Who is the spendthrift? [Bryan]

Some people think that I can see no fault is President Obama. Not true. In fact, there are many things I would criticize. I don't think he has been strong enough on civil liberties and has continued many troubling Bush-era policies in this regard. I suspect he is on the wrong track in Afghanistan, where I think we should probably deescalate. I also worry that he lacks the will and ability to reform the troubled banking industry.

Having said that, I still think we are very lucky to have him. The reason I spend so much time defending him is the amount of completely unfair criticism he receives. It seems he can do nothing, from speaking to students about hard work, to bowing (gasp!) to Chinese leaders, that won't provoke outrage. He even gets criticized for things he has absolutely nothing to do with (school kids singing about him after the inauguration). Some people, frankly, seem completely out to destroy him at any cost.

One example of this unwarranted criticism is the federal budget. Two things. First of all, where is the deficit coming from? Here is a helpful chart from the NYT, constructed from data from the Congressional Budget Office. As you can see, much of the deficit comes from 2000 and 2009 recessions and the lack of revenue that comes in during those times. The other big expenditure comes from Republican-era policies (two wars, the prescription drug program, tax cuts for the wealthy, and so forth, that were financed entirely on credit). The bailout (a Bush-era program) and the stimulus (an Obama-era program) amount to about 20% of the deficit. Recent new Obama spending programs and proposals amount to a tiny fraction of the new debt (5%). So, who should we blame for the deficit? Well, it seems that Bush is the culprit here, not Obama.

(If you can't read it, click here.)

But what about the health care proposals? So far, the CBO has found the Democratic proposals to be deficit neutral, that is, completely paid for through some cuts to wasteful programs (like Medicare Advantage) and selected tax hikes. You may or may not like the health care reform proposals, but claiming that they add to the deficit is untrue.

Second, now is not the time to worry about deficits. Believe it or not, deficit spending during times of recession and high unemployment is a good thing. I know that when times are tight at your own house, you need to cut back on expenses. This is the correct thing to do, and it is certainly what we do at my house. On the level of "macroeconomics," though, things are different. A recession happens when people stop spending and loaning money. During such times, the only entity that can fill the resulting economic hole is the federal government -- remember, what eventually ended the Great Depression was the massive government deficit spending during WWII. If we cut or freeze spending during this recession, as the Republicans in congress are proposing, the results would be pretty bad. Our state of Ohio, I know, would have been absolutely devastated without the Federal stimulus money. The key will be when we return to low levels of employment and strong, sustained economic growth: If Obama does not address deficit spending at that time, then he deserves criticism. Not now.

Update: The non-partisan Congressional Budget Office just released the deficit projections of the Senate health care reform legislation. It would reduce the deficit by $127 billion over the first 10 years and by a considerable $650 billion over the next ten years. Clearly, it seems if you want to reduce the deficit, you need this sort of health care reform.