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The Facts About Budget Deficits: How The Presidents Truly Rank
This article originally posted on Forbes.com. Please forgive me. Over and over, I hear misinformation about deficits in prior administrations, and I can’t keep quiet any longer. I have to correct the record. The latest was on “Squawk Box” on Monday morning. Joe Kernan, the host, is interviewing former Vermont Gov. Howard Dean, ex-candidate for president and chairman of the Democratic National Committee. Kernen cites campaign comments about “bad policies” going back “decades” affecting the high rate of unemployment today. He asks, “What specific policies in the Bush Administration do you think are still being used to explain 8 percent unemployment?” Dean responds, “The biggest ones are the deficits that were run up…. The deficits were enormous Let’s shed some factual light on the situation by turning to table B-79 of the current Economic Report of the President. There we find the official statistics on federal spending, receipts, and deficits (or surpluses) as proportions of Gross Domestic Product. These are the figures that economists use in determining the relationship of the deficit to the overall economy, answering the question, “How much more are we spending than taking in?” We can average the deficit-to-GDP ratio during a presidential term and get a good take on whether “deficits were enormous” in historic terms or not. The only tricky part is whether to give a president credit (or blame) for his incoming and outgoing years. For example, President Reagan took office on Jan. 20, 1980, but fiscal year 1980 started four months earlier. Similarly, he left office Jan. 20, 1989, but fiscal 1989 still had four months to run. I decided to use three sets of calculations for each president: first, the deficit-to-GDP ratio from the fiscal year he took office to the fiscal year he left minus one (thus, for Reagan: 1981-88); second, from his first fiscal year plus one to the fiscal year he left (thus, 1982-89); and third, an average of the first two Here are the ratios of deficit to GDP for the past five presidents: Ronald Reagan 1981-88 4.2 % 1982-89 4.2 Average 4.2 George H. W. Bush 1989-92 4.0 1990-93 4.3 Average 4.2 Bill Clinton 1993-2000 0.8 1994-2001 0.1 Average 0.5 George W. Bush 2001-08 2.0 2002-09 3.4 Average 2.7 Barack Obama 2009-12* 9.1 2010-12 8.7 Average 8.9 *fiscal 2012 ends Sept. 30, 2012, so this figure is estimated Source: Economic Report of the President, February 2012 The results for President Bush are skewed by the 10.1 percent deficit/GDP ratio in fiscal 2009. A large chunk of spending in that year went to the Troubled Asset Relief Program, or TARP. In fiscal 2009, TARP contributed $151 billion to the budget deficit, but in 2010 and 2011, $147 billion of that amount was recouped and thus reduced the size of the deficit during President Obama’s watch. (These calculations are complicated and are laid out by the Office of Management and Budget. See http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/spec.pdf, p. 49.) As for spending itself, during the George W. Bush years (2001-08), federal outlays averaged 19.6 percent of GDP, a little less than during the Clinton years (1993-2000), at 19.8% and far below Reagan, whose outlays never dropped below 21 percent of GDP in any year and averaged 22.4%. Even factoring in the TARP year (2009), Bush’s average outlays as a proportion of the economy was 20.3 percent – far below Reagan and only a half-point below Clinton. As for Obama, even excluding 2009, his spending has averaged 24.1 percent of GDP – the highest level for any three years since World War II. Americans can judge for themselves whether deficits are “enormous”– but only if they have the facts. In this case, there is no denying the order in which the last five presidents rank on the basis of deficits: Clinton, Bush 43, Bush 41 and Reagan in a virtual tie, and Obama. This post was written by James K. Glassman, the founding executive director of the George W. Bush Institute inDallas, Texas. The Bush Institute’s first book, The 4% Solution: Unleashing the Economic Growth America Needs, goes on sale July 17, 2012.
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