Earth to Paul Krugman

February 22nd, 2010

Krugman writes:

And the deficit came. True, more than half of this year's budget deficit is the result of the Great Recession, which has both depressed revenues and required a temporary surge in spending to contain the damage. But even when the crisis is over, the budget will remain deeply in the red, largely as a result of Bush-era tax cuts (and Bush-era unfunded wars). And the combination of an aging population and rising medical costs will, unless something is done, lead to explosive debt growth after 2020.

So many things wrong with this paragraph.
The reference to the "temporary surge" in spending is the first error.

Here, you can check the summary tables of the President's latest budget proposal. In 2009, fiscal outlays are estimated at $3.5 trillion. In 2010 they are $3.7 trillion.

In 2011 they are $3.8 trillion. And so they go, until 2020, when they are $5.7 trillion. There's a slight dip in 2012 to $3.7 trillion, but the fact that Obama's spending never drops below 2010 levels, and drops below 2011 levels only once, gives the lie to the argument that the spending surge is "temporary."

Let's also be clear that an awful lot of this spending is Obama's spending, not Bush's. The summary tables for Bush's last budget (FY09) can be found here. Bush wasn't doing ten-year budgeting, but his outlays for 2011 were $3.1 trillion, for 2012 were $3.2 trillion and for 2013 were $3.3 trillion.

That represents a $700 billion, $600 billion, and $600 billion increase over the baseline for spending that President Bush was anticipating.

Even generously allocating $200 billion for putting the wars in Iraq and Afghanistan back in the budget (where they should have been in the first place) and $200 billion for increased interest on the debt from 2008 and 2009 for TARP/stimuli, that's a pretty significant delta in the final Bush baseline and the initial Obama baseline, and it occurs well after the "temporary surge" in spending has supposedly wound down. And while Obama can argue that spending declines from 25.4% of GDP in 2010 to 22.8% of GDP in 2013 (before beginning an inexorable rise), that is still substantially higher than the 18.6% peak that President Bush foresaw.

Furthermore, and this bears repeating again and again -- the Bush tax cuts expire in 2010. After that, they have zero impact on the budget, except for the interest on the debt that they created. After that, those cuts that survive are Obama's tax cuts, something for which I imagine he will gladly take credit.

Obama campaigned on maintaining the Bush tax cuts for a very large chunk of the country -- including plenty of affluent taxpayers -- and moreover campaigned on cutting them even further (95% of taxpayers will receive a tax cut).

You won't count me among those who would defend Bush's overall approach to fiscal policies; individually many of them are defensible, but taken together they were a needless debacle. But let's be honest here, Obama is proposing massive budget increases that will significantly increase the yearly budget deficit – and they have nothing to do with George W. Bush.

http://realclearpolitics.blogs.time.com ... l-krugman/