Obama’s Budget Deficit Heroics
It has been widely reported today that President Obama plans to cut the budget deficit in half by 2013. On the surface, this sounds like a great accomplishment. In fact, if you read the remarks by Press Secretary Robert Gibbs or Obama’s own message at the Fiscal Responsibility Summit, you would quickly conclude that this administration is committed to tight spending controls and economic conservatism. This is just typical White House spin.
While it is true that Obama and team have inherited the largest deficit in the history of the U.S., it is a slight stretch to believe that the $1.3T (that is $1,300,000,000,000.00) was entirely the fault of George W. Bush. Yes, Bush ran up huge deficits which has helped destroy the credibility of the Republican Party. But, the 2009 budget, which runs from October 1, 2008 to September 30, 2009, is largely under the control of Obama, Pelosi and Reid. This budget will include some of the expenditures of the EESA/TARP (not all $700B will be recognized as cost in this year’s budget) and the ARRP (also known as the $787B Stimulus - which also impacts 2009 by “just” $185B) which were both supported by Obama and the Democratic Congress.
Here is a summary of the budget deficits from 1977 to 2013. The deficits from 2009 to 2013 are based on estimating 2009 at $1.3T and 2013 at $533B with a straight-line reduction in between (this is probably unlikely as 2010 will be much closer to $1T). Notice the highlighted area which corresponds to the projections for the Obama administration. The heroic 50% reduction of the deficit doesn’t look so spectacular in the context of history.
Source: FY2009 Federal Budget
Some readers may be quick to point out that we need to look at this in the context of the greater economy… it is common to look at budget items relative to GDP. Here is that graph. Again, I made very simple estimates for GDP for 2009-2013: $14T for 2009 and a $500B increase annually through 2013. The picture is not much more fiscally conservative here as we barely get back to deficit levels of the Bush administration.