Our Deficits

TW: That the looming deficits are "Obama's" is ludicrous. As a nation we have embraced massive deficits because we love tax cuts, bellicose foreign policy and spending on ourselves especially health care. As a nation we do not like raising taxes or cutting spending on practically anything.

But as the piece frames, a McCain Administration would have likely created deficits much like Obama unless they had embraced Hooverian policies to cut federal spending amidst the Great Contraction.

The WSJ editorial embraces the supply side tax cut fantasy whilst waving the flag in support of war spending, in other words they seek to slough off 25 years of Reagan and Bush profligacy.

We face significant fiscal challenges. We face them today, we faced them last year and will face them tomorrow. For the umpteenth time what do YOU want to do? Raise taxes, cut social security, cut defense, cut health care spending? Which is it?

From Economist:
"TODAY'S papers are reporting the results of the mid-session budget review, which projected $9 trillion in deficits over the next ten years, more than expected and primarily due to the unexpectedly deep recession. Over at the Wall Street Journal, the headline story "Decade of debt", is followed by links to other Journal commentary on the news. First up is an editorial, headlined "The Pelosi-Obama deficits", which reads in part:

'We've never fretted over budget deficits, at least if they finance tax cuts to promote growth or spending to win a war. But these deficit estimates are driven entirely by more domestic spending and already assume huge new tax increases.'

Immediately below that link is a Real Time Economics story by David Wessel, headlined, "The Deficit: Just as bad under McCain?". The piece quotes analysis from Reagan Treasury official Bruce Bartlett, who writes:

'If one goes through the March update (pp. 6-7) and the August update (pp. 52-53) and adds up all the changes to the January estimate, you find that the deficit increase since January consists of $46 billion in lower than expected revenues due to the economy (11.5%), $129 billion in higher spending due to technical re-estimates (32.2%), and $226 billion due to legislative changes to both spending and revenues (56.3%).

This suggests that we would have had a deficit of at least $1,361 billion this year even if McCain had won (January deficit plus lower revenues and technical changes and no legislative changes)...that’s assuming no stimulus and that the economy would have performed as well without it. '

Here's another piece of analysis worth looking at. Point one is that America's structural budget problems have been years in the making, and taking into account those problems and the current recession there is basically nothing the Obama administration could have done to significantly reduce the long-run budget outlook. Point two is that current deficits are a good thing; efforts to reduce spending or raise revenue amid recession would have been disastrous for the economy.

Point three is that the Journal editorial board has peculiar views on deficits that ought to be explained or supported in some way. Or ignored. What growth the Bush administration's tax cuts promoted doesn't seem to have been particularly sustainable (or revenue enhancing). Setting aside the case of Iraq, does the Journal believe that a deficit funded military victory is a good in and of itself? There are lots of potential winnable wars out there that America could fight. Presumably we care about what the deficit-funded military adventure accomplishes, relative to alternative deployments of national wealth."
http://www.economist.com/blogs/freeexchange/2009/08/juxtaposition_of_the_day_1.cfm