President Obama has referred to “casual dishonesty” in the budget debate, and he’s on to something. There has been a tremendous amount of dishonesty on the subject of spending from both Democrats and Republicans. But I’m not sure that his administration is entirely innocent. Consider the following remarks from the president’s jobs summit:
We have a structural deficit that is real and growing, apart from the financial crisis.
We inherited it. We’re spending about 23 percent of GDP and we take in 18 percent of GDP and that gap is growing because health care costs, Medicare and Medicaid in particular, are growing. And we’ve got to do something about that.
You then layer on top of that the huge loss of tax revenue as a consequence of the financial crisis and the greater demands for unemployment insurance and so forth. That’s another layer. Probably the smallest layer is actually what we did in terms of the Recovery Act. I mean, I think there’s a misperception out there that somehow the Recovery Act caused these deficits.
No, I mean, we had — we’ve got a 9-point-something trillion- dollar deficit, maybe a trillion dollars of it can be attributed to both the Recovery Act as well as the cleanup work that we had to do in terms of the banks. In turns out actually TARP, as wildly unpopular as it has been, has been much cheaper than any of us anticipated.
But where does the $9 trillion figure come from? Keith Hennessey has scrutinized the $9 trillion figure and found it highly misleading.