Political Animal


May 20, 2011 2:05 PM The drivers of our debt, cont’d

By Steve Benen

Congressional Republicans frequently talk about their desire to talk about “the drivers of our debt.” I’m not sure why — an honest look at the larger fiscal dynamic is invariably embarrassing for the GOP.

This is usually the point at which I link this famous chart from the Center on Budget and Policy Priorities, which tells quite a story. It shows that to understand why the deficit is as large as it is, one need look no further than the Bush-era tax cuts and Bush-era wars.

But the fine folks at the CBPP have a new image that, to my mind, drives the larger point home even better. Chad Stone, the CBPP’s chief economist, posted this item this morning showing the drivers of U.S. debt over a two-decade span. Stone explained:

The complementary chart … shows that the Bush-era tax cuts and the Iraq and Afghanistan wars — including their associated interest costs — account for almost half of the projected public debt in 2019 (measured as a share of the economy) if we continue current policies.

Altogether, the economic downturn, the measures enacted to combat it (including the 2009 Recovery Act), and the financial rescue legislation play a smaller role in the projected debt increase over the next decade. […]

We focus here on debt held by the public, which reflects funds that the federal government borrows in credit markets to finance deficits and other cash needs. That’s the proper measure on which to focus because it’s what really affects the economy. We compare it to GDP because stabilizing the debt-to-GDP ratio is a key test of fiscal sustainability. […]

[S]imply letting the Bush tax cuts expire on schedule (or paying for any portions that policymakers decide to extend) would stabilize the debt-to-GDP ratio for the next decade.

And here’s the image:

A GOP House member recently said it’s “insane” to hold Bush-era policies responsible for current and future debts. But that’s the opposite of the truth — policies adopted during the Bush era carry lasting consequences and left a mess that will take a very long time to clean up.

Republicans may find these details inconvenient, but that doesn’t make them false.

Steve Benen is a contributing writer to the Washington Monthly, joining the publication in August, 2008 as chief blogger for the Washington Monthly blog, Political Animal.


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  • Robert Waldmann on May 20, 2011 2:20 PM:

    I particularly like the illustration of the effects of "TARP Fannie and Freddie" which is about as wide as the line separating "debt without these factors" from "recovery measures." Remember TARP is pure political poison utterly hated by the vast majority of US citizens.

    Also I predict that the estimated costs of TARP Fannie and Freddie will be reduced the next time they are adjusted for new information. I have Predicted this many many times (although I skipped the latest chickening out) and have always been right.

    The reason is that the accounting for those programs is different from the accounting of all other programs. The prediction is *not* the CBOs best forecast of the effect on the debt. It includes a correction term for risk as if large deficits were especially costly when things go generally bad (that is as if we need to fear automatic stabilizers). This makes no sense.

    The reason for the rule is that, without that rule, it would appear that we could eliminate the problem by selling more bonds and investing the proceeds in a portfolio of all outstanding risky assets.

    Put the past two paragraphs together and note that I just claimed I know what to do about the problem and that it requires no spending cuts or tax increases. This is my view. I have stated it often. I have read no serious counterarguments. I mean not just that no couterarguments convince me, I mean they all are "you have to be joking." I am not joking.

  • Anonymous on May 20, 2011 2:27 PM:

    I expect the GOP to not call them "Bush Era Tax Cuts" real soon. The current tax rates were done under Obama and they are "Obamas" tax rates to the extent they are bad for the economy. They are "Bush" rates to the extent they are good for the economy.

  • whichwitch on May 20, 2011 2:37 PM:

    Steve, you silly goose. After all, these are facts. Since when did any Republican believe in such inane inconvenienances?

  • Dave Munger on May 20, 2011 2:52 PM:

    This is a good chart, but you should realize that it can also be reversed to show the "drivers" of the debt as social security, medicare, medicaid, and food stamps. Just put them on top in red and put the Bush tax cuts down in the gray section.

    It's nice to have propaganda like this to pull out when the haters start hating, but it's not really a starting point for a reasonable debate about what to do about the deficit. The fact is, we're not pulling out of Afghaniraqbya anytime soon, raising taxes will be a tough sell, and no one wants the guvmint interfurrin with their God-Given right to collect medicare and social security in exactly the format God Intended.

  • kevo on May 20, 2011 2:53 PM:

    If the Republicans keep insisting on being the "fairest in the land" without recognizing the realities facing their collective constiuencies, they may only find a poisonous apple at their disposal as they attempt to prevail in this current national economic debate regarding debt relief!

    In this case, the poisonous apple is obstruction to any sane remedies to our out-of-kilter revenue to expenditure ratio caused by the recklessness of the Bush years!

    Don't expect anything but flak and gibberish on this serious matter from Republicans - they got nothing! -Kevo

  • ComradeAnon on May 20, 2011 4:47 PM:

    It really doesn't suprise me that a bagger like Grimm believes that the deficits are due to Obama. This is what he's been taught. Maybe new members of Congress should have to go through a class on how the mechanics of the budget work. That if Obama comes up with a $3.8 trillion budget, that most of it is a continuation of previous policies and previous years. Maybe that should be taught in school. Naw, they'd never allow it.

  • Doug on May 20, 2011 5:27 PM:

    Dave Munger @ 2:52 PM -

    Sorry, but Social Security is NOT a "driver" of debt in any sense. SS is fully funded through 2036 (I believe) by current taxes and treasury bonds. After that, assuming the cap isn't raised, SS will pay out at 77% of CURRENT rates; ie, $1000 per month now would be $770 in 2036. These figures are NOT adjusted for inflation as we don't know how much, if any, there will be.
    The biggest problem with Medicare is, as with ANY medical insurance plan, the fact that costs increase even faster than inflation; mainly due to technological advances but also greed. If all citizens were part of some form of national health, single payer, for example, then the health authority (National Health Administration?) would have a great deal more power to make deals with pharmacy corporation and the like.
    In suc a case (national health coverage), Medicaid would disappear and would, I'm certain, be sorely missed by the Republican/Teabaggers. Food stamps were originally conceived as an efficient, cost-effective way to ensure the poor got a proper diet, as well as a way to rid government storehouses of food surpluses purchased to maintain agricultural prices.
    The costs for Iraq have already decreased and that will continue. At present we're scheduled to begin withdrawing troops in three years and I can't see that NOT occurring. How long withdrawal takes is another matter but, as the chart demonstrates, funds to pay for any continued presence there could easily be covered by a very small increase in revenues.
    The true "drivers of debt" are the Bush tax cuts (see chart). Once those are gone, 40-45% of the deficit disappears. An improving economy removes another 25-35% of the deficit, leaving a gap between revenue and expenditures of anywhere from 35% down to 20%. Trimming the Defense Department by 10-20%, for ezample, would cover nearly that entire amount.
    The present frenzied attempts by the Republican/Teabaggers to focus ONLY on spending are a recognition that much of the "deficit crisis" is made up and will disappear WITHOUT DOING ANYTHING! They have a short window of opportunity and it's our duty to ensure that the window stays closed and the opportunity passes.