How did we get here
HOW DID WE GET HERE? When President Bush took office in 2001, the federal budget had been in the black for three years, and continued surpluses were projected for a decade to come.
By the time Mr. Bush left office in early 2009, the government had run big deficits for seven straight years, and the economy was on the brink of another Great Depression. On Jan. 7, 2009 — two weeks before Mr. Obama was inaugurated — the Congressional Budget Office issued new budget estimates showing a fiscal year 2009 deficit of well over $1 trillion.
About half of today’s huge deficits can be chalked up to Bush-era profligacy: mainly cutting taxes deeply while borrowing to wage two wars and to enact the Medicare prescription drug benefit — all of which Republicans supported, virtually in lockstep.
The other half of recent deficits is due to the recession and the financial crisis.
To avoid a meltdown, the government — under President Bush and President Obama — rightly decided it had no choice but to spend hundreds of billions of dollars to bail out banks and car companies and to stimulate the economy. That prevented a very bad situation from becoming much worse, but as the recession dragged on, hundreds of billions in tax revenues have also dried up.
As for why the financial system and the economy imploded, President Bush and Congress deserve much of the blame for their devotion to debt-driven growth and blind deregulatory zeal — although on deregulation, President Clinton and his team (some of whom are back in the White House) were also complicit.
Were it not for those multiple calamities, budget deficits today would be negligible. That does not mean we would be off the hook. An aging population and relentlessly rising health care costs will hit the country with even deeper deficits as the baby boomers retire. Politicians need to pass health care reform now and start thinking seriously about Social Security and tax reform.
So what are the immediate fiscal lessons here? The first lesson is that spending without taxing is a recipe for huge deficits, and that running big deficits when the economy is expanding only sets the country up for bigger deficits when the economy contracts. The second lesson is that once a deep recession takes hold, slashing government spending is not going to solve the problem. It will only make it worse
Complete Article at Editorial – The Truth About the Deficit – NYTimes.com.
