Three Ways to Look at Our Deficit Crisis

Does anybody see glimmers of hope in our deficit picture? Anybody?

On the issue of the debt, the general attitude between Bush supporters and Obama supporters has always been: The other guy did it. Republicans blame the stimulus and ongoing bailouts. Democrats blame the tax cuts and the wars.

This week the admittedly progressive Center on Budget and Policy Priorities weighs in to argue that President Obama didn't create our deficit crisis, but rather inherited it from Bush. Truly I think their conclusion is incontrovertible. And yet ... I have my objections.

First let's look at this picture, which is our 10-year deficit forecast, color-coded to compare what factors are contributing most significantly to the deficits. Obviously, the small red line indicating the future deficit effects of TARP and the Fannie/Freddie bailouts and the light brown line that indicates the stimulus are hairline thin compared to the blue swath of the "Bush-era tax cuts."


The picture above is instructive, but also selective. It might make you believe that the deficit is the sum of only five factors when it is instead the sum of all government spending. A small-government conservative might prefer to stack all government spending under graph above, bracket $1.4 trillion of outlays, and say: "Look, I found the five or so programs that are driving our record deficit."

So to engage that argument, let's look at a graph of government spending, also carefully and colorfully broken down by CBPP:

Most of Budget Goes Toward Defense, Social Security, and Major Health Programs

The big players are Social Security, health care spending and defense. If you refuse to touch those Big Three -- as Republicans have recently suggested by slamming Medicare cuts and fighting against even small cuts to our Air Force -- then you've suddenly put 60 percent of government spending in a lockbox. Oh, and we have to pay down our interest. That puts us nearly 70 percent of the budget off limits.

But even the picture above is a bit misleading because it's a snapshot of 2008's budget rather than a projection of 2010's budget (and 2020's, and 2030's, etc). Here's what's going to happen. That Medicare/Medicaid/CHIP slice of the pie is going to grow from a big sliver to a unhealthily loaded jumbo slice in the next generation. Our long-term budget crisis (he said for the thousandth time) is a health spending crisis.

Thumbnail image for 570 socialsecuritymedicare.png
Drinking these three pictures in, I see two conclusions. First, in the short-term, the Obama administration is handicapped by two Bush legacies: (1) the Bush tax cuts, which everybody expects him to keep, and (2) the wars in the Middle East, which everybody expects him to fight. So by all means, let's blame Bush for laying the groundwork for these policies.

And yet, it occurs to me that Barack Obama is the president of the United States. Extending the Bush tax cuts will be his decision. Sending 30,000 soldiers in Afghanistan was his decision. Obama won't "inherit" the Bush tax cuts in 2010 like I inherit my mother's inability to tan. He's going to choose to extend them. It's a decision -- probably a political necessity, especially following the recession -- but it's Obama's to make. I wonder how much longer it will make sense to use the term "inherited" every time our president chooses to continue something his predecessor started.

Second (he said for the thousandth time) our long-term budget crisis is a health spending crisis. And frankly, we don't really know how to solve it. Maybe Atul Gawande is right that we just need to keep innovating with pilot programs and Mayo Clinics and letting a thousand flowers bloom. But it's sobering that we feel helpless to solve our short-term deficit, and clueless about solving our long-term crisis.