Why George W. Bush Was Worse for the Deficit Than Barack Obama
It is a simple (and poll-tested) fact: Most people like the government services they themselves consume, and they’re less than keen on taxes. When governments stop mending potholes, or the police or fire department takes 20 minutes to answer a call, elected officials start to get voted out of office; when taxes go up — and particularly when they go up to pay for services the taxees aren’t consuming — people protest.
George W. Bush found a way to split the difference: He lowered taxes while spending more on services (the Medicare prescription drug benefit, the transportation bill, agricultural subsidy increases) than ever before. David Leonhardt of The New York Times reports that taxes as a percentage of GDP fell from 21 to 18 percent of GDP between 2001 and 2008 and to 15.1 percent in 2009 — partly because of two recessions and partly because of Bush’s tax cuts — while spending increased dramatically.
But only 10 percent of $2 trillion swing into deficit is due to Obama policies; the rest, about 53 percent of the new deficit, is attributed to Bush’s tax cuts and spending increases (including the extensions. Nonetheless, by 2020, spending will equal 26 percent of GDP because of Social Security — that Bush promised to but never did reform — and Medicare — to which he added benefits — while taxes will bring in only 19 percent of GDP.
Fiscally conservative Republicans often pursue economically detrimental tax cuts under the theory that they can “starve the beast” of government spending; yet, while in office, Republicans often give into pressure to continue popular government programs while still cutting taxes. Does anyone really imagine that, were the Republicans in charge of the Senate, Paul Ryan’s push to eliminate Medicare (that is, health insurance for the elderly) for everyone born after 1955 would actually be on the table?
Obama’s deficit reduction commission is expected to release some politically palatable ways to reduce the deficit through cuts to spending programs and increases in taxes, but what is politically palatable to most people? Leonhardt suggests that Social Security become means tested, meaning that some wealthy people would pay into the system but get little or nothing in return, and that its annual cost-of-living adjustment be more of a realistic (i.e., lower) calculation of the cost of living. Neither of those ideas will get particularly far with the nation’s elderly. He also suggests eliminating some corporate and agricultural subsidies, reversing 25 years of legislative movement in the other direction. And he suggests adding a consumption (also known as a VAT) tax or reducing some major tax loopholes, like the mortgage interest deduction that subsidizes home ownership. That these are the ideas that are considered remotely politically palatable shows how far even Republicans have come from the days that they believed starving the beast would win them elections. Nowadays, most Republicans politicians are in favor of using borrowed funds to feed the beast fois gras.