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Thursday, January 04, 2007

Bush's Fiscal Irresponsibility

Don Luskin has an article in the NRO discussing Paul Krugman's column "Democrats and the Deficit." The article is critical of Krugman's position that Democrats should be careful not to hand budget surpluses to Republicans because they are likely to give them away as tax cuts rather than use them responsibly as down payments on future government liabilities.

As part of his argument, Luskin tries to rebut "Bush’s irresponsibility" by arguing Bush has done as well as Clinton on federal budget issues. For example, he says:

The debt [under Clinton] was 49.3 percent of GDP, higher than in any year of the George W. Bush administration

Well, okay, but let's look a little closer. This is from the link Luskin provides to the OMB's debt to GDP data:

Debttogdp1

Notice anything about the graph? While it's true that the debt to GDP ratio is lower today than the 1994 value of 49.3%, it's risen steadily under Bush. At the end of fiscal year 2000 the debt to GDP ratio had fallen to 35.1%, and it fell to 33.0% at the end of fiscal year 2001. But since 2001 it has risen steadily. So the important part of the story is not that the debt to GDP ratio is lower now than it was in 1994, instead, it's that the ratio has risen steadily under the Bush administration.

For more perspective, here's all of the data from the OMB (since 1940):

Debttogdp2

Start in 1980 and see if you can identify Republican and Democratic administrations from movements in the debt to GDP ratio [Answer here - the graph shows both public and inter-agency debt, but the pattern is the same as for just public debt shown above. See if the graph confirms Luskin's claim that Clinton doesn't deserve any credit for deficit reduction because it's the party that controls congress, not the president, that matters. If so, what happened under Bush?].

Looking at the two graphs gives you an idea of why Democrats who worked so hard to get the debt to GDP ratio down during the Clinton years have been so frustrated with this administration's handing it back as tax cuts. Krugman's position is much easier to understand given the debt to GDP ratio's history over the last 25 years of rising whenever Republicans are in the White House. Somehow, that part of the story is missing from Luskin's analysis.

One more note on the figures Luskin cites. Luskin uses a 2.2% figure for the deficit to GDP ratio for the 1990s and compares it to the current ratio of 2.1% as evidence of the Bush administration's success in bringing down the deficit (That .1% fall in the ratio is impressive, don't you think?). Oops. If you limit the average to just the years Clinton was president and throw out the Bush I years, the average falls to 0.8%. So, even with recent improvement in the deficit to GDP ratio from the peak of 3.6%  in 2004 to the current value of 2.1%, it's still more than double the average during the Clinton years. Oh, and by the way, the rest of Luskin's piece, "Speaking Truth to Power," is no better at speaking the truth. If you read it, realize the risk of being misled.

    Posted by on Thursday, January 4, 2007 at 02:07 AM in Budget Deficit, Economics, Politics | Permalink  TrackBack (0)  Comments (39)

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