During the presidential debate in Denver last week, Mitt Romney blamed President Obama for a $5 trillion increase in the national debt. No question, the debt has climbed by that amount the past four years (actually $5.5 trillion). How much are the president’s policies responsible?
The former Massachusetts governor promoted the impression that the president opened wide the spigot of federal spending, He jabbed the president for promising as a candidate to the reduce the federal deficit by half. As it is, the annual deficit has remained in the vicinity of what the president inherited — above $1 trillion. Worth attention is what actually has contributed to the shortfall, each year adding to the overall debt.
The Center on Budget and Policy Priorities, among others, has taken a look. It cites as leading contributors the Bush tax cuts of 2001 and 2003, the wars in Afghanistan and Iraq, plus the impact of the harsh recession. It bears emphasizing that federal tax revenues as a percentage of the overall economy stand at their lowest level in the past six decades. An average share of 18 percent since World War II dipped to 15.1 percent in 2009 and 2010, and increased slightly last year.
That translates into a large gap, especially as spending increases to ease the blow of the recession, from unemployment compensation to expanded Medicaid rolls.
What about the stimulus package, an infusion of $787 billion? Clearly, the spending added to the deficit, especially in 2009, 2010 and 2011. Note that one-quarter of the package involved tax cuts. True, too, is that the stimulus money fades to a small fraction of the deficit by 2015. In addition, the high-profile bank bailout and the cash poured into Fannie Mae and Freddie Mac were launched under George W. Bush. For his part, the president signed legislation reducing the available bailout money from the initial $700 billion to $475 billion.
The stimulus worked. It prevented a deeper recession, among other things, saving or creating roughly 3 million jobs, preventing 7 million people from falling into poverty. In that light, the charge that the president failed to keep his promise about reducing the deficit loses much punch. Look at Britain, or much of Europe. A priority on austerity prolonged the grip of recession.
The argument made by Ben Bernanke, the Federal Reserve chairman, no wild liberal, is that the struggling economy could use more stimulus, to cover temporarily for weak demand. That has been a nonstarter on Capitol Hill, mostly Republicans standing in the way. As a result, the Congressional Budget Office reports modest spending increases of late, as little as 1.2 percent this year.
That is far removed from the average 7 percent annual increases of the Bush years.
Many critics see evidence of an Obama spending binge in the percentage of federal spending as a share of the economy jumping to 25 percent in 2009, the highest level since 1945, and remaining at 24 percent. To be sure, that percentage must be lowered, just as the country must set a path to fiscal discipline, balancing spending restraint with additional revenues. For now, that percentage has more to do with a contracting economy and measures to avoid something worse.