Former Bush administration budget adviser Jeff Rosen — no relation to esteemed legal writer Jeffrey Rosen — argues today in National Review that the Obama administration’s reckless spending is responsible for our budget deficit. Rosen’s evidence is that, in 2008, the budget forecasting agencies predicted that the government would be running a surplus by 2012. But instead we have a deficit! So it’s Obama’s fault:
As the nation’s federal budget problem comes back into the spotlight, it has unfortunately been forgotten that as recently as 2008, the White House Office of Management and Budget and the Congressional Budget Office both issued spending forecasts that determined that the federal government would have a budget surplus in 2012 and continuing thereafter. Although OMB and CBO used quite different policy assumptions, both foresaw surpluses starting in 2012 — CBOprojected a surplus of $87 billion for 2012; OMB projected a surplus of $48 billion for 2012.
Instead, while a recession and some temporary tax relief reduced the government’s revenues, federal spending soared, the surplus disappeared, and the federal debt increased by trillions of dollars.
During the Obama administration, instead of moving towards the projected surpluses, the federal deficit exploded to a record $1.4 trillion in 2009, $1.3 trillion in 2010, and $1.3 trillion in 2011 — a level nearly triple the highest deficit ever recorded previously.
This is pretty incredible. Yes, in 2008, the CBO did forecast a surplus by 2012. The forecast was based on many things that did not come true. Start with the expectation that the economy would be humming along just fine. From the 2008 CBO report:
CBO does not expect the slowdown in economic growth to be large enough to register as a recession. Economic performance worse than that suggested in CBO’s forecast could significantly decrease projected revenues and increase projected spending. Furthermore, policy changes intended to mitigate the economic slowdown would, by design, tend to increase the budget deficit in the short term.
Yeah, that massive worldwide economic calamity kind of happened, didn’t it?
Rosen does allow that the greatest economic crisis since the Great Depression may have played a wee role in causing this forecast, though he doesn’t concede that there was any justification in short-term stimulus policies that increased the deficit in order to combat the crisis, even though the Bush administration did the same thing in response to a far shallower recession.
What’s more, if we actually read the CBO report cited by Rosen, it all but screamed, right on the first two pages, that the forecast — that lovely surplus whose disappearance Rosen blames on those nasty Obama policies — was almost certainly a mirage. First, CBO warned, it relied on the assumption that revenue would climb, because the Bush tax cuts were projected to expire at the end of 2010. And it remains the case that, if the Bush tax cuts are not extended, revenue will increase by nearly $4 trillion over a decade.
Rosen focuses all his attention on spending:
the budget proposal the Obama administration submitted to Congress this year shows the significantly higher level of spending each and every year relative to the spending previously projected in the 2008 CBO forecast.
But that CBO forecast also specifically warned that the spending projections foisted upon it by Congress were unrealistically low. CBO specifically noted that it had to make the dubious assumptions:
That outlays for discretionary programs (those whose spending levels are set anew each year through appropriation acts) will decline from 7.6 percent of GDP last year to 6.1 percent by 2018—a lower percentage than any recorded in the past 40 years. Such a projection derives mainly from the assumption in the baseline that discretionary funding will grow at the rate of inflation, which is lower than the growth rate that CBO projects for nominal GDP. Implicit in the projection for discretionary spending is an assumption that no additional funding is provided for military operations in Iraq and Afghanistan in 2008 and that future appropriations for activities related to the war on terrorism remain equivalent, in real inflation adjusted) terms, to the $88 billion appropriated so far this year.
Again, I am quoting here from the same CBO report that Rosen is citing. He’s citing a CBO report from 2008 projecting a surplus by 2012, but the report explains right up top that the projection is a bunch of nonsense because it assumes large spending cuts, a sudden end to two wars, and the expiration of the Bush tax cuts, not to mention the total absence of a recession. That hacks like Rosen were helping to devise federal budget policy for eight years tells you a lot about why the Bush administration ran the budget so incompetently.
If you want a concise explanation of what caused the budget picture to get so bad, the White House neatly encapsulated it in a chart. (I realize it’s a partisan source, but I haven’t seen any refutation of it save some hand-waving from Megan McArdle.)