Andrew calls George Bush "the most fiscally reckless president since FDR" and says we should name the tax increases needed to pay for the current deficits after him. George Bush was indeed fiscally reckless, but the honor of most fiscally reckless president since FDR goes not to him, but to Ronald Reagan, who ran 6% deficits without even the excuse of a war.
I suppose you could claim that his decline was more impressive, but that decline was only about half due to tax cuts or spending; the rest was the popping of the stock market bubble, which both hammered GDP and changed the tax base in ways that made it less lucrative to the government. (Tax revenues in America do best when the very rich are making a whole hell of a lot of money in big whacks, like stock-option vests)Nor are the current deficits, or the tax increases needed to pay for them, much about George Bush. By 2007, as the chart above shows, budget deficits were at 1.2%, rather average by postwar norms, and low interest rates mean that debt service payments for Bush's spending are not notably onerous. There are Medicare Part D and Iraq, of course, but Iraq is simply dwarfed by the current deficit, and the chief alternative to Medicare Part D was making it more expensive. I was against it, but the Democrats can hardly complain.
One could argue that George Bush should have run a nifty surplus, but that's not American politics; anything but a modest deficit or (very) modest surplus was going to get spent, as has been true for the last seventy years.
More broadly, this misunderstands what stimulus is. Stimulus is not spending; it's deficit. If Bush had delivered a budget in rough balance, Obama would have had to borrow up to the current deficit to get the stimulus he desires. Given that more recent debt is always much more expensive than older debt (that's the magic of inflation, kids!), when taxes are finally raised, they will pay more for spending on Obama's watch than on Bush's.
That's not to blame Obama; recessions are what they are, and if you favor big stimulus, you favor a big deficit. But those big deficits won't have much to do with Bush's fiscal imprudence. In fact, they won't have much to do with either president, except insofar as they failed to reform entitlements. The coming structural gap from Medicare and Social Security will make any interest payments on spending we're doing now look trivial.
I don't agree that Reagan didn't have a war excuse. He had more of one than Bush did -- a cold war with a superpower that required a massive military for deterrence. I would also point that Reagan agreed to a tax hike later on to get deficits under control while Bush was *still* flogging tax cuts ever year.
I'd be interested to see the fist derivative of that plot, which I think might be more indicative of fiscal policy. That drop-off in the Bush years is just so sharp.
"the chief alternative to Medicare Part D was making it more expensive"
Au contraire. How about actually reforming the health care system instead of throwing more money at it? We pay way more per capita than any other country, yet our health care system ranks behind most industrialized countries. George W. Bush couldn't be bothered with any serious work so he just asked the lobbyists whom he should make the check out to.
Reagan revolutionized our entire concept of the income tax -- no president since him has even dared mention raising the marginal tax rate above 39%. Before he came to office the top rate was 70% -- that's socialism guys. That's why his deficit spending was justified.
My recollection is that standing eye to eye with the bear was, if not as bloody, every bit as costly as putting boots on the ground in Iraq and Afghanistan, maybe more so.
Guys, there was a Cold War on for the entire graph (to that point). AND two real wars. Yet somehow Reagan gets a pass on deficit spending?
We spend just about as much on public care for the old, needy, and veterans as other countries do on their public systems for the entire country. What procedures will you ration or salaries will you slash to produce these awesome cost savings?
Your little chart misses one crucial point - in 1986, Reagan (and congress) passed an increase on payroll taxes into social security which every president since (except Clinton) have pumped right back into the general account even though that money was meant to "shore up" the long term social security deficits. Thus did Reagan - God and Jesus incarnate of Republican conservatism - enact the largest expansion of the federal government since WWII.
As a result, the deficit picture now and since King George II became president in FAR WORSE than your little graph shows. By the standards of pundits and theorists both, the only truly 'conservative' president of the last 50 years in Bill Clinton - whom "conservative" Republicans tried to impeach.
As I recall, Reagan went to Washington promising to cut taxes and shrink the government. But he had a Democratic Congress in both houses. While the tax cuts were popular enough to go through he was unable to carry out the other half of the plan, for instance, eliminating the Department of Education.
This whole line of reasoning presupposes the president has more power over the budget than he really does. He can propose all he wants, but all spending bills originate in the House, and they have to get past the Senate. In theory the president can veto spending bills he doesn't like, but that just means Congress bundles up every government expenditure into one giant omnibus spending bill that he can't veto unless public sentiment is heavily in his favor.
So charting the President vs. the deficit is just kind of silly. What matters is who controls Congress.
Sullivan knows this, too. He's just trying to get a few more kicks in on the guy who didn't support gay marriage.
tsotha,
You recall wrong. Reagan had a Republican majority in the Senate until the 1986 elections. He had strong support in a marginally Democratic leaning House from 1981-83, with a lot of souther 'Dixi-crats' (including future Republican Phil Grahm) - more than enough to pass spending cuts, had he the inclination or the guts to do so.
Further, thats a complete cop-out. 'Oh, I wanted to cut spending but the Dems wouldn't let me.' You cut taxes (IE: government revenue) didn't you? It doesn't take courage to spend money or cut taxes - see Obama and his stimulus bill. It takes guts to cut spending. Thats when the interest groups come out with the long knives. Department of Education? Give me a break. The real money is in entitlements and defense. Oh, and interest payments on the debt, which Reagan's horse's ass policies swelled.
I know people love Reagan, but the guy was one of the worst presidents ever - at least until Bush II proved you could actually do worse.
Seriously, Patrick? I have to echo Megan here - what's your alternative (besides the talking points)?
In fact, they won't have much to do with either president, except insofar as they failed to reform entitlements.
Sure they do, we wouldn't need a big stimulus if Bush hadn't driven the economy off a cliff.
Further, thats a complete cop-out. 'Oh, I wanted to cut spending but the Dems wouldn't let me.' You cut taxes (IE: government revenue) didn't you?
How is that a cop-out? Congress voted for the tax cuts but wouldn't vote for the budget cuts. You're proceeding from a false assumption, that the president is somehow driving the process. He's not. Congress decides what gets spent and how high the taxes are. People talk about "Reagan's budget " this and "Clinton's budget " that. It's all an illusion.
Aside from his very limited veto power, the only input the president has is his ability to sway voters. But there's a lot of variables to that influence, chief of which is how friendly the press is.
Department of Education? Give me a break. The real money is in entitlements and defense.
I know that. It was just an example.
I know people love Reagan, but the guy was one of the worst presidents ever - at least until Bush II proved you could actually do worse.
Well, that's your opinion, I guess. I'm certainly not happy with everything Reagan did, but he wasn't a bad president, and I don't think GWB was even close to the worst president we've had, even in the last 100 years.
It doesn't matter what we think. It matters what the market for Treasuries thinks. Deficits are financed with T-bills.
When the demand for T-bills dries up, the game is over. That day is coming. soon.
Reagan didn't win the cold war. He just caused us to loose slower than the Rooskies. We sustained a fatal blow that has taken 20 years to kill us. That blow was a national debt obligation composed of an unsustainable military empire and fiscal entitlement time-bomb.
If the U.S. Gov't was a corporation, would any sane investor buy it's bonds, given the balance sheet? There is no hope of future profit. None. It's a dotcom. A money pit. A black hole.
I was in favor of the "Bush Tax Cuts" (I thought Congress voted for them too).
But I was not in favor of Bush/Congress spending.
I am in favor of the pitiful tax cut Obama hopes to call Stimulus, which kits in 10 bucks a paycheck starting in 4 months or so. How that stimulates much right now when the economy is spiraling is beyond me. But still I'll take what I can.
I think most people that sided with Bush on the tax cut issue think this way. Cut taxes and spend less.
Bush didn't spend less and his approval ratings were low with most of us, albeit with some explanation (I supported Bush on several things and I think he completely screwed up on others -- I would have been happier if the impossible happened and someone else ran for reelection when he won in 2004).
The difference with Obama is he is spending like crazy and barely cutting taxes, and the Democrats will be much more prone to increase taxes rather than to increase spending.
At least the Repubs talk (lie?) about decreasing spending. That's what we need. People have been preaching smaller government for years and we've never done it. Or if we have never for more than 1-2 years.
I would prefer if the government spent less and less and less every year to make the current tax revenues work, rather than running up deficits.
"Democrats will be much more prone to increase taxes rather than to increase spending."
Should read rather than to decrease spending... most likely we'll see increased taxes, and increased spending at some point in the future.
But Spock and I see eye to eye on this one. Once the demand for Treasuries dies, the gig is up. Unfortunately for us we'll probably get one of those pathetic "ask what you can do for your country" speeches followed by a tax hike for patriotic reasons.
Bloomberg is reporting that Geithner's "stress tests" are just cosmetic procedures designed to produce depositor confidence.
http://www.bloomberg.com/apps/news?pid=20601087&sid=a.DoUvyCa0cE&refer=home
Here's the question nobody seems to be asking:
If a stimulus is financed by selling treasuries, then unless the Fed is buying them, don't they remove as much money as they inject? Think about it: Where is the money coming from that purchases the T-bills? from the economy!
If the Fed buys treasuries and holds them, then the debt is just monetized and inflation is the result.
Of course, Reagan had a war, and he actually won it.
Obama's going to be running 10%+ deficits, and that makes him what...?
"Given that more recent debt is always much more expensive than older debt (that's the magic of inflation, kids!), "
Aren't you forgetting about rates? Bush locked in debt when yield on the 30y was 5%, it's now 3.6% and was 2.5% as recently as Dec.
So we should consider inflation effects when moralizing about deficits, but not discounting cash flows by financing costs? I thought you were always up on the 'good business' angles?
I can't believe I'm defending Reagan, who in my eyes was the minster who performed the marriage between the GOP and America's aspiring theocracy. I think that marriage has been a disaster for our country. But..
As Rob points out, Reagan presided over a massive military build up, which if it did not actually win the Cold War, certainly hastened the demise of the Soviet Union. Unless it suddenly comes to light that AQ has nuclear armed subs, transcontinental bombers and ICBM, and 10,000 heavy tanks, comparing our military situation under GWB to Reagan is preposterous.
Of course that's exactly the complete failure of perspective that GWB & Co promulgated, and then didn't even have the stones to pursue a commensurate policy.
If the U.S. Gov't was a corporation, would any sane investor buy it's bonds, given the balance sheet? There is no hope of future profit. None. It's a dotcom. A money pit. A black hole.
Posted by Bearded Spock | February 26, 2009 12:46 AM
Maybe, Spock, but have you looked at most other countries? Debt ot GDP is much worse and people are still lending to them. The U.S. has been around and selling debt longer than most corporations. I won't argue that it's sustainable til the end of time, but it's also not the apocolypse.
The evidence that Reagan's defense spending in any way led to the fall of the Soviet Union is sketchy at best. It's pretty clear that the Soviets were on their way out regardless of what Reagan did. To put it in perspective, Reagan's peak defense spending was high in inflation adjusted dollars than what we spent during Vietnam. The man reinvented the Republican party as military Keynesians, and dealt a deathblow to conservatism.
What procedures will you ration or salaries will you slash to produce these awesome cost savings?
Whenever anyone screams "But then we will have to ration health care! People won't be able to choose their own doctors!" and such my reply is always "What's this we've got now then?"
If I want full coverage from my insurer (Blue Cross) for doctors office visits, then I better be sure the doctor is in their network. If he isn't, then I'm not fully covered. This is intended as a cost saving measure. My health care is rationed, and I don't get completely free choice of doctors. Which is just what Megan seems to object to.
"the only truly 'conservative' president of the last 50 years in Bill Clinton - whom "conservative" Republicans tried to impeach." -Nathan
I never considered attempting to nationalize one seventh of the economy to be all that conservative.
Wiredog, I'm not screaming anything. I'm asking for specifics on where these magical cost savings will come from. You can't claim you're going to wring fabulous administrative costs savings from Medicare, yet Medicare+Medicaid+VA already spend about as much as many industrialized economies do on their health care system. I ask again: if Bush really could have slashed costs with reform, which salaries will be cut, or which procedures will not be performed? These two areas are the major sources of medical cost growth--everyone loves to bash pharma, but prices on drugs aren't growing that fast; to the extent pharma spending is growing, it represents more drugs taken, not pricier drugs, and those new drugs probably save money by avoiding much more expensive procedures.
I'll make my usual observation that Megan is offering no support for this statement, but in this case she happens to be essentialy correct. The cost of new drugs is rising, certainly, but most people don't take the newer drugs, and what were formerly pricey brand drugs revert to generics over time. So yes, costs have risen, but this has been driven by the number of prescriptions written.
Oh, it's not the best but here's a confirming source:
Sigh. Even if the latter statement is true, the two are not necessarily exclusive.
What procedures will you ration or salaries will you slash to produce these awesome cost savings?
The same procedures that are rationed in France, Germany, and most other prosperous Western European nations. The same salaries that are "slashed" in France, Germany, and most other prosperous Western European nations.
Simple questions, simple answers.
@ScentOfViolets:
Sigh. They are as exclusive as you and your claiming to be a "moderate".
You are always welcome to quote mine. Just what have I said that makes you think that I am anything other than a moderate? Quotes, please.
And, just to save you some effort: being against right-wing craziness, against Republican perfidy, or against disingenuous libertarian glibness does not make one a liberal. Maybe a 'liberal', but no more.
I've read the same declassified 1970s intelligence reports you have, so yes, probably the USSR was on it's way out with or without Reagan's defense buildup. But I believe making that determination now is what Taleb calls "picking the winner after the fact."
In any case, Reagan did destroy conservatism.
That’s correct, the House and Senate Democratic alternative to the $540 Billion Medicare Part D was a $600 and $900 Billion drug benefit. Senate Democrats also deserve much (not all) of the blame for why Medicare Part D was expensive as it was by using the threat of a filibuster to get Republicans to remove means-testing from the drug benefit (which is what we need for both Medicare and Social Security).
Anyone notice how Andrew has yet to comment on the horrendous budget Obama and company laid out for the public today? Wonder why? George W., no doubt, compounded our national debt with the Iraq War and not offsetting spending cuts when he cut taxes. But this latest Obama udget is as big a joke as the stimulus. This budget alone makes GW look like a fiscal hawk.
Nice down payment on socialized medicine too. So Bubba gets free health care -- at least he won't have to sacrifice his new car, flat screen TV and suped up cell phone -- God forbid he prioritize his life to pay for things that matter.
If you were wondering whether or not we are screwed as a country, rest assured, we are.
I think you missed Andrew's point. The point is not how big are Obama's deficits or would they need to be this big even absent Bush's fiscal policies. The point is how high is the debt that Obama is starting with because of Bush's fiscal policies? Bush more than tripled the national debt by $5 trillion. If he responsibly managed the surpluses he received, then Obama would have $5 trillion (even $4 or $3 trillion if you assume that even some deficits would've been necessary under Bush) to play with before having to worry about the national debt getting so high that tax increases are necessary. Arguably, absent Bush's fiscal irresponsibleness, then taxes might not need to be raised even after Obama's stimulus/bailout packages, so it arguably is appropriate to name the tax increases the Bush Tax Increase Bill.
WRONG, WRONG, WRONG.
Take another look at any reasonable long term budget projection and you will see that interest on the federal debt will be a much larger item than medicare and maybe even larger than medicare and social security combined.
WRONG, WRONG, WRONG.
Look at the data.
The military budget under Reagan was a smaller share of GDP and/or of the federal budget than every Cold War president but Carter. Military expenditures were a larger share of government spending and/or GDP under Truman, Ike, Kennedy,
LBJ, Nixon and Ford than under Reagan.
Why does it always seem to take such willful ignorance to be a libertarian?
Spencer is sure to be correct, and you don't even need to look at the projections to know this. Only a fool thinks there will be balanced budgets once the Baby Boomers begin drawing the entitlements. $2 trillion deficits (in today's dollars) will be the norm in 15 years (and maybe even in the next five).
At present, the on balance sheet liabilities of the government are reasonable by any comparison with the past, but, of course, the off-balance sheet liabilities are the ones you have to pay attention to, and the debt-service on those liabilities will begin soon enough. My prediction is that interest on the debt will be over half the budget by 2025.
Alex,
Do you really think that the public debt incurred in the last few years and that which is coming is largely financed by treasury bonds? It is isn't. The maturity on the public debt is much shorter than you think.
Megan,
The budget deficit you are showing is based on fraudulant accounting that would make the guys at Enron proud.
Through 1989 reciepts - outlays of social insurance contributions were close to 0. Note that the government does not use accrual based accounting like it properly should. The budget deficit should be anywhere between $200 and $400 billion greater under Bush. Clinton also benefited from this accounting trick, which was why we had a "surplus".