JONATHAN CHAIT AUGUST 4, 2011
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One of the most effective Republican themes of the last two years has been blaming President Obama for the explosive growth in the budget deficit since 2009. The accusation that "Obama's spending binge" has blown up the deficit has discredited any further fiscal stimulus, and helped encourage Republicans to use the debt ceiling as a hostage. The White House fought back with a chart showing that its policy changes contributed only a small fraction to the worsening deficit picture:
Megan McArdle dismissively responds, "The duck starts here." Her rebuttals are extraordinarily weak. McArdle begins:
this graph attributes decisions made by Obama and an all-Democratic Congress--like doubling down in Afghanistan--to Bush, while taking responsibility for basically nothing except the stimulus. When Obama extends the Bush tax cuts for the rich under pressure from Congressional Republicans, that disappears from his side of the ledger, because after all, he didn't want to do it. When Bush enacts Medicare Part D under pressure from Congressional Democrats, the full cost is charged against his presidency. The list of such silliness goes on.
The notion that Bush passed his prescription drug bill "under pressure from Congressional Democrats" is bizarre. Republicans controlled both houses of Congress at the time, and exerted massive pressure to pass the bill. The coalition that squeezed the bill through after the vote was held open for hours consisted of 207 Republicans and 9 Democrats. Some pressure!
McArdle is probably correct that Bush only endorsed the concept of extending Medicare coverage to prescription drugs in order to avoid being outflanked on a popular issue, just as Obama did on middle class tax cuts. But Bush did not have to design the bill so as to maximize profits for the insurance and pharmaceutical industries, rather than to maximize value for taxpayers. The Republicans also suspended the pay-as-you-go rules, which, had they remained in place, would have forced them to offset the cost of providing prescription drug coverage. When Democrats won back the House, they reinstated those rules, forcing them to offset the cost of the Affordable Care Act, which as a result was far more painful and less popular than if they had simply put the whole thing on the credit card as Bush's Republicans did.
McArdle ends this passage by asserting, "The list of such silliness goes on," but she does not continue the list. If Medicare prescription drugs is her best example, I suspect the list does not go on at all. Instead, she turns to her next point, which is to point out that budget deficits have in fact been higher under Obama than under Bush:
It's not really very easy to look at these graphs and tell a story where the deficit is 1.6% under George Bush in 2007, and then suddenly balloons to 10% under Obama a few years later--and does so almost entirely as a result of policies initiated under George W. Bush, and only those initiated under George W. Bush. (Not because of say, Medicare, Medicaid, and Social Security.) What changed about Bush policies that made them so much more expensive once Barack Obama took office?
Nor is it exactly obvious to look at the $2.4 trillion in additional debt incurred during Bush's eight-year presidency, and say that he is nonetheless actually responsible for $7 trillion of our current debt load--and then turn to the $3.1 trillion of debt incurred during Barack Obama's three-year presidency, and declare that his policies are actually responsible for only $1.4 trillion.
What changed about the Bush policies that made them more expensive when Obama took office? What changed is that the economy underwent its deepest crisis since the Great Depression. Bush inherited a budget that was structurally balanced, which became a large surplus at the peak of the business cycle. His policies turned it into a budget that was structurally in deficit even at the peak of the business cycle. And then when the economy collapsed, those structural deficits became massive.
McArdle is implying, without quite openly arguing, that presidents should be judged on the deficits that occur under their watch, not on whether their policies increase or decrease the deficit. This ignores the reality that the business cycle plays a huge role in year-to-year deficits. Take George H.W. Bush. His policies significantly reduced the deficit. But the deficit ran at extraordinarily high levels under his presidency, and McArdle's data would suggest he was a massively irresponsible president. In reality, what happened is that he presided over a recession and the necessary bailout from the Savings and Loan crisis, which bloated the deficit despite his (eventually successful) efforts to tame it.
It also ignores the reality that the U.S. political system makes significant policy change hard, and that raising taxes or reducing spending tends to be unpopular. Status quo bias is enormous. It's bizarre and unrealistic to treat the federal budget as a kind of blank slate for which a president bears responsibility once he assumes office. If George W. Bush had not cut taxes, does McArdle think Obama would have set tax rates at the current level? Of course not. But, once established, that policy requires immense political capital to overturn.
Finally, McArdle turns to a theme she's explicated before -- she's tired of hearing excuses about who caused the deficit. She wants Obama to take responsibility and fix it:
Settling whether "Bush policies" or "Obama policies" were the "cause" of the deficit wouldn't tell us a damn thing about what we should do--unless you're the sort of person who thinks that the most important fact about a policy is who was president when that policy was enacted. ...
These seem like more important questions than which items to put in the "Bush" ledger and which items to put on the "Obama" side. And I'm afraid that the White House graphic doesn't offer any answers.
McArdle is insisting here that we shouldn't care who caused the deficit, we should care about fixing it. That is a strange case to make immediately after trying to affix Obama with the blame for the deficit. It seems also to assume that understanding which policies caused the deficit interfered with the task of reducing the deficit. I don't understand the logic of this. It might make sense of Obama were arguing that the fact that he inherited the deficit absolves him of any responsibility to address it, but in fact Obama is arguing the exact opposite of that.
Indeed, Republicans are the the party determined to attach the questions of "who is responsible" and "what should we do." The Republicans have proceeded from the erroneous premise that Obama's spending caused the explosion of the deficit to their syllogistic assertion that "we have a deficit because the government spends too much, not because it taxes too little." Given that they have done so, Obama's effort to recontextualize the cause of the deficit is highly relevant to the solution.
McArdle's item contains a great deal of signalling about her lack of interest in partisan finger-pointing, such as disdaining "the sort of person who thinks that the most important fact about a policy is who was president when that policy was enacted." Obviously, you can care about both long-term fiscal re-balancing and determining which policies led to the deficit. Elected officials often enact policies whose effects, good or will, are felt long after they depart office, complicating the ability of voters to assign responsibility, and giving the officials an incentive to take short-term benefits and long-term costs. Determining which policies led to what outcomes seems like an important function in an electoral democracy.
18 comments
As you point out, this is a lame attempt to try to claim that it's Government over-spending that CREATED the bulk of the deficit, not under-taxation. When in fact the opposite is true. By "starting the clock" at the beginning of the Obama administration, with the Bush tax-cuts already factored in, they can claim that it's all Obama's fault, therefore all that's needed is less spending. While ignoring the effect on the deficit that the Bush tax-cuts continue to have. And it's a lame attempt, both because it's so transparent, and so easily rebutted. When Bush-II took office, he had a burgeoning economy, no major wars, and a forecasted budget surplus. When he left office, he had a staggering economy, TWO major wars, and a trillion dollar deficit -- and had run deficits every single year of his presidency. It's easy to conclude we never COULD afford the Bush tax-cuts. But then, that wouldn't serve the "starve the beast" attempt by the Republican Party to over-spend on tax-cuts and the military, then use the deficit to kill Social Security.
- AllanL5
August 4, 2011 at 11:10am
Good post, good points. Ms. McArdle's opinion reminds me of what lawyers do when testimony in front of a jury is going badly for them and the jury seems riveted. To interrupt the flow, they stand and yell "Objection!" Then they must quickly come up with something to say to the judge for their objection, anything will do (Speculative!); it doesn't matter what it is or if it is overruled -- anything to distract the jury.
- Nusholtz
August 4, 2011 at 11:10am
Here is another example of why you are the best political analyst going, Jonathan. You just totally demolished the execrable Megan McCardle. She got hit by the Chait tsunami. I love how she doesn't want to point fingers concerning the deficit right after she has done so, to Barack Obama's detriment. If a high school student turned in this piece as an assignment to me, I would give it a D. Okay, Megan, how about if I come over to your place and demolish half of it. You own it now, so no whining or finger-pointing, please. So many starboard scribes are unintentionally hilarious in their writings, these days.
- liberalref
August 4, 2011 at 11:14am
An excellent take down and a satisfying read. Countering BS with facts always feels good.
- GSpinks
August 4, 2011 at 11:16am
"Determining which policies led to what outcomes seems like an important function in an electoral democracy." Of course it is, but don't expect any semblance of the truth to come from the Republicans or their media apologists. The current deficit-cutting measures are nothing but Kabuki theater. How is cutting some $250 billion a year from federal expenditures going to balance the budget when the annual deficit is $1.5 trillion? Even if the recession ended and government revenues increased, the budget would still be close to a trillion dollars in the red and borrowing would have to continue to make up the difference. Obama should challenge the House Republicans to submit a balanced budget. Demand that they show what they would cut to bring the budget into balance without any revenue increases. They won't do it, of course, because they can't. But maybe some crazed Tea Baggers could propose such a budget, with enormous cuts to Medicare, Medicaid, and Social Security. Maybe also eliminating half of the national parks and getting rid of all food and workplace-safety inspectors. How about gutting the National Institutes of Health and the CDC? See what the American people think then about "smaller government."
- DAVIDDREIER@EARTHLINK.NET-old
August 4, 2011 at 11:18am
"Settling whether "Bush policies" or "Obama policies" were the "cause" of the deficit wouldn't tell us a damn thing about what we should do--unless you're the sort of person who thinks that the most important fact about a policy is who was president when that policy was enacted. ..." It's very important to identify whose policies caused the deficit. Even aside from the partisan implications of the answer, this allows you to learn from mistakes and reverse the policies. Republicans who want to be post-partisan when it's clear their stewardship was 80% of the problem are problematic because they don't consistently embrace this framework. They respond in one of two ways. I. Propose a slew of self-inconsistent BS arguments and try to discredit whatever objectivity and authoritative status exists within the field. This is the cornerstone strategy on climate change, but it's also their go-to policy on macroeconomics (the subject of McArdle's disingenuous post) and evolution. And then they wonder why scientists tend to hold Republicans in such contempt, even apart from their terrible record on funding scientific research. II. Vaingloriously (and undeservedly) take credit for stuff they were actually against. This is the Mitt Romney story on the auto bailout, but more visibly, it's the Republican explanation for why the budget was balanced in the late 90s in the first place. Sure, gridlock kept Clinton from proposing new programs. But ever since (and even before!) the 1990 tax-raising budget deal, Republicans had been clamouring for huge tax cuts. This was true in 1990 right after the deal. They pushed cuts in 1993 when Clinton got into office and they unanimously opposed his tax hikes. They pushed cuts in the Contract with America. It was true in the 1996 election, interestingly enough. They pushed cuts in 1997 and 1998, when they buried the budget hatchet and started to see a forecast of balanced budgets. They pushed cuts in 1999 when Bush sought the nomination and we had an unprecedented boom. And they pushed cuts right after the 2000 election, when Bush pivoted his rationale for cutting taxes to Keynesian stimulus to people's pockets. It should be absolutely obvious that the tax cuts would have savaged any rational budget balancing in the first place. But maybe they'll conclude that they weren't conservative enough and that real tax cuts were never tried.
- chaitless
August 4, 2011 at 11:26am
served
- subterran
August 4, 2011 at 11:32am
What I've learned is that it's okay, even laudable, to start a war or 2 without asking anyone to pay for it as long as you plan to blame everything on the next administration somehow. It's patriotic politics, like when a head of state stands at the wreckage of a terrorist attack and tells everyone that the best thing they can do to defeat the bad guys is to go on vacation & go shopping. Hey, remember when Obama preemptively dismissed all notions of persecuting or investigating any of the W administration's poor decisions/crimes? And now this chart (above) marks probably the strongest commentary Obama has delivered regarding the bad policies of his predecessor. Obama keeps the padded gloves on; he is too nice, so he throws facts & math at everyone. Yeah, Republicans have not reciprocated such undue kindness, and now it's been construed as weakness.
- Konstantin
August 4, 2011 at 11:32am
subterran, i see your "served" and I raise you a "pwned"
- miceelf
August 4, 2011 at 11:35am
The loudly proclaimed policy of the GOP is to starve the beast, so they set up structural deficits whenever they have power. This is not a difficult policy to implement and it's not a hidden agenda; how can anyone be surprised that it results in deficits? Democrats, meanwhile, do not want to starve the beast. This is a more difficult policy to implement. For example, Obama took huge political risks to PAY for his healthcare plan. This is legislation that saves money over ten years and beyond according to the CBO. It also tries to address the real budget problem of the federal government---healthcare costs. The GOP tried to block all of these efforts and slimes him as as a socialist on a spending binge. And we are supposed to blame Obama for not fixing the deficit? Help me.
- stevedwight
August 4, 2011 at 11:40am
Awesome post.
- VBKim
August 4, 2011 at 11:52am
I don't get the esteem given Ms. McArdle, or the platform given to her by Atlantic. I believe she considers herself a libertarian of sorts. But she's not. What she offers is contrarian nonsense. Brink Lindsey, I may disagree with him, but I respect his arguments and his point of view. To appreciate her vacuity, one need only watch her on bloggingshead; I especially enjoy the facial expressions of her debater when she lands a particularly insipid comment. While McArdle may fancy herself as an expert in economics, her talent is representing that class of Gen Xers who graduated from America's finest colleges but with few if any bearings from the experience.
- rayward
August 4, 2011 at 12:10pm
"Bush inherited a budget that was structurally balanced, which became a large surplus at the peak of the business cycle." Amid a great post, I would like some clarification on that point. The second part of that is clearly true. The question is whether the surpluses during the peak of the Clinton business cycle were large enough to consider the cycle structurally balanced. Has anyone assessed whether the budget policies in effect in 2000 would have led to a balanced budget over the course of a typical business cycle (that is if you add the deficits during the recessions and surpluses during peaks, would the sum have been a balance)?
- sighthnd
August 4, 2011 at 12:22pm
Everything you say is true, but your message is too complicated for the voters. McArdle's is easy to understand if you don't think too hard: "Stop blaming Bush for everything that happened on Obama's watch."
- BillW
August 4, 2011 at 12:23pm
Not thinking too hard about stuff is how the country got to where it is.
- GSpinks
August 4, 2011 at 12:32pm
Granted that the Bush policies pretty much wrecked our financial situation, why have the wars and tax cuts continued under Obama? What exactly have we won in these wars, except a huge hit to the purse and thousands and thousands of dead and maimed soldiers and who knows how many injured, bereaved and dead in several countries that we are "saving for democracy", rescuing from dictators, fundamentalists, so forth? Maybe they want some of our fundamentalists? We could send Grover Norquist.
- Sophia
August 4, 2011 at 12:50pm
BillW's comment is the most salient. Chait's is an explanation for those who don't need one. They know this already, if not in exquisite detail.
- roidubouloi
August 4, 2011 at 1:56pm
@Sophia: "why have the wars and tax cuts continued under Obama?" Because wars and national policies have such enormous inertia that not even presidents can--or should--stop them suddenly. I was not in favor of either war (and I was a soldier at the time), but nor was I in favor of Obama quitting them after gaining office. That, Sophia, would have been a disaster. It not only would have reflected terribly on America but also would have been profoundly against our national interest, leaving behind a vacuum of devastation that would immediately have been filled by those given cause to hate us. The old principle "You break it, you buy it" applies here; our best option is to ease ourselves out carefully and hope to leave something functioning behind. I believe that Obama was sincere in wanting to escape those conflicts, just as he worked hard to close Guantanamo and to include responsible tax cuts into the deficit legislation. But the stone of Bush's legacy picks up weight as it rolls, and Obama has more than a few stones of his own. In the end, there's only so much a president can do.
- bacchant
August 4, 2011 at 11:00pm