Jonathan Chait

Who Or What Caused The Giant Deficit?

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Mitch McConnell repeats the claim that George W. Bush left the budget in kinds-decent shape before President Obama ruined it:

The last year of the Bush administration, the deficit as a percentage of gross domestic product was 3.2 percent, well within the range of what most economists think is manageable. A year and a half later, it’s almost 10 percent.

Paul Krugman replies:

First, they’re hoping that you won’t know that standard budget data is presented for fiscal years, which start on October 1 of the previous calendar year. So this isn’t the “last year of the Bush administration” they’ve conveniently lopped off everything that happened post-Lehman TARP and all.

Second, they’re hoping you won’t look at what was happening quarter by quarter. Here’s net federal borrowing as a percentage of GDP, quarter by quarter, since 2007:

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Source

Can we agree that the deficit in the first quarter of 2009 Obama didn’t even take office until Jan. 20, the ARRA wasn’t even passed until Feb. 17, and essentially no stimulus funds had been spent had nothing to do with Obama’s polices, and was entirely a Bush legacy? Yet the deficit had already surged to almost 9 percent of GDP. Even in 2009 II, Obama’s policies had barely begun to take effect, and the deficit was already over 10 percent of GDP.

I made a similar argument a week ago. It really does seem to be an extremely common belief that Obama's policies created the massive deficits we're seeing now. I think most Republicans and even many non-Republicans think that if we hadn't passed a stimulus, or maybe health care reform also, we'd be having Bush-sized deficits. It's totally false. CBO's budget update from January 2009 -- before Obama took office -- forecast a deficit of 8.3% of GDP. This was without a single one of Obama's policies in effect. And that was before the economic crisis turned out to be deeper than forecast -- which also happened before any major Obama policies had taken effect.

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