Part of this is unfair -- with the government running a surplus in the late 90s, it was inevitable that the next administration would offer some kind of tax break. But the vast majority of Krugman's calculus is spot on, and he doesn't even mention other expensive policies like Medicare D. It's been well-reported that the nearly $2 trillion deficit under Obama this year really has very little to do with Obama's policies (see this essential David Leonhardt piece). In fact, Obama's most criminal contribution to our deficit is his continuation of Bush policies, including tax cuts for households making under $250K and the ongoing wars in the Middle East.
There were two big-ticket Bush policies. One was the tax cuts, which cost around $1.8 trillion in revenue; add in interest costs, and we're presumably talking about more than $2 trillion in debt. The other was the Iraq War, which has cost at least $700 billion, and will cost more before we finally extract ourselves.
Without these gratuitous drains on the budget, it seems fair to assert that we'd be coming into this economic crisis with a federal debt around 20 percent of GDP ($2.8 trillion) smaller than we are. And that, in turn, means that we'd be looking at projected net debt in 2019 of around 50 percent of GDP, not 70.
And that would definitely not be a scary number. Net federal debt was 49 percent of GDP in 1993, at the end of the Reagan-Bush years; Bill Clinton did move to reduce that number, and succeeded, but the nation wasn't facing imminent crisis.
Another way to look at this, as I wrote yesterday, is to ask: What would the long-term deficit look like under a President John McCain? The answer is: About 93 percent the same. The right way to rail on Obama's fiscal policy is to say he found the house and fire and hasn't produced a plan to extinguish it. But let's not pretend the guy in office for seven months lit the flame.
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