FIGURE 1.
Originally submitted by volunteer editor Mark H. Found on The Center on Budget and Policy Priorities’ website.
Bush Tax Cuts, War Costs Do Lasting Harm to Budget Outlook
Some commentators blame recent legislation — the stimulus bill and the financial rescues — for today’s record deficits. Yet those costs pale next to other policies enacted since 2001 that have swollen the deficit.
Just two policies dating from the Bush Administration — tax cuts and the wars in Iraq and Afghanistan — accounted for over $500 billion of the deficit in 2009 and will account for almost $7 trillion in deficits in 2009 through 2019, including the associated debt-service costs. ... These impacts easily dwarf the stimulus and financial rescues. Furthermore, unlike those temporary costs, these inherited policies (especially the tax cuts and the drug benefit) do not fade away as the economy recovers (see Figure 1).
Without the economic downturn and the fiscal policies of the previous Administration, the budget would be roughly in balance over the next decade. That would have put the nation on a much sounder footing to address the demographic challenges and the cost pressures in health care that darken the long-run fiscal outlook.[7]
The Effect of President Obama’s Budget
The key question is: where do we go from here? President Obama’s 2011 budget proposes to reduce anticipated deficits over the next ten years, chiefly by letting the Bush tax cuts for high-income taxpayers expire on schedule, closing certain tax loopholes and reforming the international tax system, keeping estate taxes at their 2009 parameters, enacting health care reform, and freezing (in aggregate) most appropriations for non-security domestic programs for the next three years. The President also supports another round of temporary recovery measures that would boost the deficit in 2010 through 2012, a proposal that is appropriate in size and well targeted.[8] Center on Budget and Policy Priorities’ analyses have found that in aggregate, the President’s proposals would reduce deficits over the 2011-2020 period by an estimated $1.3 trillion.[9]
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[7] See Kathy Ruffing, Kris Cox, and James Horney, “The Right Target: Stabilize the Federal Debt,” Center on Budget and Policy Priorities, January 12, 2010.
[8] Kris Cox, “President’s Budget Requests $266 Billion to Support Economic Recovery,” Center on Budget and Policy Priorities, February 5, 2010.
[9] Kathy A. Ruffing and James R. Horney, “Obama Budget Reduces Deficit by $1.3 Trillion Over Next Decade Compared to Current Policies,” Center on Budget and Policy Priorities, April 5, 2010. The Congress subsequently enacted several major proposals — including health-care reform and changes in higher-education programs — that constitute part of that $1.3 trillion in estimated savings.
[10] Brian M. Riedl, “The Three Biggest Myths About Tax Cuts and the Budget Deficit” (Heritage Foundation, June 21, 2010).
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