I just read David Leonhardt’s column in today’s New York Times and I praise it for its easy to grasp explanation of complex economic terms when it comes to the national deficit.
For those who still believe that Obama’s stimulus bill is sinking this country into steep deficits, I invite you to read the complete column here.If you are going to skip the column, this is the national debt explanation for dummies:
The Congressional Budget Office 2001 projection for the years 2009-12 was a surplus of $800 billion. The CBO 2009 Projection for 2009-12, the most recent one, shows a different picture: a deficit of $1.2 trillion.
Leonhardt argues that the roughly $2 trillion difference between these two estimates is due to 4 categories, which have and are still contributing to this projected deficit.
Of this $2 trillion deficit, 37% come from the business cycle. It’s a reflection of both the 2001 recession and the current one which have reduced tax revenues and required more spending on safety net programs.
The second category, 33%, comes from eight years of Bush’s policies, including tax cuts for the wealthy, the cost of wars in Iraq and Afghanistan and the Medicare prescription plan. Not only did the economic growth under Bush did not generate nearly enough tax revenue to pay for his agenda, it did not cover the increased interest payments to service our national debt which Asian countries have collected.
The third comes from Obama’s extension of Bush’s policies, at 20%, which include the continuation of the wars and a new tax cut for households making less than $250,000. It also includes the Wall Street Bailout, which Bush initiated and signed and Obama supported.
Only 7% of this projected $2 trillion deficit, the fourth category, comes from Obama’s stimulus bill, of which 3% accounts for healthcare reform, education reform, and energy reform.
Furthermore, White House officials say “the president is committed to a deficit equal to no more than 3% of total GDP within five to 10 years.” Insofar, the CBO discredits this by stating that they project a deficit of at least 4% of GDP for the next 10 years. Those White House economists are really good with their deficit projections!
So next time you are discussing this administration’s budgets tirades or sensing misplaced criticism or angst, remember this report and think how unfair it would be to blame Obama for incurring gigantic deficits and compromising our prosperity. The only blame we can put on this administration is its reluctance to fix this problem.
For those who still believe that Obama’s stimulus bill is sinking this country into steep deficits, I invite you to read the complete column here.If you are going to skip the column, this is the national debt explanation for dummies:
The Congressional Budget Office 2001 projection for the years 2009-12 was a surplus of $800 billion. The CBO 2009 Projection for 2009-12, the most recent one, shows a different picture: a deficit of $1.2 trillion.
Leonhardt argues that the roughly $2 trillion difference between these two estimates is due to 4 categories, which have and are still contributing to this projected deficit.
Of this $2 trillion deficit, 37% come from the business cycle. It’s a reflection of both the 2001 recession and the current one which have reduced tax revenues and required more spending on safety net programs.
The second category, 33%, comes from eight years of Bush’s policies, including tax cuts for the wealthy, the cost of wars in Iraq and Afghanistan and the Medicare prescription plan. Not only did the economic growth under Bush did not generate nearly enough tax revenue to pay for his agenda, it did not cover the increased interest payments to service our national debt which Asian countries have collected.
The third comes from Obama’s extension of Bush’s policies, at 20%, which include the continuation of the wars and a new tax cut for households making less than $250,000. It also includes the Wall Street Bailout, which Bush initiated and signed and Obama supported.
Only 7% of this projected $2 trillion deficit, the fourth category, comes from Obama’s stimulus bill, of which 3% accounts for healthcare reform, education reform, and energy reform.
Furthermore, White House officials say “the president is committed to a deficit equal to no more than 3% of total GDP within five to 10 years.” Insofar, the CBO discredits this by stating that they project a deficit of at least 4% of GDP for the next 10 years. Those White House economists are really good with their deficit projections!
So next time you are discussing this administration’s budgets tirades or sensing misplaced criticism or angst, remember this report and think how unfair it would be to blame Obama for incurring gigantic deficits and compromising our prosperity. The only blame we can put on this administration is its reluctance to fix this problem.
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