Deficit driven

Andrew calls George Bush "the most fiscally reckless president since FDR" and says we should name the tax increases needed to pay for the current deficits after him. George Bush was indeed fiscally reckless, but the honor of most fiscally reckless president since FDR goes not to him, but to Ronald Reagan, who ran 6% deficits without even the excuse of a war.


I suppose you could claim that his decline was more impressive, but that decline was only about half due to tax cuts or spending; the rest was the popping of the stock market bubble, which both hammered GDP and changed the tax base in ways that made it less lucrative to the government.  (Tax revenues in America do best when the very rich are making a whole hell of a lot of money in big whacks, like stock-option vests)

Nor are the current deficits, or the tax increases needed to pay for them, much about George Bush.  By 2007, as the chart above shows, budget deficits were at 1.2%, rather average by postwar norms, and low interest rates mean that debt service payments for Bush's spending are not notably onerous.  There are Medicare Part D and Iraq, of course, but Iraq is simply dwarfed by the current deficit, and the chief alternative to Medicare Part D was making it more expensive.  I was against it, but the Democrats can hardly complain.

One could argue that George Bush should have run a nifty surplus, but that's not American politics; anything but a modest deficit or (very) modest surplus was going to get spent, as has been true for the last seventy years.

More broadly, this misunderstands what stimulus is.  Stimulus is not spending; it's deficit.  If Bush had delivered a budget in rough balance, Obama would have had to borrow up to the current deficit to get the stimulus he desires.  Given that more recent debt is always much more expensive than older debt (that's the magic of inflation, kids!), when taxes are finally raised, they will pay more for spending on Obama's watch than on Bush's.

That's not to blame Obama; recessions are what they are, and if you favor big stimulus, you favor a big deficit.  But those big deficits won't have much to do with Bush's fiscal imprudence.  In fact, they won't have much to do with either president, except insofar as they failed to reform entitlements.  The coming structural gap from Medicare and Social Security will make any interest payments on spending we're doing now look trivial.