Skip to main content

This week, Rex Nutting of the MarketWatch caused a stir with his analysis correctly showing that federal spending has hardly budged under President Obama, rising at the slowest pace since Dwight Eisenhower was in the White House.  Predictably, James Pethokoukis of the conservative American Enterprise Institute cited the jump in Washington's spending as a percentage of the U.S. economy to comically "prove" that "actually, the Obama spending binge really did happen."  Comically, that is, because Pethokoukis conveniently ignores the staggering economic contraction resulting from the Bush recession, with GDP only last year having returned to 2008 levels.  Even less surprising, the perpetual tax-cutters of the right neglected to mention that thanks to the steep recession and the Treasury-draining Bush tax cuts, total federal tax revenues as a percentage of GDP hit their lowest level since 1950.

On January 7, 2009, Reuters reported that President Bush was bequeathing a $1.2 trillion budget deficit to his successor.  That record gap was fueled by Bush's $700 billion TARP program and plummeting tax revenue due to the shrinking American economy.  As Reuters noted, President-Elect Obama "said he expects deficits around $1 trillion for years, forcing tough budget choices."

Which is exactly what came to pass.  But even with the 2009 stimulus program and the necessarily growing outlays for Medicaid, unemployment insurance, food stamps and other safety net programs, those trillion deficits had less to do with Barack Obama boosting spending than the dramatic loss of tax revenue.  As former Reagan administration official Bruce Bartlett explained in October 2009:

According to the Congressional Budget Office's January 2009 estimate for fiscal year 2009, outlays were projected to be $3,543 billion and revenues were projected to be $2,357 billion, leaving a deficit of $1,186 billion. Keep in mind that these estimates were made before Obama took office, based on existing law and policy, and did not take into account any actions that Obama might implement...

Now let's fast forward to the end of fiscal year 2009, which ended on September 30. According to CBO, it ended with spending at $3,515 billion and revenues of $2,106 billion for a deficit of $1,409 billion.

To recap, the deficit came in $223 billion higher than projected [in January], but spending was $28 billion and revenues were $251 billion less than expected. Thus we can conclude that more than 100 percent of the increase in the deficit since January is accounted for by lower revenues. Not one penny is due to higher spending.

Obama's own tax cuts, the ones contained in the February 2009 stimulus bill, "reduced revenues in FY2009 by $98 billion over what would otherwise have been the case."

This chart shows just how dire the tax revenue drought has become.  For those Republicans who claim "tax cuts pay themselves," it's worth noting that federal revenue did not return to its pre-Bush tax cut level until 2006.  (While this graph shows current dollars, the dynamic is unchanged measured in inflation-adjusted, constant 2005 dollars.)

But that picture tells only part of the story.  Measuring taxes and spending as a percentage of the total U.S. economy reveals revenue at historical lows.  Meanwhile, the temporary jump in outlays as a percentage of recession-reduced GDP, literally the lowest common denominator, is ignored by Pethokoukis.

Of course, that the American tax burden hasn't been this low in generations has long been apparent to honest observers. Thanks to the combination of the Bush Recession and the latest Obama tax cuts, the AP reported last year, "as a share of the nation's economy, Uncle Sam's take this year will be the lowest since 1950, when the Korean War was just getting under way." In January, the Congressional Budget Office (CBO) explained that "revenues would be just under 15 percent of GDP; levels that low have not been seen since 1950." That finding echoed an earlier analysis from the Bureau of Economic Analysis. Last April, the Center on Budget and Policy Priorities concluded, "Middle-income Americans are now paying federal taxes at or near historically low levels, according to the latest available data." As USA Todayreported in May 2010, the BEA data debunked yet another right-wing myth:

Federal, state and local taxes -- including income, property, sales and other taxes -- consumed 9.2% of all personal income in 2009, the lowest rate since 1950, the Bureau of Economic Analysis reports. That rate is far below the historic average of 12% for the last half-century. The overall tax burden hit bottom in December at 8.8% of income before rising slightly in the first three months of 2010.

"The idea that taxes are high right now is pretty much nuts," says Michael Ettlinger, head of economic policy at the liberal Center for American Progress.

Or as one-time Reaganite official Bruce Bartlett explained it in the New York Times a year ago:
In short, by the broadest measure of the tax rate, the current level is unusually low and has been for some time. Revenues were 14.9 percent of G.D.P. in both 2009 and 2010. Yet if one listens to Republicans, one would think that taxes have never been higher, that an excessive tax burden is the most important constraint holding back economic growth and that a big tax cut is exactly what the economy needs to get growing again.
It's no wonder Reuters global editor Chrystia Freeland concluded today, "Like an Anorexic, U.S. Sees Itself Fat with Taxes."

Largely overlooked in the discussion of whether Barack Obama has or has not gorged on a federal spending binge is that state and local governments are on a starvation diet.

In the states, public sector revenue and spending has yet to return to pre-recession levels, with devastating results.  Last week, that Republican bastion the Wall Street Journal concluded that the 600,000 state and local government jobs already lost since December 2008 represented an "anti-stimulus" which has added a full point to America's unemployment rate.  Last month, the Economic Policy Institute noted that the private sector had gained 2.8 million jobs while federal, state and local governments shed 584,000 just since June 2009. EPI concluded that the public sector job losses constituted "an unprecedented drag on the recovery":

"The current recovery is the only one that has seen public-sector losses over its first 31 months."

Back in March, Paul Krugman expressed the same point, but with some inconvenient historical context for the Party of Reagan. "In fact, if it weren't for this destructive fiscal austerity," Krugman explained, "Our unemployment rate would almost certainly be lower now than it was at a comparable stage of the 'Morning in America' recovery during the Reagan era."

We're talking big numbers here. If government employment under Mr. Obama had grown at Reagan-era rates, 1.3 million more Americans would be working as schoolteachers, firefighters, police officers, etc., than are currently employed in such jobs.

And once you take the effects of public spending on private employment into account, a rough estimate is that the unemployment rate would be 1.5 percentage points lower than it is, or below 7 percent -- significantly better than the Reagan economy at this stage.

Earlier this month, Krugman's New York Times colleague Floyd Norris offered more detail on "the Incredible Shrinking U.S. Government."
For the first time in 40 years, the government sector of the American economy has shrunk during the first three years of a presidential administration.

Spending by the federal government, adjusted for inflation, has risen at a slow rate under President Obama. But that increase has been more than offset by a fall in spending by state and local governments, which have been squeezed by weak tax receipts.

In the first quarter of this year, the real gross domestic product for the government -- including state and local governments as well as federal -- was 2 percent lower than it was three years earlier, when Barack Obama took office in early 2009.

On Wednesday, President Obama weighed in on Nutting's finding that "government spending under Obama, including his signature stimulus bill, is rising at a 1.4 percent annualized pace - slower than at any time in nearly 60 years."  Casually reminding Americans of the Republican debt orgy of the Bush years, Obama pointed out:

"This other side, I don't know how they've been bamboozling folks into thinking that they are the responsible, fiscally-disciplined party. They run up these wild debts and then when we take over, we've got to clean it up."
Or as Vice President Dick Cheney famously put it during George W. Bush tax cut and spending binge, "Reagan proved deficits don't matter."  Unless, that is, a Democrat is in the White House.

UPDATE: Politifact ("mostly true") and the Washington Post (three Pinocchios")  looked at Nutting's assertion on Obama's spending and came to opposite conclusions.  But neither seems to mention that the Congressional Budget Office forecast FY 2009 spending at $3.54 trillion (that is, more than Obama actually spent) two weeks before his inauguration.

* Crossposted at Perrspectives *

Originally posted to Jon Perr on Thu May 24, 2012 at 01:44 PM PDT.

Also republished by Community Spotlight.

Your Email has been sent.
You must add at least one tag to this diary before publishing it.

Add keywords that describe this diary. Separate multiple keywords with commas.
Tagging tips - Search For Tags - Browse For Tags


More Tagging tips:

A tag is a way to search for this diary. If someone is searching for "Barack Obama," is this a diary they'd be trying to find?

Use a person's full name, without any title. Senator Obama may become President Obama, and Michelle Obama might run for office.

If your diary covers an election or elected official, use election tags, which are generally the state abbreviation followed by the office. CA-01 is the first district House seat. CA-Sen covers both senate races. NY-GOV covers the New York governor's race.

Tags do not compound: that is, "education reform" is a completely different tag from "education". A tag like "reform" alone is probably not meaningful.

Consider if one or more of these tags fits your diary: Civil Rights, Community, Congress, Culture, Economy, Education, Elections, Energy, Environment, Health Care, International, Labor, Law, Media, Meta, National Security, Science, Transportation, or White House. If your diary is specific to a state, consider adding the state (California, Texas, etc). Keep in mind, though, that there are many wonderful and important diaries that don't fit in any of these tags. Don't worry if yours doesn't.

You can add a private note to this diary when hotlisting it:
Are you sure you want to remove this diary from your hotlist?
Are you sure you want to remove your recommendation? You can only recommend a diary once, so you will not be able to re-recommend it afterwards.
Rescue this diary, and add a note:
Are you sure you want to remove this diary from Rescue?
Choose where to republish this diary. The diary will be added to the queue for that group. Publish it from the queue to make it appear.

You must be a member of a group to use this feature.

Add a quick update to your diary without changing the diary itself:
Are you sure you want to remove this diary?
(The diary will be removed from the site and returned to your drafts for further editing.)
(The diary will be removed.)
Are you sure you want to save these changes to the published diary?

Comment Preferences

  •  Not true. It's both. (5+ / 0-)

    Look at the White House's own data.  Table 1.2 here.  That tracks spending as a percent of GDP.

    From 1997 - 2008, it's 19 - 20%.

    2009 -- 25.2%.

    2010 - 12 -- about 24%.  

    Yes, revenues are down as a percent of GDP, as that chart shows.  But spending is also up as a percent of GDP, as that chart shows.  

    We need to do both -- increase revenue AND cut spending.

    •  As Documented in the Diary... (8+ / 0-)

      ...the spending level for FY 2009 was set by President Bush before Obama even took the oath of office. While spending in09 increased slightly under Obama (Nutting's point), revenue plummeted.

      While some spending cuts will be necessary, these charts help show the size of the revenue hole.  

      •  AA - how does your data treat F'09 (1+ / 0-)
        Recommended by:

        spending on things like the first Obama stimulus which was not part of the early F'09 budget (which Bush actually never signed) but did increase F'09 federal spending?

        Your diary makes a compelling case for letting all the tax cuts expire at the end of 2012, which I favor.

        "let's talk about that"

        by VClib on Thu May 24, 2012 at 03:05:18 PM PDT

        [ Parent ]

        •  FY 09 Numbers Are "Actuals"... (8+ / 0-)

          ...which means that they include the portion of the stimulus spending occurred in 2009, as well as the TARP funds spent during that time.

          It's worth noting that since it was passed in February 2009, the American Recovery and Reinvestment Act paid out $755 billion.  As the government's website points out, about $298 billion has gone to tax relief, $233 billion in contracts, grants and loans and $225 billion in entitlement spending.

          While I have favored the expiration of the Bush tax cuts, letting them all end at the end of 2012 combined with mandated spending cuts would have a substantial hit on 2013 economic growth.  The CBO estimated that growth would slow to 0.5% instead of 4.4% next year if Congress does not act on either.

          My take is that economic growth and job creation has to take precedence over debt reduction.  So, I would probably recommend:

          1.  Allow the upper income Bush tax cuts to expire as scheduled at the end of 2012.  Also, let the estate tax return to 45% starting at $3.5 million (instead of 35% and $5 million now) and let capital gains tax return to 20%.

          2.  Phase in higher tax revenue for everyone else over time (starting in 2014?) to give the economy more time to recover.  This reform could include some simplifcations of the code (ending or limiting some tax deductions in order to keep rates down).

          3. Defer most spending cuts into the future.

    •  You are so wrong... (14+ / 0-)
      We need to do both -- increase revenue AND cut spending.
      Unless your goal is to deepen the recession, it is absolutely insane to cut government spending.

      Contrary to Republican economic mythology, income tax cuts are contractionary, not expansionary.

      Tax cuts are contractionary because governments cannot spend money that they do not have. If taxes are cut and nothing else is done to sustain government spending, then government spending is going to drop by the amount of the drop in tax revenue.

      Because not all of the tax ‘refund’ will be spent (some of the money will be removed from the economy by savers), the increase in consumption C generated by the tax cut is going to be less than the drop in government spending G that will also be caused by the tax cut.

      That, my friends, is what we call a contractionary effect, a caused drop in GDP that is initiated solely by a reduction in taxes collected.

      Raising taxes, on the other hand, is expansionary if at least some of the tax revenues collected by the government would have been saved. The increase in G is greater than the drop in C.

      Money that would otherwise have been removed from the economy by savers is spent, instead, by the government. The result is a net increase in aggregate demand, in GDP, and that is the very definition of the term ‘fiscal stimulus.’

      It is true that if the government cuts taxes while maintaining its spending levels with borrowed funds, a net stimulus to the economy is generated, but none of the increase in GDP effected by this fiscal policy ‘combo initiative’ can be rationally attributed to the tax cut.

      All of the stimulus effect we would observe would be derived from the spending of borrowed money, money that had been removed from the economy by savers.

      Tax cuts BY THEMSELVES are always contractionary (or at least, never expansionary). But when the government borrows money to finance a tax cut, the stimulative effect of spending borrowed money is usually enough to overcome the contractionary effect of the tax cut (sometimes only barely: see The Bush Years).

      So if you want to reduce government borrowing and stimulate the economy at the same time, what you need to do is significantly increase the amount of taxes you collect from rich people and then spend that money on real economic investments, the kind of investments that 'grow the economy' in the long run.

      It has worked every time it has ever been tried.

      •  You reference yourself as a source (0+ / 0-)

        As your assertion that "income tax cuts are contractionary" conflicts with Keynesianism you need to provide a better source for this to be considered.

        Do you have any links from leading recognized economists that agree with your assertion?

        The most important way to protect the environment is not to have more than one child.

        by nextstep on Fri May 25, 2012 at 09:57:43 AM PDT

        [ Parent ]

        •  Well, yeah... (0+ / 0-)

          You appear to be looking for an argument that is essentially an appeal to authority; I'm sorry, that was not my purpose in this posting.  My purpose was to offer the stream of logic that justifies the claim that tax cuts are contractionary.

          But as for leading recognized economists who agree with my assertion, how about Paul Samuelson?  You remember the Balanced Budget Multiplier?  That was his creation.  

          Now he didn't explicitly state that tax cuts are contractionary in explaining the BBM, but he did offer a stream of reasoning to justify his prediction that a tax increase of a certain amount will---if it is spent by the government---produce a net increase in GDP of an amount equal to the amount of the tax revenues collected from the increase.

          Tax increase ---> increase in GDP = stimulus.

          The basis of his justification is ultimately the same thing as mine.  He points to the MPS = Marginal Propensity to Save of the taxpayers paying the higher taxes.  I point out how tax cuts are contractionary through a different line of reasoning, but we are both invoking the same key determinant, which is the savings habits of income earners.

          To state that a tax increase will cause an economic stimulus to occur is the same thing as arguing that a tax cut is contractionary.  Both happen for the same reasons.

          •  I think your reasoning has an error (0+ / 0-)

            BBM assumes the taxes collected will be spent by government on domestic goods and services.  Fundamental to its reasoning is that of the taxes collected, some would have been saved by the taxpayer.  It is based on the propensity of government to spend was higher than the taxpayer's propensity to spend.  

            Your assertion that tax cuts result in lower GDP does not follow.  Consider the case of a tax cut financed with monetized debt.  The taxpayers then spends part of the cut on domestic consumption or investment, which results in higher GDP not lower.

            The case you may want to assert related to BBM, is the one of a tax cut financed by reduced spending in the same time period and at the same size.

            From an actual policy implementation perspective, the incentive effects of the change in tax policy must also be factored.  For example a policy that increased taxes on US manufacturing above that of other countries may cause reduction in US production and increase imports reducing both US GDP and US employment.

            The most important way to protect the environment is not to have more than one child.

            by nextstep on Sat May 26, 2012 at 09:28:07 AM PDT

            [ Parent ]

            •  Hmm... (0+ / 0-)
              Your assertion that tax cuts result in lower GDP does not follow.  Consider the case of a tax cut financed with monetized debt.  The taxpayers then spends part of the cut on domestic consumption or investment, which results in higher GDP not lower.
              Try to understand that my assertion that tax cuts lower GDP is made by looking only at THE essential effect that a tax cut has on government spending (and therefore on GDP).  As soon as you introduce other government actions that could affect levels of govt. spending all by themselves, you are no longer talking about the effects that a tax cut has on GDP, but the effects of a tax cut + some other govt. action has on GDP.

              That is the fundamental problem with your rebuttal.  You cite the case of a tax cut that is financed in a particular way (with 'the printing press'), ignoring the fact that this particular method of financing G has its own effect on GDP all by itself.  The effect of spending 'created money' is always expansionary, whether that money is used merely to finance a tax cut, or to simply finance additional government spending, instead.

              (Indeed, the first option---simply spending the created money---would have a greater stimulative effect on GDP than using it to finance a tax cut.)

              You then conclude, after adding an additional govt. action that is always expansionary, that because in this special case tax cuts are not contractionary, that my claim that tax cuts are contractionary is shown to be false.  It is the very definition of a specious argument.

              ...the incentive effects of the change in tax policy must also be factored.  For example a policy that increased taxes on US manufacturing above that of other countries may cause reduction in US production
              Here, you introduce a strawman argument that has nothing to do with the points I am arguing, citing the effects that an increase in business/corporate excess profits taxes would have on the global demand for US products.  Let's try to keep in mind that increases in income taxes do not affect the costs of manufacturers in any way.
              •  Your assertion is really (0+ / 0-)

                Reducing government spending to match a tax cut lowers GDP - which is similar to BBM stating the change in the negative direction instead of its usual positive direction.

                However, just saying cutting taxes lowers GDP is an incomplete statement in that it does not mention to what extent this is paired with reductions in G or with increased government debt.

                The most important way to protect the environment is not to have more than one child.

                by nextstep on Sat May 26, 2012 at 01:36:07 PM PDT

                [ Parent ]

              •  Changes in income taxes most definitely effects (0+ / 0-)

                costs to manufacturers, especially in that a US or Foreign company can choose to lower that cost by choosing which country to manufacture in directly or indirectly through contract manufacturing.  This is a major reason why, for example,  very capital intensive semiconductor manufacturing facilities (labor costs are only a percent or two of product cost) are rarely placed in the US without special tax provisions.

                By your statement it is clear you have never been involved in making decisions in international operations.

                I raised the tax method point, in that the type of increased tax applied for BBM can have a big impact on how effective it is, or if it is even counter productive.  BBM works differently with a person working for a salary and unlikely to move, than a person or business that has a range of US and foreign investments with very different associated tax treatments.

                The most important way to protect the environment is not to have more than one child.

                by nextstep on Sat May 26, 2012 at 01:56:05 PM PDT

                [ Parent ]

                •  Hmmmmm... (0+ / 0-)
                  Changes in income taxes most definitely effects (0+ / 0-) costs to manufacturers...


                  By your statement it is clear you have never been involved in making decisions in international operations.

                  The statements you are making, like those above, suggest that you have never been responsible for managing the costs of a business.

                  A reminder: Business Profits = Total Revenue - Total Costs.  The 'personal' income tax is a tax on individuals' earnings.  At no point does the tax on individually-earned incomes show up on the ledger of a business.  A business' salary costs are not affected by however much a government many want to tax the incomes of the people working for that business.

                  The one possibility that you may be focusing on is a calculation that never shows up on an income statement: an estimate of the after-tax earnings of the executives who will operate the company wherever it is located.

                  Anyone who wants to do such a complicated calculation would have to include full consideration of every conceivable obligation listed in a country's tax code as well as estimates (that may or may not be accurate) of the purchasing power one would enjoy in the different countries involved.

                  IMO, your suggestion that these calculations---which may or may not have anything to do with members of the Board of Directors who make such decisions---are anything other than a minor consideration in the calculus of choosing a new plant location is disingenuous.

                  This argument strategy is also common among Republican Economists.  They choose some economic variable of minor importance (e.g., the cost of malpractice settlements relative to the total costs of the H.C. industry, actually only a fraction of 1%) and then exaggerate its importance through repetition way beyond what it really is.

                  I consider the point you're making now to be just this sort of obfuscation.

      •  Unless they cut defense spending (0+ / 0-)

        It's the only place where cuts are needed and won't harm the economy.

        "We must not confuse dissent with disloyalty." Edward R. Murrow

        by Betty Pinson on Fri May 25, 2012 at 10:14:32 AM PDT

        [ Parent ]

        •  False. (0+ / 0-)

          Cuts in defense spending, if not offset elsewhere, will harm the economy. Defense spending is basically welfare for thousands of towns and cities across the country, from Seattle to Virginia Beach.

          "Let’s just move on, treat everybody with firmness, fairness, dignity, compassion and respect. Let’s be Marines." - Sgt. Maj Michael Barrett on DADT repeal

          by kyril on Fri May 25, 2012 at 05:32:10 PM PDT

          [ Parent ]

          •  Wrong (0+ / 0-)

            Defense spending no longer has the positive economic impact on local communities as it did decades ago.

            We're spending more than ever on defense these days, have been waging two wars for over 10 years. If there were economic benefits to all that spending, our economy would be in great shape.

            It's not.  Times have changed, defense spending trickles up to the 1% and overseas to foreign companies and economies.  

            "We must not confuse dissent with disloyalty." Edward R. Murrow

            by Betty Pinson on Sat May 26, 2012 at 09:10:47 PM PDT

            [ Parent ]

    •  But cutting spending should not be done... (12+ / 0-)

      ...while the impacts of the Great Recession continue at the level they are now. Rather obviously one reason spending as a percentage of GDP is up is because GDP fell and there was a Keynesian response to that recession. Without that response, GDP would have fallen a good deal further, and cutting spending now, before a full recovery is made, will reduce its growth, or worse.

      Don't tell me what you believe, show me what you do and I will tell you what you believe.

      by Meteor Blades on Thu May 24, 2012 at 05:34:57 PM PDT

      [ Parent ]

      •  Wouldn't cutting spending now be exactly (2+ / 0-)
        Recommended by:
        Still Waters, kyril

        repeating the mistake Roosevelt made after the Great Depression?

        While I am not a deep student of history, my understanding is that the reduction of spending made the depression last longer, and raised unemployment a bit...

        Recession of 1937

        For a better America, vote the GOP out of office whenever and wherever possible and as soon (and as often) as possible!

        by dagnome on Fri May 25, 2012 at 08:48:35 AM PDT

        [ Parent ]

    •  You're actually wrong. Remove Bush's wars and.... (0+ / 0-)

      spending as a percentage of GDP is at a post-WWII historic low.

      Correct for Bush's catastrophic 2008 depression, and once more government spending as percentage of GDP would be much lower. The GDP was grossly depressed by the crash, while government spending on banking bailouts and unemployment insurance mushroomed.

  •  You've got a lot of (6+ / 0-)

    great stuff there, and I admit I haven't had time to absorb all of it in sufficient detail. I do want to comment on the first part, though.

    I think Pethokoukis is half right. First, I agree with you that charting spending as a share of GDP, without even mentioning the shrinking denominator (GDP), is downright dishonest. However, he does have a point -- and I've seen this in other critiques of the MarketWatch chart as well -- that using FY2009 as a baseline to measure the Obama administration's spending, relative to other administrations, is unrealistically generous to Obama. After all, FY2009 was a one-time, extreme outlier of an increase in government spending. So accepting it as the "new normal" and lauding Obama for only surpassing it slightly masks the magnitude of the increase over all previous administrations' spending.

    Instead of looking at a chart of spending as a share of GDP, you need only look at a chart of spending in constant dollars. We're still at unprecedented levels -- which is the core of the conservative critique -- even if the rate of change has slowed.

    You are reading my signature line. #hashtag

    by cardinal on Thu May 24, 2012 at 02:16:16 PM PDT

    •  You're Right That FY2009... (4+ / 0-)

      ...was an extraordinary, emergency year compared to 2008.  The difference between $3.1 trillion and $3.5 trillion is nontrivial. Stll, spending has plateau since, even with stimulus, demand for social services and increased defense sepnding.

      Republicans have tried to have it both ways, saying the $1:2 trillion trillion deficit Obama inherited belongs to him alone.

  •  Why don't we hear more about this? (10+ / 0-)

    The numbers are clear. Yet the commentary in the media is that Obama is spending too much.
      Has the news media become immune to facts, just like the GOP?

    Callate o despertaras la izquirda! - protest sign in Spain

    by gjohnsit on Thu May 24, 2012 at 04:16:52 PM PDT

  •  This is a truly superb diary. (8+ / 0-)

    And Obama's folks should put this into a power point for the media.

  •  Good points, but poorly chosen title (2+ / 0-)
    Recommended by:
    Avenging Angel, kyril

    To use a word like "binge" implies that more spending would have been a bad thing, while as the article points out, more spending would mean a much lower unemployment rate.

  •  If I recollect correctly (4+ / 0-)

    Bush kept Iraq war costs off the budget books and Obama correctly counted them as expenditures.  I think this was a big contributor to the "jump" in spending.

    Democrats give you the Bill of Rights; Republicans sell you a bill of goods!

    by barbwires on Thu May 24, 2012 at 04:58:53 PM PDT

  •  The arguments for spending (0+ / 0-)

    and taxing might make more sense if the spending wasn't all of borrowed money, fueling an ever-growing federal debt that simply cannot maintain its geometric expansion indefinitely. The chart linked below shows nothing but up, and the only kind of taxing that will put a hole in it will have to drag in a lot more than the so-called "rich."

    •  Looking at it in systems terms (2+ / 0-)
      Recommended by:
      Calamity Jean, kyril

      deficit spending is counter-cyclical negative feedback.

      Pay down deficits in good times, run up deficits in bad times to support employment and demand.


      We are the principled ones, remember? We don't get to use the black hats' tricks even when it would benefit us. Political Compass: -6.88, -6.41

      by bmcphail on Thu May 24, 2012 at 06:52:50 PM PDT

      [ Parent ]

      •  It's a theory (1+ / 0-)
        Recommended by:

        except that the "pay down deficits in good times" never seems to happen—and most certainly not over the past 40 years or so.

        And not all counter-cyclical negative feedback is created equal. In the bad times, the running up of deficits is supposed to be in the form of a short-term, concentrated, pump-priming stimulus. The shape of that stimulus would be best as large infrastructure projects providing both immediate construction and engineering employment and lasting infrastructure for the long term (but much less effective as just keeping teachers and firemen on the job).

        •  Clinton Paid Down Deficits in Good Times... (8+ / 0-)

          ...balancing the budget and producing surpluses during his tenure.  

          Recall that before the Bush tax cuts, the CBO forecast a $5.6 trillion federal SURPLUS within a decade.  But those Bush tax cuts, two wars, slow economic growth and then a devastating recession (among other factors) washed it away in an ocean of red ink.

        •  As a matter of fact it has happened twice (2+ / 0-)
          Recommended by:
          Larsstephens, kyril

          over the last 40 years....

          Forty years ago would be 1972.  

          In the first case, the debt as a percentage of GDP decreased steadily from 1972 to 1982 (the last Carter budget).  This was the tail end of a 36 year decline from 1946 (the peak of war debt) to 1982.

          In the second case, the debt as a percentage of GDP decreased from 1995 to 2001 (the last Clinton budget).

          If anyone is counting, that is 16 years out of 40 or about 40% of that time period.

          If the Dems had been making more budgets, it would have been more.  We ARE the party of financial responsibility.

          We are the principled ones, remember? We don't get to use the black hats' tricks even when it would benefit us. Political Compass: -6.88, -6.41

          by bmcphail on Fri May 25, 2012 at 01:24:27 AM PDT

          [ Parent ]

          •  What's wrong with this (0+ / 0-)

            is that we now are all too well aware that the economy grown during the Clinton years (and Reagan, and Bush I&II, was part of an inflating bubble, and the so-called balanced budgets of the Clinton years were an accounting trick made possible by borrowed  money. There has been no party of fiscal responsibility in at least 40 years.

            •  So the 23 million jobs (3+ / 0-)
              Recommended by:
              bmcphail, ferg, kyril

              produced during the Clinton years were an illusion? Funny, they didn't go away when the tech bubble deflated. And what is this borrowed money you speak of? By the end of the Clinton years they were debating how quickly they could buy back T bills without upsetting the bond markets.

              The tax increases and pay as you go rules under Clinton, which were responsible for reducing the deficit, were not an indication of fiscal responsibility?

              Are you saying Bush stopped borrowing money, and that's why the debt grew? Or that he instituted some sort of more accurate accounting methods? I recall the opposite: the wars were kept off budget by Bush, a practice that Obama eliminated, which made the deficit look instantly worse under him than under Bush, even though spending was unchanged.

              "A lie is not the other side of a story; it's just a lie."

              by happy camper on Fri May 25, 2012 at 05:53:06 AM PDT

              [ Parent ]

              •  Not that hard to understand— (0+ / 0-)

                the difference between operating surplus and  longterm borrowing. There is no year since 1950 in which the U.S. debt did not increase, al though for part of Clinton's term it increased less than it had for all the years surrounding that period. This is not great news. As for Bush, I said nothing about either Bush stopping the borrowing—they didn't. However, as for wars kept off budget, the best you could say Obama did was that he included part of that cost in the budget and met the rest as per normal, by off budget supplementary bills.

                Were the 23 million jobs an illusion—in part, yes, as they were part of a bubble economy (not just tech stocks) that was rising even then—all floated on a mountain of governmental, corporate, and private debt that has done little but increase for at least 30 years. See here fore moment-to-moment details:

        •  I, for one, would have liked to see (1+ / 0-)
          Recommended by:

          GM start to make rail cars and locomotives in a big way, along with the steel interstate.

          We are the principled ones, remember? We don't get to use the black hats' tricks even when it would benefit us. Political Compass: -6.88, -6.41

          by bmcphail on Fri May 25, 2012 at 01:27:17 AM PDT

          [ Parent ]

  •  Excellent diary. One addition: While it is... (15+ / 0-)

    ...true that the budget is rising at an annualized rate of 1.4%, that's in nominal dollars. In inflation-adjusted dollars, it is decreasing.

    Don't tell me what you believe, show me what you do and I will tell you what you believe.

    by Meteor Blades on Thu May 24, 2012 at 05:50:21 PM PDT

  •  Spot on framing. (2+ / 0-)
    Recommended by:
    Calamity Jean, kyril

    And I hope Pethkoukis is taken to the media woodshed.  

    Life is good. Injustice? Not so much.

    by westyny on Thu May 24, 2012 at 07:36:45 PM PDT

  •  Coultergeist (3+ / 0-)
    Recommended by:
    Calamity Jean, Larsstephens, kyril

    came out screeching against the Rex Nutting piece, predictably with blatant falsehoods and misrepresentations.

    It continues....

    Fight SPAM tyranny - Use Lion-Mail.NET for e-mail

    by takascar2 on Thu May 24, 2012 at 08:48:30 PM PDT

  •  Republicans like these (2+ / 0-)
    Recommended by:
    ferg, kyril

    enormous debt levels. They have been doing it purposely, starting with Reagan,as a deliberate strategy, and now they hope to get their wish of eliminating social spending on the pretext that we simply cannot afford to take care of the poor and the elderly.

    This is a feature of Republican governance, not a bug. Witness the Ryan budget, which produces red ink for the next twenty years. And they claim they are trying to balance the budget? Bullshit. They are trying to bankrupt the federal government.

    They have to break the system before people will agree to throw it away.

    "A lie is not the other side of a story; it's just a lie."

    by happy camper on Fri May 25, 2012 at 05:34:52 AM PDT

  •  So, this is the narrative.. (1+ / 0-)
    Recommended by:

    It's a tough sell.

    Children have imaginary friends, adults have god.

    by soros on Fri May 25, 2012 at 05:54:47 AM PDT

  •  and WHOSE fault is this? fascists AND enablers (1+ / 0-)
    Recommended by:

    of the fascists in our party -

    enablers in the form of diaper pissing cowards who NEVER take 'em on, but, who whine and snivel,

    and, enablers in the form of Third Way DLC New Dem yuppie sell out scum,

    and, enablers like ME who voted for decades FOR the sell out scum !


    Yond Cassius has a lean and hungry look; He thinks too much: such men are dangerous

    by seabos84 on Fri May 25, 2012 at 05:55:38 AM PDT

  •  Mike Luckovich's (0+ / 0-)

    cartoon from Thursday's Atlanta Journal-Constitution seems to fit here.

    "The object of persecution is persecution. The object of torture is torture. The object of power is power. Now do you begin to understand me?" ~Orwell, "1984"

    by Lily O Lady on Fri May 25, 2012 at 07:07:28 AM PDT

  •  Thanks for the diary. (0+ / 0-)

    "Such is the irresistible nature of truth that all it asks, and all it wants, is the liberty of appearing." - Thomas Paine

    by blueoregon on Fri May 25, 2012 at 10:15:05 AM PDT

  •  Politifact's analysis (0+ / 0-)

    is here

    Seems to be reasonable. I've always thought of % of GDP to be the most objective barometer for judging spending/taxes etc.

  •  This would all have much more resonance IF (0+ / 0-)

    it weren't for the fact that Obama signed into law the renewal of the Bush tax cuts (now effectively the Obama-Bush tax cuts) in December of 2010 over the howls of surprise and outrage from the left.  The response of the White House to this at the time, of course, was that President Obama was doing this because he was "The Only Adult in the Room."  In fact, this meme was repeated multiple times.

    (This might be a reminder why the last-adult-in-the-room meme is not a very good one to recycle around here for Obama supporters).

    So the title of this diary, "Obama presided over a tax revenue drought," is true, but it's a drought that Obama imposed on us with his own signature on a compromise with the Republicans.

    Somebody will surely point out, now, that Obama imposed this further drought on us because HE HAD TO, because 1) the unemployment benefits extension would have run out if he hadn't signed it, and 2) he would have received harsh criticism from the right for being a tax-increaser if he had sat on his hands and let the Bush tax cuts expire, as they were schduled to by law.

    Fine.  Make that argument then.  Just please don't tell me that what happened didn't happen.

    If the arguments of December 2010 were valid then, then they should be valid now, or else they were wrong.  Obama shouldn't run on being the president who presided over a tax revenue drought, but as the president who didn't raise taxes during a recession, as his defenders at the time put it, that he was a fiscal conservative, that he was compassionate about it, and not beholden to the more strident voices of the left.

    Make that argument then.  That's the honest argument, whether it works or not.  But this "presided over" passive language bullshit is offensive.  He didn't "preside over" it anymore than Bush "presided over" it.

    •  Some Important Clarifications (0+ / 0-)

      You're absolutely right that the extension of the Bush tax cuts in December 2010 was unfortunate, to say the least.  Obama should have acted on his promise to end them for families earning over $250,000 a year much earlier in his term.  By not doing so, he lost the game of brinksmanship in late 2010.

      That said, the point about "Obama presiding over tax revenue drought" is true regardless.  Why?

      1.  As I've documented elsewhere, the Bush tax cuts were the single largest driver of national debt from 2001 on.   Obama's plan would have saved $700 billion (not the full $3.8 trillion) over the next decade by ending the upper income tax cuts.

      2.  The recession hammered U.S. GDP growth and tax revenue.  Large revenue losses in 2008, 2009, 2010 and 2011 would have happened regardless.  Arguably, they were smaller than they would have been thanks to the Obama stimulus, which drove GDP and job growth.

      I'm as disappointed as anyone about what happened with taxes in December 2010.  But tax revenue throughout Obama's tenure so far would have declined regardless.

      •  You're saying that what Obama did (0+ / 0-)

        is not what he wanted to do.  While he was president.  Okay.  I can understand that sometimes people do things they don't want to do.  However, that point relies on our believing the things people say about their intents versus their real world actions.  You say he had a different plan.  I would say, I see the plan.  It's what he did.  It's not what he said.  It's what he did.

        In fact, they BOASTED at the time about how mature they were for doing this.  The centrist pundit talking head class like Gloria Borger were proud as punch of Obama for doing this, while the rest of us here, the ones who are expected to defend this tax revenue drought he thus created, we're pissed on.  He was "The Only Adult in the Room," on the subject.

        Well, fine.  Run on maturity.  Run on being wiser than the people who told you this is a bad idea, this is not what you said you would do.  Don't put us in the position of having to portray what happened as if it didn't.

        We had a tax drought, and you can trace it directly to the pen sitting on his desk and the hubris of his staff and advisors who told him it was better to change plans.  

        Let me add... personally... I DON'T CARE that much that he renewed the Bush tax cuts.  To me, it was a close call because we were in a recession.  I was more horrified than anything else, though, that he did it SO CHEAPLY, that he made his supporters out to be fools in the process to his benefit, and that then having nothing to offer the Republicans because he'd given them back their favorite hostage and had no leverage, he offered up cuts to SS and Medicare in order to get a de rigeur deficit limit increase passed.

        More than that, too... I feel like he has always dealt with us in bad faith in all these issues.  It might make him a good centrist candidate for the Gloria Borger types who want somebody who can stand up to the Left.  I just see him as the lesser of two bad evils right now.  And I hate being put in the position of having to deny history.

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site