Your average poorly informed lefty (but I repeat myself) will reliably tell you that our current fiscal straits are the result of three things: 1. Bush’s wars; 2. Bush’s tax cuts for the rich; 3. Bush’s bank bailouts.
That is not true, of course: The main bank bailouts (odious as they were) have been paid back, often at a profit. The money-losing parts (and the likely money-losing parts) are the ones insisted upon by Barack Obama and his Democratic colleagues: the foreclosure-prevention programs, the endless maintenance of Fannie Mae and Freddie Mac, etc.
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The Iraq War, in its most expensive year, cost $140 billion, according to the Congressional Budget Office. Its total cost over the years is estimated at about $700 billion — a good deal less spending than, say, Obama’s stimulus package. It is not, and has not been, an exceptionally large driver of our deficit spending.
Our deficit is running around $1.6 trillion. If we took all military spending — not just the Iraq and Afghanistan wars, but the whole shebang — and cut it to $0.00, we’d save about $664 billion a year. Iraq and Afghanistan will cost about $170 billion combined in FY2011. Ending the Bush tax cuts for “the rich” — for the $250,000-and-up crowd, in Obama’s formulation — would put on average about another $80 billion a year into Treasury coffers. (CBO estimates the ten-year cost of those tax cuts at $800 billion.) The spending on the wars and the forgone revenue from the Bush tax cuts do not add up to much of that $1.6 trillion deficit: a little less than 16 percent.
The tax cuts for the unrich were a good deal more expensive, which is why Obama’s rhetoric on the tax cuts sort of makes my head hurt: The president says he agreed to tax cuts for “the rich” only to preserve tax cuts for “the middle class” — which is to say, he agreed to a mere $800 billion in tax cuts that he didn’t want in order to preserve a considerable $2.2 trillion in tax cuts that he did want — and then argues that our problem is too many tax cuts, two-thirds of which he was so intent on keeping that he took the other third, too. But even that $2.2 trillion over ten years would not make much of a dent in our $1.6 trillion annual deficit.
And just who are these “rich”?Under Obama’s arbitrary, politically minded cutoffs ($200,000 for an individual, $250,000 for a couple), a public-school administrator earning $130,000 a year married to a pharmacist earning $125,000 a year and raising four kids is rhetorically lumped in with “millionaires and billionaires,” as the president put it, and desperately in need of a tax hike — but a single guy earning $198,000 a year is in the middle class, and his $2.2 trillion in tax cuts must be protected.
Definitional quibbles aside, the war spending and the Bush tax cuts don’t add up to a whole lot in the context of the $1.6 trillion deficit. What does?
The Department of Health and Human Services will see more than $900 billion in outlays in FY2011. About $83 billion of that is discretionary spending on things like the Centers for Disease Control. Almost all of the rest is Medicare and Medicaid — the two programs that President Obama has vowed to shield from substantial reform of the sort envisioned by Rep. Paul Ryan. The other big driver of spending, as the president himself acknowledged yesterday, is Social Security, meaningful reform of which he also promises to resist.
Obama’s big plan for the health-care entitlements is appointing a committee, called the Independent Payment Advisory Board (IPAB). This committee will be composed of experts. (Really.) And they will, the president promises, expertly discover ways to reduce Medicare spending. At the end of that sentence is an invisible asterisk: The committee is forbidden to change anything about the structure of Medicare, to increase premiums, to change cost-sharing arrangements, etc.
Great article, Kevin. If the American people would analyze facts the way you do, there would be a lot more problem-solving and a lot less finger-pointing. Unfortunately, most Americans are more familiar with the talking points of their favorite political party than with the truth. During the Hannity show last evening, a perfectly reasonable and polite Obama voter made the point that the President shouldn't be expected to clean-up in two years the mess that was made during the previous eight and not a single person sitting on the panel challenged that statement, probably because most agree with her.
The media has done its job so well that even the most intelligent and reasonable Americans believe that it took the incompetent - and not very intelligent - George Bush only eight years to bring the greatest nation in the world to the brink of economic disaster, which included tricking the geniuses on the Democratic side of the aisle into authorizing two wars they now tell us they never supported. And two years into his Presidency, the ghost of George Bush caused Barack Obama to take credit for extending tax cuts for the rich he believes are bad for the economy.
Great article and timely! I'm in the throws of arguing this point with my mother in law who is a die-hard democrat. She of course thinks the deficit is all because of "Bush's Wars". She did not even mention the tax cuts or the bailout of that matter.
Question. I was under the impression that our entire military spending averaged around 20% of the budget yet the $664 b cited in the article equates to about %40 of the deficit. Just trying to make sure I can back up the earlier claim. Thanks!
The usual lib-progressive "thiefs" will be here at NRO soon enough to bash your piece but at this moment they are busy gathering their "talking points"...no doubt you'll be ready!!!
Lefty's problem is that the class warfare they've encouraged for decades may still be working, but they hate so many groups - the vast numbers they were able to play in the past have dwindled to a more even playingfield.
Obama insists he doesn't need a tax cut? Well,everyone doesn't have all the perks of the Presidency at their disposal. I'll be interested to see just how much money he's sheltered to avoid paying taxes on it. How many deductions will he take advantage of since he KNOWS his private spending of those funds he is hoarding is NOT as effective as having the government spend it? Hypocrisy? Of course!
Remember the token offer Boehner put out there about returning his paycheck should the Govt. Shutdown? Where is a similar challenge by Obama for Congress and people who dont need the breaks, to refuse the tax cuts and deductions; to expose the greedy Republicans, who only protect their self-interests?
Where, in the search for new revenue sources, is the proposed taxation of campaign donations? If each candidate for office had to pay x% on that "income"... Think of the spending the government could do? Because we all know it would never be used for debt/deficit reduction.
Revenues were 20.6 percent of GDP in 2000 and 18.5 percent of GDP in 2007, at the peak of the business cycle before the recession reduced them to 14.9 percent of GDP, where they have been for the last two years. (The postwar average is about 18.5 percent of GDP.) Without the Bush tax cuts – and those added by Obama – revenues would likely be more like 17.5 percent of GDP, which is where they were at the trough of the last three recessions.
If revenues had been 2 percent of GDP higher over the last 10 years, the federal debt would be about $2.5 trillion smaller. Instead of having a debt of about 60 percent of GDP last year, it would have been about 44 percent. And that doesn’t take into account all the interest that would have been saved that now adds about $60 billion to the deficit annually. Together, higher revenues and lower interest spending would have reduced last year’s deficit by one-third.
Oh my, a breath of fresh air, some thing that actually makes sense that a lumpkin like me can understand!
Oh Kevin, by the way I caught you on C-span over the weekend, you rule, dude, can't wait to read your book!
I think you make some good points, but you can't completely absolve Bush of any responsibility for our debt and defict. I have to agree with SmithersJones, who points out how much smaller the debt and deficit would be without the cuts. Plus, Bush was a spender, not a saver. So, while I think Obama has some responsibility for our current fiscal mess, Bush bears an equal amount too.
SmithersJones is absolutely on the wrong track here and BG has the right mantra: it is not a revenue problem, it is a spending problem.
What the progressives get wrong is that all of the government spending, social or military, has done precious little to develop the economy of this country. We accept monopolies no where else except in government because monopolies concentrate power and reduce quality. Why do progressives not connect the dots?
I'm not sure how the free market solves elderly health care either. I'm not convinced that private insurance has any interest in insuring the elderly without any backing by the government. The free market does not work for health care because insurers make profit by denying care.
matsutov66, I am a senior over 55 and plan to opt into the premium support provided by Ryan's P2P. So not "every time". Medicare has some distinct disadvantages in being minutely controlled by the government, and not being accepted by many doctors. If the govt cuts payment rates, even fewer doctors will accept it, unless Congress legislates that they have to, in which case we will have a worse doctor shortage than we already do. Medicare may provide insurance coverage, but I have never been cured by insurance, only by actual medical care.
KW, why can't the government discuss financial matters in terms of annual expenses? Normal people don't do ten-year budgets, even if they do budgeting at all. The ten-year projections are useful for showing long-term effects of the current budget, but the numbers overwhelm most people who get them confused with annual numbers. For example, the cutting of 4 or 6 trillion dollars is referenced in some places without the caveat that it's a ten or twelve year figure.
On top of that, a slow decline in the deficit isn't enough. We need a backup plan for if the creditors decide today they will lend us no more. Unlike the average citizen, the nation cannot move in with friends or relatives until the debt is paid off.
Ryan's budget is a joke. Why hasn't Williamson challenged any of its dubious claims?
And is he serious about Medicare "reform" when he says that "premium support would grow relatively slowly, putting pressure on both consumers and providers of health-care to reduce costs." We have a market-based system now that has proven over and over again that premiums and cost increases defy market principles. They rise arbitrarily and at what ever rate the market will bear. How is that good?
Social Security went into the red in 2010. For nearly all of the years since it was passed in the 30's it has been in the black. The government has taken that excess revenue and spent it since day 1. The government took the excess, loaned it to itself in exchange for worthless bonds that can only be redeemed by printing more money or bringing in more tax revenue.
I believe the transition from Social Security going from being a net profit to a net loss in recent years explains a lot (though not all) of the explosion in the debt over those same years. Through the surplus years, we were deluded into thinking we could afford government functions that in fact we could not afford long term. Now we have all those functions that we have become accustomed to and the big Social Security bill has come due. Hence the explosion of debt. Not the only driver, but I believe the biggest.
I don't think it is Bush or Obama or any individual's fault. I believe at the root it is the fault of Roosevelt and EVERY politician since.
Our current crop of politicians has been handed a 75 year old mess and they are slowly coming to grips with it. They will eventually figure it out because reality will force them to. It is just a matter of how painful it will be.
ARegularGuy says we have a "market based" health care system in this country today? If only NRO provided emoticons, this would be the ultimate ROTFLOL post.
I think would be very useful is if you could graphically show how much wealth needs to be confiscated to pay off the debt. For example, the debt would be payed off if everyone with over 3 million in assets would turn all of it over to the government. You could do the same thing with the deficit versus income i.e. everyone with income over $250,000 needs to be taxed at 100% or everyone earning $100,00 needs to be taxed at 80%. This would be a convenient way to relate taxes to the debt problem.
Keep up the good work.
cellinghaus: I've read elsewhere that the deficit is about 45% of the budget. So if defense is about 20% of the budget, it would make sense that it was also 40% of the deficit.
I hadn't meant to paint W. and the congressional Republicans of his time as anything other than the spending-happy, palm-greasing, half-organized bouquet of fiscal incontinents they were. Don't get me wrong: They were awful. But the real fiscal problem transcends even their awesome awfulness.
