The Plank

The Truth About Obama And The Deficit

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A few weeks ago, I wrote a column pointing out how strange it is that President Obama is being blamed for huge budget deficits, when the projected deficits we face are entirely due to policies he inherited. In my column, I cited this paper by the Center on Budget and Policy priorities, which found that Obama's budget would reduce the budget by $900 billion over ten years compared with keeping current policies in place.

Yesterday David Leonhardt of the New York Times took up a similar question. Leonhardt looked at the budget from 2009 through 2012, and tried to figure out what had changed in those years since 2001. He found that the business cycle accounted for 37% of the higher red ink. More than half came from legislation signed by President Bush. Seven percent came from Obama's stimulus bill, and only three percent from his regular budget.

It was an admirable and serious article. A good sense of how serious can be seen in the contrast to a Politico story that ran the same day. Politico concerned itself entirely with the perception that Obama is responsible for the new debt without bothering to explore the merits of the perception. It ran quotes alleging as much (GOP Sen. John Cornyn: "This was not an inherited situation. This was a matter entirely of
this administration’s and this Democratic leadership’s making") without pointing out that the allegation is demonstrably false.

But Leonhardt's article, superior though it was, actually overstated Obama's contribution to the deficit. The figure I cited above, remember, said that Obama's budget would reduce the deficit by $900 billion over ten years compared with maintaining current policy. Leonhardt, looking only at three years, says that Obama's budget would make the deficit higher, but just a little bit. Even accounting for the difference in time frame (ten years versus three), that's a big discrepancy. So, which is it -- is Obama shrinking the deficit slightly, or increasing it slightly?

I asked James Horney, a budget expert at CBPP, how to reconcile the two changes. He told me that Leonhardt made two different assumptions. First, he put on Obama's tab the 2009 omnibus appropriations bill. Second, he added in several tax credits, such as for R&D or alternative energy, that Obama plans to extend. The first is a fair though debatable point -- the appropriations bill was passed by Congress under Bush's watch, but Obama signed it, so you can blame him for it. But the second is pretty unfair. The tax code is filled with credits that, rather than being part of permanent law, Congress simply extends year after year in order to keep lobbyists on the hook for campaign contributions. Those clearly belong in the category of extending inherited policy rather than new policy created by Obama.

It's a sign of how distorted the debate has been that Leonhardt's conclusion that Obama accounts for just a tiny share of the fiscal collapse was recieved as a shocking revelation. Leonhardt himself treated it as such. ("How can that be?," he wrote.) You can fault Obama for failing to do more to solve the problem -- though his health care reform will make a huge difference if it works -- but to attribute the situation to his policies is simply inaccurate.

--Jonathan Chait

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