How Projected Surpluses Became Deficits: Main Causes Were Tax Cuts and Higher Security Spending

How Projected Surpluses Became Deficits: Main Causes Were Tax Cuts and Higher Security Spending: By Richard Kogan and Gillian Brunet

The federal budget is projected to run a $546 billion deficit in 2009, compared with the $710 billion surplus that budget experts projected for 2009 back when President Bush took office nearly eight years ago.  This $1.3 trillion deterioration in the nation’s fiscal finances for 2009 can be seen by comparing estimates that the Congressional Budget Office (CBO) released this week with those that CBO released in January 2001.

The story is much the same for the entire ten-year period covered by CBO’s 2001 projection.  In January 2001, CBO projected a cumulative $5.6 trillion surplus for 2002-2011.  Now, CBO’s new report suggests the nation will amass a cumulative deficit of $3.8 trillion over that same period, marking a $9.4 trillion deterioration.

For both 2009 and the ten-year period, this massive deterioration is partly due to weaker-than-expected performance of the economy, along with other “technical” factors that are beyond policymakers’ control.  But these economic and technical factors account for less than one-fourth of the fiscal deterioration for each period, and they are not responsible for the return of deficits.  Even given the disappointing performance of the economy since 2001 relative to CBO’s earlier projections, there would have been large surpluses in every year — totaling $3.4 trillion over the 2002-2011 period — if policymakers had enacted no tax cuts or program increases since 2001.

The dominant factor in the unprecedented fiscal deterioration thus was not the performance of the economy.  Nor was it increases in domestic programs.  The key factors have been large tax cuts and increases in security-related programs.  For fiscal 2009, some $1 trillion of the $1.3 trillion deterioration in the nation’s fiscal finances stems from policy actions, and tax cuts account for 42 percent of this $1 trillion deterioration.  Increases in military and other security programs account for another 40 percent of the deterioration. 

The story is much the same for the ten-year period as a whole.  For the 2002-2011 period, tax cuts and increases in security programs account for more than four-fifths of the fiscal deterioration caused by policy actions.  Increases in domestic programs played a much more modest role.

Comments

[Neil B ♪]

Yes, just as BushCo's (& Reagan's) critics always said.
[This is a legit comment, and I'd appreciate it getting in this time - remove this line as desired. I've been wondering, WTF is going on up there ...]