The Deficit

The republicans are all up in arms about the deficit and the debt.  Too bad they weren't this worked up about it while the debt was being racked up...we'd be in a very different position than we are.

Here's an interesting group of tables that I like a lot.  He puts together a number of correlations--by party, president, who controls congress, top tax rate and so forth.  There are a number of important correlations to be seen and a number of surprising statistics.

Studying Table 1 carefully shows clearly that increases in the deficit correlate to three things: Tax cuts, wars and economic downturns.   With one surprising exception, reduction in the deficit correlates to one thing only: tax hikes.  The effect of the Reagan, GHW Bush, and Clinton tax hikes can clearly be seen in the data, and it overwhelms the effects of other factors.

Table 3 shows that 6 of the 17 presidents in the past century have reduced the deficit: Wilson, Truman, Eisenhower, Carter, Clinton and Obama.   Wilson, Truman and Eisenhower all presided over the ending of a war and an economic boom.   Wilson raised taxes to pay for WWI.  Truman and Eisenhower's predecessors had done the same.  Carter presided over a period of high inflation, during which time the deficit increased in nominal terms, but decreased in constant (corrected by CPI) dollars--he left taxes at their previous, high rate.  Clinton raised taxes and presided over a sharply rising economy.

Obama's situation is a little more complicated.  He took office shortly after the start of the deepest recession since the Great Depression of 1929-39, and the economy continued to plummet for months after he took office.  The ARRA put the brakes on the plummet, but added about $400B to the deficit in both FY 2009 and 2010.  Because FY 2009 started under GW Bush, those $400B are added to his totals. Even if we move this $400B from GWB to Obama, GWB raised the deficit by over $600B 1983 dollars and Obama has reduced it by $150B 1983 dollars.

As they always say, past performance is not necessarily a predictor of future performance, but if Obama's average improvement in the deficit were to continue, the deficit will become a surplus in February 2015.  This is unlikely.  CBO projects the deficit stabilizing at about $500B after 2013, and this is probably correct--the republicans certainly won't allow anything to improve the economy or budget while Obama is in office, and they've never before done anything to improve the economy or budget while they've had power themselves.   But note that this is lower than the non-recession Bush deficits of 2003-2007, although not much. 

The other 11 presidents since Wilson took office in 1913 all increased the deficit.