Monday, August 02, 2004

A breakdown of the deficit

So, maybe we've been too hard on Bush about the deficit.

The New York Times:
Mr. Bolten attributed the worsened government balance sheet to 'an extraordinary confluence of adversity: the stock market downturn that began in 2000, and the subsequent recession that the president inherited as he took office; the terrorist attacks on America, and subsequent spending for homeland security and the war on terror; and the crisis in confidence produced by corporate scandals years in the making.'

He did not mention the effects of Mr. Bush's tax cuts. But the nonpartisan Congressional Budget Office has calculated that about half of the budget turnaround was caused by the weaker economy, about a quarter by higher spending and about a quarter by lower revenue because of the tax reductions.
The reasoning is supposed to be that people will take their tax cuts and improve the economy. With increased spending and the tax cuts, Bush can only be responsible for $223 billion of the deficit, +/- depending on how effective his policies (tax-cuts) were on the economy.

The other thing we need to consider is that record deficits don't seem so bad when you look at it as a percent of our GDP, which of course is always "record-breaking" when we aren't in a depression.
...the figure projected on Friday is 3.8 percent of the gross domestic product, "well within historical range" and much lower than the record 6 percent reached in 1983.
Source: Brad Delong says that they don't know what they're talking about because the previous estimate already figured in the effect of Bush's "tax relief". This means that the lowered deficit forecast is just the result of an overshot estimate.

UPDATE 9:41 PM August 7, 2004: My appreciation of the situation is was entirely facile. Here is a look at the decision-making process and the critique from a former Treasury secretary compounded with that of an economist concerning the administration's fiscal policy. I didn't quite understand what was going on (why am I reading DeLong anyway? Oh, right, because he's an accessible expert), I can tell that that I was the one being simplistic when I dismissed MoveOn.org's Bush in 60 seconds winning commercial with little kids working off the national debt as shying from controversy.

Forget uplifting our economy, our people from the recession. In the meeting notes, O'Neill was pushed aside in his efforts to prevent others in the administration from letting/making Bush endanger the economy in all but the short term with an onslaught of tax-cuts. I haven't read, The Price of Loyalty, but the didn't we already help them out at the top quote has new context and meaning.

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