I’ve had to write about the deficit and debt too much this election season (and no, Republicans, they're not the same thing), but there are a few things everyone should know:
1. President Obama is barely responsible for the current level of debt. In fact, the only two presidents since 1980 to have seen an overall reduction in deficits were Clinton and Obama. It is also an absolute falsehood to claim, as Karl Rove’s Crossroads GPS says in an ad and Romney claimed at both debates, that Obama has added $5 trillion to the debt.
2. Almost all of the $16 trillion in debt we see right now was put there by Republicans, not Democrats. In fact, a case can be made that even most of the current deficits are the responsibility of George W Bush and Congressional Republicans, not President Obama and Democrats.
3. The current level of national debt is not unprecedented and it is not catastrophic. It is actually manageable, as long as we get it under control within the next few years, and that is not possible through spending cuts only.
To say Barack Obama is responsible for the deficits from the second he was inaugurated is just simpleminded and inaccurate. By the time President Obama was inaugurated, fiscal year 2009 had been underway since October 1, 2008. Fiscal years don’t run from January through December, they run from October through September. By the time Obama took the oath, the bail-outs had already been doled out, and the economy was losing 800,000 jobs (read, taxpayers) per month. The bail-outs, the big stimulus and several smaller stimuli stopped the bleeding much quicker than otherwise; otherwise, the deficit for Bush’s last year, which was FY2009, which ended up being $1.7 trillion, might have been closer to $2 trillion. In fact, the numbers for the first quarter 2009 bear that out. The first quarter of FY2009, whch ended a month before Obama was inaugurated, saw a budget deficit that had already topped $485 billion. (Source) Multiply that by 4, and that’s how much the deficit could have been, had Bush been there for the full fiscal year.
Of course, Bush wasn’t finished adding to the deficit. In addition to the jobs that were bleeding, there were also his tax cuts for the rich, which were costing more than $80 billion each year, and the two wars that he started but couldn’t seem to finish, and which he left off the books for President Obama and the Democratic Congress to fund. That came to an additional $150 billion that Bush had left off the books. It was the last time the wars were off the books.
By the time FY 2009, which was Bush’s baby all the way, was over, the national debt topped $12.5 trillion. Clinton had left Bush 43 with a debt of just over $6 trillion, and surpluses that had the projected debt sitting at just under $5 trillion by 2008. Bush added at least $6 trillion to the debt in eight years, including $4 trillion even before he crashed the economy.
The current deficit is also not increasing, as Republicans claim, it’s shrinking. The last Bush budget deficit was $1.4 trillion. The deficit for FY 2010 was was $1.33 trillion. The deficit for 2011 was $1.3 trillion, and the 2012 deficit ended up at $1.089 trillion. Not only that, but the projected deficit for FY 2013 (which has already started) is $889 billion.
In any case, if you remove the cost of the wars, the cost of the Bush tax cuts and the interest cost on only the debt Republicans added over the past 32 years, the current deficit would be roughly $650 billion lower. That means, at worst, during a deep recession and slow recovery, Obama is "responsible" for perhaps $1 trillion of the $16 trillion debt.
For all of their talk about the deleterious effects of deficits and debt, Republicans only seem to care when Democrats are adding debt. And they don’t seem to mind running the debt up very high. None other than Vice President Dick Cheney once famously said, "Reagan proved that deficits don't matter,..” (Source)
He’s wrong, of course. Deficits do matter sometimes, and don’t matter others. You should collect enough in taxes to pay for things that may happen when the economy’s going well, so that you can borrow money when the economy’s in the tank, as was the case in 2008. It was foolish and stupid to run up the debt during the bubble economy, when everyone thought the economy would go up up up and never stop. Likewise, it is equally foolish to cut government spending during a recession. That’s like getting laid off at your job and selling all your suits, so that you can’t look for another o replace it.
Not passing the first stimulus was irresponsible, yet every Republican voted against it. Not passing a second and third stimulus was equally as irresponsible, yet Republicans fought every attempt tooth and nail. One of the main purposes of stimulating the economy is to reduce the deficit, not increase it. Every dollar the government spends in the economy, building infrastructure and other projects we need to build actually circulates through the economy multiple times, and brings in more tax revenue than it costs in government spending.
And look around you. We need roads. We need public transportation. We need a new electrical grid that is far less dependent on oil. We need street cleaners and we need more police, firefighters and teachers, not just because they provide a public service, but because they spend their earnings in the economy. If 660,000 public workers (taxpayers) hadn't lost their jobs due to budget cuts the GOP Congress insisted on, another $40-50 billion would be lopped from the deficit, because they would be paying taxes, plus everyone who worked for a business with which they spent their money would also be paying taxes and spending money in the economy. If they’d passed the American Jobs Act and the original Highway Bill, Republicans could’ve shaved another $50-60 billion from the deficit.
And let’s get real about the national debt.
One way Republicans like to scare you is by throwing the number in your face; $16 trillion! (gasp!). I won’t say that’s not a lot of money, or that there isn’t some inherent danger to keeping it that high. But while the debt is too high, it’s not unmanageable yet. It’s not even at a record, when compared to the economy as a whole.
Look at this chart. At its peak, right after World War II, the debt was 120% of GDP, and by 1980, without even runng major surpluses, the national debt fell to 31% of GDP. Keep in mind; that was when Reagan was running on a promise to balance the budget, because he felt Carter’s deficits were out of control. Yet, when Reagan was finished in 1988, the debt had more than tripled and was about 58% of the national debt. By the time Bush 41 was finished, it was at about 63%. Clinton had us going in the right direction, but Bush 43, with his massive tax cuts, mainly for the rich, the debt exploded again, and it’s now about 98% of GDP.
The debt is not at a record level, really. And obviously, we have two templates for getting the debt down. We know how to do this. For the 25 years following the war, we became the most prosperous nation in the history of the world. We built a model economy during that time; a model that Republicans fail to follow these days. We grew the economy in large part based on government spending, which increased every year from 1947 (the first fiscal year to not include many World War II expenses) until 1972.
We spent money to help teens and soldiers attend college, because doing so creates a workforce with greater skills and earning potential. We started to invest in public transportation systems, because, when it's easier for folks to get back and forth to work, businesses have a larger pool of workers to choose from, and it makes roads last longer.
There are things to build now, just as there were then. We need a new energy infrastructure and more highways and more high speed rail systems and a whole lot more. We have to start manufacturing more of our own goods, because dependence on other, potentially unstable countries is a disaster waiting to happen. We also need a complete overhaul of our energy production system, and an all new electric grid to power the next generaton of technology. Building more things and improving the infrastructure will cost a lot of money in the short run, but it will create jobs, taxpayers and economic activity in the long run. Running a high deficit for a year or two will actually reduce future deficits. Unfortunately, Republicans don’t care about the deficit or the debt, no matter how much they whine about it when Democrats are in charge.
One last thing.
It is not possible to balance the budget simply by cutting spending. Do the math some time; it’s not possible to do all of the things we want the government to do and simply “trim” $1 trillion. We have to raise revenues. There are two ways to do that; raise taxes to cover expenses, or increase the number of taxpayers.
The second one makes the most sense, of course. But it takes investment, and Republicans can't see government spending that way. It has to end.