There’s been a fair bit of hemming and hawing over the news that the federal debt has now surpassed $12 trillion. Sen. Judd Gregg (R-NH), widely known for his fiscal hawkishness during Democratic administrations, couldn’t resist pointing the finger, saying, “this level of fiscal recklessness and irresponsibility should be shocking to the American taxpayer, especially since it is our children and grandchildren who will be forced to grapple with the consequences of our debt.”
While this milestone is actually nothing of the sort – $12 trillion is gross federal debt, not the debt owed to the public, which is the much more important figure – you can be sure that many people will use this as another excuse to condemn what Gregg called “expensive expansions of government” and to blame all of our fiscal problems on President Obama. But here are three facts about this year’s deficit that you probably won’t hear much about:
– Less than one-fifth of all the new spending in FY 09 came from Obama initiatives;
– The big deficit this year was as much a product of a huge decline in tax revenues as it was an increase in spending;
– The overall cost of the decline in tax revenues was four times larger than the cost of Obama’s initiatives.
These facts don’t fit with the narrative of an Obama “spending binge.”
It’s true that there was a big increase in spending in fiscal year 2009. Total spending rose by about $600 billion, not counting payments for interest on the debt (which actually declined in 2009 because of extraordinarily low interest rates).
But fiscal year 2009 began on October 1, 2008, when George Bush was still president, and by the time President Obama took office more than 40 percent of that new spending had already been committed, in the form of TARP and the bailouts for Fannie and Freddie. Another quarter of the new spending came from growth in entitlement programs and unemployment insurance, which was certainly outside the control of a new president.
The American Recovery and Reinvestment act, on the other hand, was responsible for only 18 percent of the new spending in 2009. So, spending did rise, but only one in five of those new dollars came from Obama’s initiatives.
And spending is only half the story. The other half is that tax revenues plummeted this year to their lowest levels since 1950.
Johnny-come-lately fiscal hawks almost never talk about the tax side of the balance sheet when they rail against deficits, because it’s more politically expedient to point fingers at the Recovery Act. But the size of the decline in tax revenues was four times larger than all the Recovery Act spending this year!
This year’s deficit was eye-catching, but it didn’t just appear out of the blue on January 20th, and it isn’t just a product of new spending. If you hear some pundit or politician claiming that a huge expansion of government is responsible for our fiscal woes without mentioning President Bush and with nary a word about tax revenues, you can be pretty sure that he’s more interested in scoring political points than actually solving problems.