My colleagues Kathy Ruffing and Jim Horney have shown that the economic downturn, President Bush’s tax cuts, and the legacy of the wars in Iraq and Afghanistan explain virtually the entire federal budget deficit projected for the rest of this decade (that is, through 2019). That is, there would be practically no deficits over that period if the tax cuts, the wars, and the downturn had not occurred and other policies remained the same. This widely circulated CBPP chart makes their point vividly.
Last week columnist Robert Samuelson looked at a related — but different — question, one that looks backward in time rather than forward: why did the federal government amass large deficits between 2002 and 2011, rather than the large surpluses that the Congressional Budget Office (CBO) projected in early 2001?
Over the 2002-2011 period, the negative budgetary impact of so-called “economic and technical” changes — most notably, the 2001 and 2007-2009 downturns — dwarfed that of any single legislative change that policymakers enacted. Samuelson cites an analysis of CBO data that accordingly ascribes about a quarter of the deterioration in the budget over that period to President Bush’s 2001 and 2003 tax cuts and the Iraq and Afghanistan wars.
The 2002-2011 period is now history. For the years ahead, CBPP found that the tax cuts (if policymakers extend them in full) and the wars, plus the lingering effects of the recent downturn, essentially account for the entire deficit between now and 2019. Indeed, the tax cuts and the wars alone account for nearly half of the public debt by 2019.
More HERE.
