economy, along with other “technical” factors that are beyond policymakers’ control. But these economic and technical factors account for less than one-fourth of the fiscal deterioration for each period, and they are not responsible for the return of deficits. Even given the disappointing performance of the economy since 2001 relative to CBO’s earlier projections, there would have been large surpluses in every year — totaling $3.4 trillion over the 2002-2011 period — if policymakers had enacted no tax cuts or program increases since 2001.
The dominant factor in the unprecedented fiscal deterioration thus was not the performance of the economy. Nor was it increases in domestic programs. The key factors have been large tax cuts and increases in security-related programs. For fiscal 2009, some $1 trillion of the $1.3 trillion deterioration in the nation’s fiscal finances stems from policy actions, and tax cuts account for 42 percent of this $1 trillion deterioration. Increases in military and other security programs account for another 40 percent of the deterioration.
This gives you a little perspective on the makeup of our growing deficit. The largest contributor has not been “entitlement programs” or a broad conceptual “spending,” but rather very specific spending (Iraq), and the Bush Tax Cuts.
John McCain is promising to not only extend those tax cuts, but increase them. In fact, McCain’s economic proposals would slash revenue from it’s 25 year average of 18% GDP to a low we haven’t sunk to since the early 60′s: 16% GDP. 2% sounds meager, but in the scope we are addressing here, it’s a large amount of revenue to cut from a policy that also plans to extend the same tax cuts that have contributed (again to the tune of 42% makeup) to our blossoming debt.
Anyone who manages a checkbook might find themselves asking at this point: How does John plan to pay for it? So far, he’s offered magic money trees an $18 billion cut in “earmarks” (everywhere but Alaska, of course!) and a generous estimate of $15 billion cut from “wasteful spending” programs, which would include after-school programs, student aid, public broadcasting, and job training. Cuts to Social Security have also been hinted at. Sounds super, huh? There’s only one problem:
$18 billion + $15 billion = $33 billion. The estimated deficit by 2009 is $546 billion. You finish the math.
- Jason
Interesting information. The blame is unfairly placed here, however. It should be understood that tax cuts without spending cuts are dangerous because it demands deficit-spending. I don’t find a problem with the Bush tax-cuts; tax cuts stimulate the economy. But I do find the amount of spending by the Bush administration to be objectionable- that is the real culprit.
Here’s a good article outlining this:
http://capmag.com/article.asp?ID=4962
Farmer you bring some good points, I liked the article.
Jason, I noticed in talking of the budget nothing about obamas liberal spending agenda is addressed, or how he plans on paying for his big goverment plans.
I am hoping that McCain/Palin will lower goverment spending, and smaller limited goverment, everybody knows obama doesn’t offer that.
As far as estimated deficits have they ever been right in projecting it in the past?
Tax cuts only stimulate the economy if they are given equitably, otherwise they are just hoarded by the rich because they have no reason to create supply.