Economics
A tale of two charts
I THOUGHT Ezra Klein made a nice point a few days ago when he wrote:
We talk about the budget as the president's budget, and that makes sense, as the president is the one proposing it. But this is also the country's budget. It reflects not just what the president is proposing, but what's actually happening, and what's been happening. It reflects the creation of Medicare (Lyndon Johnson) and Medicare Part D (George W. Bush), Social Security (FDR) and lower marginal tax rates (Ronald Reagan). It reflects economic growth, which can't be traced to any one president, and financial crises, which are similarly diffuse.
This is something Barack Obama has been at pains to point out, as Republicans have attacked him as a profligate spender and runner of deficits. Most of today's borrowing, he has said, is attributable to factors beyond his control. He is essentially pointing people to charts like the one at right.
That's a damning chart. It implicates a lot of people, including some of the same Congressional Democrats who are now joining Republicans in assailing the president for budgeted deficits, but who voted for the Bush tax cuts and the wars in Iraq and Afghanistan. Politically, this is a pretty important chart.
But economically speaking, it's all but irrelevant. To understand why, have a look at the chart below (of debt held by the public as a share of GDP), which is taken from the Congressional Budget Office's report on the long-term budget outlook.
That massive increase there at the end is due to two things: growth in spending on Medicare and Medicaid, and growth in interest payments on the debt. But the real problem is Medicare and Medicaid. By about 2070, spending on Social Security, Medicare, and Medicaid alone will outstrip revenues.
In the end, who caused what deficits when isn't important. What is important is finding some way to avoid that spike. And both parties seem to be a long way away from having anything like a serious discussion about that challenge.
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Considering that we were projecting the elimination of the national debt at the end of the Clinton administration, I'd say that the Bush administration has a lot to answer for: a pointless tax cut combined with a pointless invasion of Iraq showed spectacular fiscal irresponsibility; an amazing, quasi-religious faith in financial markets left us with the biggest economic disaster since the Great Depression. And if I remember correctly, Republicans were running the country, so I have to wonder why anyone would want them running it again - unless they repent, and sin no more.
Great post. One quibble, though- the Bush era tax cuts, I believe, carry sunset clauses to lapse at the end of this year and seem to comprise the biggest hunk of the projections thereafter. If I'm right about that then either the chart's wrong or it assumes that this president and the democratic congress will continue those changes in law, in which case it wouldn't be fair to call that portion Bush- rather than Obama-era.
In this blog, our correspondents consider the fluctuations in the world economy and the policies intended to produce more booms than busts.
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