What Caused The Deficit? See Chart.
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.
In so many words McArdle's argument is that conservatives and libertarians are never responsible for anything. If that is true shouldn't it also be the case that if by some miracle they do something good, they should not get credit for that either.
