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The Bush administration's fiscal record

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One of the other takeaways from the Congressional Budget Office's long-term budget outlook is that the Bush administration really wasn't fiscally responsible, while the Obama administration pretty much has been.

The major domestic initiatives of the Bush years -- the tax cuts and the Medicare Prescription Drug Benefit -- made the budget picture much, much worse. The Obama administration's health-care reform proposal has, by contrast, made the budget picture much better. (You could say that the stimulus wasn't paid for, but that was sort of the point of the thing. And if we want to put emergency measures into the mix, we also have all costs related to 9/11 and TARP accruing to Bush. And I've been nice and haven't mentioned Iraq so far. Oops.) In fact, there's no high-priced initiative from the Bush years that improved the budget situation, or was even paid for.

This has, I think, had a psychological effect on Washington. One reason people are so skeptical that the government will actually pay for health-care reform -- as it is now statutorily obligated to do -- is because people got used, under the Bush administration, to seeing the government routinely shirk its fiscal duties. And the fact that the same people who voted for all that shirking are now screaming about deficits just makes observers less willing to credit the commitments made by politicians.

By Ezra Klein  |  June 30, 2010; 3:13 PM ET
Categories:  Budget  
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Comments

Ezra writes:
"The Obama administration's health-care reform proposal has, by contrast, made the budget picture much better."

That is not at all true. I've posted numerous times on numerous threads the indisputable facts showing that PPACA does not reduce the deficit. It improves cash flows in a specified time period. That is a very different thing from improving the deficit. All of the supposed deficit reduction in PPACA has an equivalent unfunded liability being created by the bill, unfunded liabilities that are not scored as part of the bill.

Posted by: ab_13 | June 30, 2010 3:24 PM | Report abuse

"The Obama administration's health-care reform proposal has, by contrast, made the budget picture much better."

Also, Doug Elmendorf disagrees with you Ezra. He said:

"Rising health costs will put tremendous pressure on the federal budget during the next few decades and beyond. In CBO’s judgment, the health legislation enacted earlier this year does not substantially diminish that pressure."

http://www.cbo.gov/ftpdocs/115xx/doc11544/Presentation5-26-10.pdf

Posted by: ab_13 | June 30, 2010 3:47 PM | Report abuse

You're being too hard on Bush. Remember in 2001 the concern among the chattering class and at the Fed was we'd have surpluses as far as the eye could see, what would we do if we didn't have Treasury bonds to invest in, etc. etc. I know, I exaggerate, but only a little.

Posted by: bharshaw | June 30, 2010 3:47 PM | Report abuse

The only time we seem to make progress on the deficit & national debt is with divided government. See Bush I and the Democratic Congress and Clinton and the Republican Congress.

One party rule is a recipe for deficits, whether caused by tax cuts (Republicans) or spending growth (Democrats).

I think you are too optimistic on health care reform reducing the deficit. Once employers figure out how to game the system by shifting new hires to the subsidized exchanges, the taxpayer cost for the subsidies will increase significantly over the projections.

http://www.newyorker.com/online/blogs/johncassidy/2010/03/obamacare-by-the-numbers-part-1.html

Posted by: jnc4p | June 30, 2010 4:02 PM | Report abuse

ab_13, Elmendorf agrees with Ezra. The Post quotes him saying that Obama's health care reform made "steps in the direction of a sustainable fiscal policy. But they are small steps relative to the journey that will be needed for fiscal sustainability." You're just citing someplace where he said that they were only small steps.

http://www.washingtonpost.com/wp-dyn/content/article/2010/06/30/AR2010063003396.html

Posted by: vince432 | June 30, 2010 4:08 PM | Report abuse

To say that "the government will actually pay for health-care reform -- as it is now statutorily obligated to do" is false, unless the clarification is made that state-collected taxpayer dollars will be used to pay for a significant portion of costs under the PPACA.

This particular issue -- that federally-collected taxpayer dollars do not cover all costs -- is one element of Florida's litigation, so substantial factual information is available. And, as always, I'd note that both federally-collected and state-collected taxpayer dollars come from taxpayers: the "government" pays for nothing whatsoever.

Posted by: rmgregory | June 30, 2010 4:21 PM | Report abuse

As your earlier post mentioned, even if by allowing Bush Tax cut to expire, chances of covering deficit in a respectable manner are good. So can we get exact details about the Bush tax cuts and how they will impact individuals in different income bracket / different income sources? I guess I need to ask this question to the research desk... will do there to.

Posted by: umesh409 | June 30, 2010 4:25 PM | Report abuse

The obvious solution to the deficit problem is to raise taxes on the rich and everybody else, to where they were in 2000. But once you cut taxes, who is going to step up to "raise" them back to where they should have been all along? Nobody. It's political suicide. The spineless democrats who let Bush get away with what he did are just as guilty.

Posted by: rjewett | June 30, 2010 4:28 PM | Report abuse

@vince432, you don't know what you're talking about. Read the direct quote I gave from Elmendorf.

"the health legislation enacted earlier this year does not substantially diminish that pressure."

This directly contradicts Ezra's claim that PPACA has "made the budget picture much better".

Posted by: ab_13 | June 30, 2010 4:35 PM | Report abuse

"..the Bush administration really wasn't fiscally responsible..."

Of course not. He (and Congress) ran deficits that persisted even during the peak of the boom phase.

"...while the Obama administration pretty much has been."

What? Utterly, utterly false. The deficits projected under the President's budget are plainly irresponsible. You can blame Bush for 2008-2009, and I'll even let you blame him for 2010-2012. However, the CBO expects full employment over the 2016-2020 period, and we see deficits rising from $894 billion in 2016 to $1,254 billion in 2020 (4.7% to 5.6% of GDP). This is worse (in both dollars and as a percentage of GDP) than Bush when the U.S. wasn't experiencing full employment.

http://crfb.org/sites/default/files/CBOs_Analysis_of_the_Presidents_FY2011_Budget.pdf

I'd guess liberals will blame interest payments on the debt, but then again I thought rates are so low, we might as well just go on a spending spree now. I'd be okay with taking care of that problem in the next year or two, not 2015 and beyond.

By 2020, CBO projects we'll be spending $5.67 trillion. $5.67 trillion. With that much money, you could actually balance the budget (cut $1,254 billion), alot $1.5 trillion for interest payments, the military and other vital programs, and then send every American citizen a $9,000 check each year ($36,000 for a family of four).

Posted by: justin84 | June 30, 2010 5:30 PM | Report abuse

@ab_13, I read it. "Does not substantially diminish" does not mean the same as "does not diminish."

On page 7 Elmendorf says, "The legislation will reduce budget deficits by about $140 billion during the 2010-2019 period and by an amount in a broad range around one-half percent of GDP during the following decade."

You might criticize Ezra for saying the budget picture is "much" better, but to say it is "indisputable" that the "PPACA does not reduce the deficit" is just flat wrong.

Posted by: adagio847 | June 30, 2010 5:49 PM | Report abuse

1. Want the debate to change? Draw a new line at this moment. Forget the past, it can change here. Everything is okay from this point in time onwards. Because the CBO actually says the long-term budget will be okay, is completely manageable, if we just let everything alone.

That means new rules for the public conversation. You can insist on them:

Before extending the Bush Tax Cuts or giving any other tax cuts, politicians must propose and deliver valid cuts in spending first. Or else let the Bush Tax Cuts expire, as they are supposed to.

Likewise, before any new gov't spending, politicians must show how it is maintained, or how it gets repaid.

And further: Doctors, or perhaps a doctor's organization such as the AMA, must endeavor to look at cost-cutting, themselves. PPACA, a.k.a. Obamacare must go on to propose extra-market efficiencies, and bring them up for public discussion.

We can leave Social Security for now, honoring it as the first and only measured, tax-dedicated, and paid-for instance of injecting common sense into the U.S. safety-net.

From this moment on, every change in long-term spending or taxation must be offset, to make an equipoise. Because that is the only way most of us are able to ratiocinate.

With an extra item: Long-term deficits and revenue MUST BE DISTINGUISHED, in every breath, from short-term stimuli and short-term tax policy. Because quick pay-outs and pay-backs are just rounding errors on the longer line of the long-term budget.

Notice what this really means: we immediately come to the problem of motives and preferences. Why would you cut taxes, or why would you increase gov't spending? There are really no good scientific reasons, although there are many claims. As I understand it, economic research shows that neither tax-cutters nor deficit-spenders usually get more than modest results in economic growth. In other words, neither side in the tax vs. spend debate keeps a purchase on results. This rhetoric should be called out and eliminated.

Posted by: Lee_A_Arnold | June 30, 2010 6:00 PM | Report abuse

2. (continuing): Of course selfish motives have not been lacking. At least right now you could claim unselfishly that, in the current economic circumstances, (a) investors won't invest in supply at near-zero interest rates: (b) anyway this is not a supply crunch, it's a demand crisis, and (c) we already know that investors do not, by definition, create much demand: Therefore, more short-term stimulus.

But on the other hand, the Bush Tax Cuts did not claim a dire extremity of circumstance. The most succinct explanation came from Dick Cheney, blunt as ever: "This is our due."

Notice that the Bush Tax Cuts were written to be short-term, while lawmakers cynically supposed they would never really be ended. In other words the Bush Tax Cuts were posed as a short-term rounding error, but they knew they were planning bad damage to the long-term budget.

(And did the economy do better than ever? No.)

So let's cut it off right here, and look at the future. The most basic need is long-term real growth that is ecologically sustainable. Neither tax cuts nor gov't spending can much increase long-term real growth. It comes from innovation -- which comes from general education, because we really don't know where the next little geniuses will pop up.

Government spending can create demand, but it finally overheats, while government's strongest effect on long-term growth has perhaps been mostly basic R&D (including military R&D) plus the guarantee of universal education.

On the other hand, tax-cutting can create short-term supply, but investors do not create innovation. They merely fund it, while diverting their surplus "commodity" to half-blind gambling in the overgrown financial swamps.

So let's take this opportunity to hold the current line on the long-term budget, and start constructing our best synthetic understanding of the future instead of rehashing the phony arguments.

One path for the Democrats would be to realize that smarter and more helpful government can be smaller government. The economic theory is already there: just as innovations create efficiency by reducing transformation costs, so, too, do institutions create efficiency by reducing transactions costs. Innovations and institutions are formally identical in this sense. It ought to follow, that institutions could miniaturize in much the much the same way that innovations do, and reduce transactions costs by becoming rather narrowly focused, tightly constructed, user-friendly, easy to understand. Obamacare strikes me as having just this sort of potential. Obamacare got a lower price tag and it is even finally easy to understand. What a political mistake it was for Republicans to disown a package half-full of Republican ideas!

Posted by: Lee_A_Arnold | June 30, 2010 6:01 PM | Report abuse

On another note, Dems and progressives would do well to stop blaming the huge deficits on Bush and put the blame where it really belongs, on the Republican-led Congress. We're making it way too easy for them to toss it off as the doings of a rogue President. Only Congress can appropriate funds. Are we really supposed to believe that Bush was so persuasive that they had no other choice?

Posted by: adagio847 | June 30, 2010 6:10 PM | Report abuse

@adagio847: " read it. "Does not substantially diminish" does not mean the same as "does not diminish.""

Elmendorf said the budget is under great pressure, and PPACA "does not substantially diminish that pressure". That is in direct contradiction with Ezra saying PPACA "made the budget picture much better". There is no ambiguity there. If PPACA made the budget "much better" Elmendorf would not word his commentary as such.

As for this comment:

-----
On page 7 Elmendorf says, "The legislation will reduce budget deficits by about $140 billion during the 2010-2019 period and by an amount in a broad range around one-half percent of GDP during the following decade."

You might criticize Ezra for saying the budget picture is "much" better, but to say it is "indisputable" that the "PPACA does not reduce the deficit" is just flat wrong.
-----

You are sadly mistaken. We've rehashed this ad nauseam the past few days on this blog.

$70B of the revenue in ACA is premiums paid for the new federal long-term care insurance program (the CLASS Act). But every penny of that revenue will be needed to eventually pay benefits, so you cannot use it as an offset to the spending in ACA. The CBO counts in cash in the door and cash out the door, not future liabilities created as part of a bill. But those liabilities are very real, and will definitely have to be paid.

Another $53B in revenue in ACA is higher Social Security taxes received as employers substitute salary for insurance (due to either dropping coverage or reducing coverage because of the excise tax). But receiving more SS taxes means more benefits are owed. Once again, you cannot use that $53B as an offset to the spending, because you’ve created a new $53B liability in SS. But because those benefits won’t be paid in the 10 year scoring window, they do not count them. Cash in the door, cash out the door, nothing else.

When you say that CBO has scored it reducing the deficit it is because you do not understand how the CBO scores a bill. They use cash accounting. They do not account for new liabilities. So by creating a ton of new liabilities the Democrats can create the illusion of deficit reduction because of the CBO scoring methodology.

This is the equivalent of paying off one credit card using another card and then claiming you've eliminated your debt.

It IS indisputable that PPACA does not reduce the deficit, you are flat wrong. Feel free to try and refute any facts I've stated above.

Posted by: ab_13 | June 30, 2010 6:17 PM | Report abuse

I love how the Obama-worshiping Klein thinks Obama is fiscally responsible. Maybe he should look at that chart again; those revenue lines are still trending downward, and have been since Obama has been in office.

Does Klein do a dance when he worships his god (Obama)?

Posted by: steve_tsouloufis | June 30, 2010 6:37 PM | Report abuse

"When you say that CBO has scored it reducing the deficit it is because you do not understand how the CBO scores a bill.

It IS indisputable that PPACA does not reduce the deficit, you are flat wrong. Feel free to try and refute any facts I've stated above."

The problem with your argument is that the deficit, as defined by the CBO, is smaller every year for the foreseeable future as a direct result of the passage of PPACA.

The possibility that there is some definition of 'deficit' that you use, have not defined, and have used to reach different conclusions than the CBO likely feels irrelevant to most people who consider the annually reported deficit as the preferred metric for determined the deficit.

Posted by: eggnogfool | July 1, 2010 12:56 PM | Report abuse

@eggnogfool:
"The problem with your argument is that the deficit, as defined by the CBO, is smaller every year for the foreseeable future as a direct result of the passage of PPACA."

Read my comment from June 30 6:17PM. The CBO counts cash in and cash out during a fixed time period. They do not count the liabilities created by the bill. When the claims from the CLASS Act and the additional Social Security benefits come due, the money to pay for them will not be there, because it has already been spent. Like I've said repeatedly, this is no different than paying off one credit card with another and claiming you've gotten rid of your debt. Eventually the bill comes due. And when these bills come due there won't be any money for them.

-----
"The possibility that there is some definition of 'deficit' that you use, have not defined, and have used to reach different conclusions than the CBO likely feels irrelevant to most people who consider the annually reported deficit as the preferred metric for determined the deficit."
-----

Reporting things on a cash basis is fine when the outflows all happen within the same time period. But you cannot report on a cash basis when you're creating long-term liabilities. But this is the way the CBO does it, and this is why the Democrats structured the bill this way, because they can take advantage of the CBO's scoring method.

This is not an alternate definition of deficit, this is the simple arithmetic of how much money the government will spend in the future.

If you believe this bill reduces the deficit, where will the money come from to pay CLASS Act claims, and to pay back Social Security for the money they borrow out for the trust fund? Since you are claiming that those liabilities don't exist, where are the funds to pay for them?

If you believe this bill reduces the deficit, do you also believe that the government could completely wipe out our entire national debt by selling $13T worth of life insurance that didn't pay benefits for 30 years?

Posted by: ab_13 | July 1, 2010 3:01 PM | Report abuse

Ezra, I agree with pretty much all you wrote here, except for (unless I misunderstand what you wrote): TARP

Does _did_ help the financial picture no? (OK, it didn't directly help the budget, but it saved the banking industry from falling into the abyss, didn't it? And we're getting most of that money back, aren't we?)

Posted by: ADCWonk | July 2, 2010 11:07 AM | Report abuse

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