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While Congressional Republicans are threatening to trigger a U.S. default if their debt ceiling blackmail is not paid, their allies in the conservative blogosphere are deploying the same chart to attack President Obama's supposedly out-of-control spending. But their horrifying picture of the yawning gap between in federal receipts and outlays between 1999 and 2012 isn't just predictably incomplete. By conveniently ignoring both the years before the budget-busting Bush tax cuts and the rapidly shrinking deficits to come, the duplicitous debt argument of the GOP's right-wing water carriers is, to be kind, completely useless.

Writing in USA Today, Glenn "Instapundit" Reynolds pointed to the chart above to claim that "Obama owns the debt now." Originally featured in the libertarian Reason to make the case for the Bush tax cuts, the graph of federal revenue and spending (in constant 2005 dollars) provided ammunition for this shot across the bow of the White House:

Well, things did start to go south under Bush. But look at that graph more closely. In 2003, when we invaded Iraq (one of those "two wars on the credit card" that Obama likes to blame for the debt), and when we passed the Bush tax cuts (the other thing Obama likes to blame for the debt) revenue actually started to climb. The revenue and spending lines start to converge, and, as they head up to 2006 it actually looks as if the two might cross, with revenue outpacing spending...

Well, things did start to go south under Bush. But look at that graph more closely. In 2003, when we invaded Iraq (one of those "two wars on the credit card" that Obama likes to blame for the debt), and when we passed the Bush tax cuts (the other thing Obama likes to blame for the debt) revenue actually started to climb. The revenue and spending lines start to converge, and, as they head up to 2006 it actually looks as if the two might cross, with revenue outpacing spending.

Reynolds' claims are fatally flawed. But to truly appreciate his disingenuousness, it helps to expand the timeline. By going back, say, to 1980, the revenue-draining impact of the Bush tax cuts of 2001 and 2003 becomes much more evident. And looking to ahead to forecasts for the next several years, federal receipts finally start to recover from the calamitous recession that began in late 2007 and as the upper-income tax breaks end.

(Continue reading below the fold.)

Reynolds' excited assertion that "when we passed the Bush tax cuts...revenue actually started to climb" is his own variant of the perpetual Republican myth that "tax cuts pay for themselves." In fact, he gives the game away when he says, "Spending keeps going up. Revenues, however, are not." It's not just that individual income tax revenue did not return to its pre-Bush tax cut level until 2006. Measured in constant 2005 dollars, total federal revenue in 2011 ($1.999 trillion) is less than it was I 1998 ($2.040). It's abundantly clear that revenue was much lower than it otherwise would have been in the absence of the Bush tax cuts.

The extent of the right-wing fraud becomes even clearer by looking at federal revenue and spending as a percentage of the total American economy. And over the next decade, the federal deficit will shrink as spending returns to its Reagan-era level of around 22 percent and revenues reach the 19 percent level. (It should be noted, as Ezra Klein does, that the last five times Uncle Sam had a balanced budget, tax revenue were around 20 percent.)

As it turns out, the American tax burden hasn't been this low in generations. Thanks to the combination of the Bush Recession and the latest Obama tax cuts, the AP reported, "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. 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 Michael Ettlinger, head of economic policy at the liberal Center for American Progress put it:

"The idea that taxes are high right now is pretty much nuts."
Or as one-time Reagan Treasury official Bruce Bartlett explained it in the New York Times two years 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, "Like an Anorexic, U.S. Sees Itself Fat with Taxes."

Now, it is true that measured in both dollars and as a percentage of GDP, U.S. spending has fattened up as recession-battered tax receipts plummeted since 2008. But the surge in federal outlays that began with President Bush's $700 billion TARP program in the fall of 2008 and including the 2009 stimulus program is both temporary and countercyclical.

As the nation's economy recovers, spending on assistance programs like food stamps and unemployment insurance will begin to decline. So while Reynolds frets that "the debt is up about 60% since Obama took office, this can't go on forever," it won't. As Paul Krugman explained in December:

Right now, given reasonable estimates of likely future growth and inflation, we would have a stable or declining ratio of debt to G.D.P. even if we had a $400 billion deficit. You can argue that we should do better; but if the question is whether current deficits are sustainable, you should take $400 billion off the table right away.

That still leaves $600 billion or so. What's that about? It's the depressed economy -- full stop.

As for the causes of the "ballooning debt" Instapundit decried, these charts from the Center on Budget and Policy Priorities and the Washington Post suggest a different culprit than the current occupant of the White House.

Ronald Reagan tripled the national debt, while President Bush almost doubled it again. But as CBPP found in 2010, the Bush tax cuts accounted for half of the deficits during his tenure, and if made permanent, over the next decade would cost the U.S. Treasury more than Iraq, Afghanistan, the recession, TARP and the stimulus—combined. (It is worth noting that the expiration of all the Bush tax cuts would have eliminated most of the deficits over the next decade. Instead, the CBO estimates, the fiscal cliff deal just concluded will add about $4 trillion.) As Ezra Klein explained:

What's also important, but not evident, on this chart is that Obama's major expenses were temporary -- the stimulus is over now -- while Bush's were, effectively, recurring. The Bush tax cuts didn't just lower revenue for 10 years. It's clear now that they lowered it indefinitely, which means this chart is understating their true cost. Similarly, the Medicare drug benefit is costing money on perpetuity, not just for two or three years. And Boehner, Ryan and others voted for these laws and, in some cases, helped to craft and pass them.

Or, as Glenn Harlan Reynolds says, "Obama owns the debt now."

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Comment Preferences

  •  When does a president NOT own the debt? (2+ / 0-)
    Recommended by:
    jfromga, whaddaya

    When they dump it on the next president instead of dealing with it thermselves.

  •  A couple of things (2+ / 0-)
    Recommended by:
    Icicle68, FogCityJohn

    The first four charts are about the deficit rather than debt. In real dollars, that's good. Spending as a percentage of GDP really tells us nothing.

    That blip in revenues from 2003 to 2006 was Greenspan's corruption. He unnecessarily slashed interest rates and convinced Americans to refinance their homes and take the equity out to spend. That caused a massive bubble, as builders got in on the act.

    It's a false economy based on Mortgage Equity Withdrawal (and house flipping). Money was pouring in at the bottom and people were spending and upgrading like mad, hence the revenue hikes.

    Here's what it looks like in a chart. Those red bars tell us that the normal economy was already crashing. The blue bars was the middle class being stripped of their wealth and life savings.

    Then, that stupid sonovabitch, Greenspan, raised interest rates 17 months in a row starting in 2006 (right after the corrupt 2005 Bankruptcy Bill passed. which prevented homeowners or judges from negotiating mortgages with banks). That basically crashed the US economy and put millions out of their homes.

    I wrote at the time:

    As for the mortgage bubble, beginning in 2002, Bush desperately needed to hide the terrible costs and economic harm of his tax cuts -- and his monumental but secret war budget. There was only one source of that kind of wealth in the US -- middle class home equity. The only way to get to it was through Mortgage Equity Withdrawl.

    Greenspan conspired with the Bush administration and Wall Street to steal it (and put the middle class into staggering debt and ultimate impoverishment) by abnormally slashing interest rates. He let banks offer cheap home refinance with tons of cash back for consumers spend at Wal-Mart and other big box stores, kicking the GDP through the roof and widening the trade deficit with China.

    Denial is a drug.

    by Pluto on Thu Jan 17, 2013 at 02:41:40 PM PST

    •  Clarifications and Follow Ups (2+ / 0-)
      Recommended by:
      Pluto, whaddaya

      A couple of follow ups to your comment.

      You're right that the chart of annual spending versus revenue shows the deficit for each year.  But the area between the two lines shows the net addition (or subtraction) to the national debt over the time period in question.

      Spending and revenue as a percentage of GDP matter very much.  On the revenue side, the GOP wants to cap taxes at 18% of GDP.  At no point in the last 50 years has the budget been balanced at that level.  More importantly, to keep it at that level would require steep spending cuts-and soon.

      On the spending side, the 24% figure for 2009 is historically high.  (Then again, with the contraction of the economy due to greatest recession in 75 years and the need for stimulus and safety net spending, it's not out of line with what should have been expected.) But 22% is not (Reagan routinely spent that or more).  The Simpson-Bowles Commission wants to target 21%.

      So, there is a lot of talk about pegging taxes and spending to specific GDP targets, which is a very bad idea.

  •  Walking through your charts (0+ / 0-)

    Do they include Bush's keeping war spending off the books?

    "What could BPossibly go wrong??" -RLMiller "God is just pretend." - eru

    by nosleep4u on Thu Jan 17, 2013 at 03:07:22 PM PST

    •  These Charts Do Include Total War Spending (1+ / 0-)
      Recommended by:

      While Bush routinely avoided putting "contingency" (i.e. war-fighting costs) in his budget proposals, these actual numbers from the Office of Management Budget include all defense spending.

  •  If you can't win an argument with the truth then (1+ / 0-)
    Recommended by:

    lie about it seems to be the Republican way.

    Our money system is not what we have been led to believe. The creation of money has been "privatized," or taken over by private money lenders. Thomas Jefferson called them “bold and bankrupt adventurers just pretending to have money.” webofdebt

    by arealniceguy on Thu Jan 17, 2013 at 07:51:42 PM PST

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