More Deficit Data
I just came across OMBwatch, another good site for those excited by data on federal revenue and spending. There, I found a page devoted to “Interpreting the Return to Budget Deficits“. The analysis and findings are similar to my earlier post, but with more detail and some additional graphs. In OMBwatch’s estimation,
There are several reasons for the dramatic deterioration of the budget situation. The primary cause has been the dramatic decline in revenues, which have dropped to 16.3% of GDP – the lowest level since 1959. To a lesser extent increased expenditures, especially on military activities, have played a role as well.
Part of this can be explained by a weak economy, and part by the tax cuts enacted over the past three years. However, the recession that began in March 2001 was, by historical standards, relatively mild. In addition, recent recessions have not seen revenue declines of nearly the same magnitude as the current recession (see Figure 4.) This suggests that a large part of the revenue reduction was due to enacted tax legislation.
Using conservative numbers, I allocated approximately 53.3% of the blame to the tax cuts, which seems supported by this report (full disclosure: OMBwatch is not non-partisan; based on its “what we do” and “who we are” pages, it’s clearly a lefty think tank. Still, the deficit numbers are sufficiently straightforward that I think this particular analysis can be taken at face value).
And the Center on Budget and Policy Priorities (which is non-partisan, though some might judge it center-left) has a similar analysis, “SANITIZING THE GRIM NEWS: The Administration’s Efforts to Make Harmful Deficits Appear Benign.” This report leads with this:
“…a number of policymakers on Capitol Hill this week began describing the deficits as ‘spending driven’ and arguing that tax cuts had nothing to do with the deterioration of the budget outlook. This analysis seeks to draw a more balanced picture of the causes and implications of current and future deficits.”
Then, in a section titled Tax Cuts or Spending Increases?, the CBPP concludes that
OMB’s own figures in the Mid-Session Review show that tax cuts account for 54 percent of the cost over the 2002-2008 period of all legislation that has been enacted since the Administration took office or that the Administration is now proposing. In other words, under Administration policies, tax cuts will account for the majority of the deterioration in the budget caused by actions taken by policymakers.”
and then concludes that
“…A final point is that many of the recent spending increases that have been instituted are not truly elective. The nation had little choice but to rebuild after 9/11 or to strengthen homeland security. Large, permanent tax cuts do not qualify as necessities for the nation in the way that some of the spending increases do.”
IndeedTM to both analyses.
P.S. In other news, Matt Yglesias is back and appears to be in full pre-Europe force.