Responsibility for the Deficit

As I suggested earlier, Greenspan is spouting more garbage when he claims that his support for the Bush tax cuts was justified given the projections of the budget surplus at the time. Greenspan’s deliberate implication is that the US’s budget deficits are the result of bad budgetary forecasts, not the tax cuts.

That is simply not true, however. How can we see this? Easy. Just compare the actual budget deficit (the forecast is from the CBO, assuming continued spending in Iraq and extensions of expiring tax cuts) with the budget deficit that would have prevailed without the Bush tax cuts. The CBO provides estimates of the cost of each tax cut (and their extensions) in its semi-annual Budget Outlook, and the comparison shows that without the tax cuts — even if everything else (such as the surprising fall in tax revenue in the early 2000s, bad budget forecasts, war in Iraq, etc.) had been exactly the same — there would be no looming budget crisis. The budget deficit would be moderate, and moving rapidly toward balance.

Greenspan is wrong to suggest that the tax cuts he supported are not responsible for the US’s budget problems. They clearly are.