In the run-up to the August 2 deadline for the US to raise its debt ceiling or risk a technical default, the depressingly familiar blame gain about who is responsible for racking up these enormous debts has filled the airwaves and the blogosphere.
As is usual these days, what passes for political discourse in the US is of the public swimming pool variety - all the noise comes from the shallow end. Little of what is written or shouted has been illuminating, much of it disingenuous and the dismal science of economics manages to be debased further.
The Tea Party faction within the Republican Party resolutely refuses to compromise over raising the debt ceiling, arguing that President Barack Obama and his Democratic administration have been on a spending spree that is leading the country into ruin. Certainly, the US needs to gets its finances in order - the Ross School of Business at the University of Michigan says that under current projections, the budget deficit by 2015 is estimated to reach about 13.5% of GDP, while the debt level in 2015 would equal 135% of GDP.
However, while the right in the US describe this as "Obama's deficit", actually it's the Republicans and Congress as a whole that bear most responsibility for this fiscal mess. Looking at the chart from the Washington Post below shows that the debt ceiling needs to be raised not because of new policies passed in the past two years, but because of the accumulated effect of policies passed in recent decades, many of them under Republicans.
The two most egregious spending splurges were the unfunded tax cuts and the disastrous wars in Iraq and Afghanistan, both of which were launched under former President George W. Bush's watch. Together with the Troubled Asset Relief Program (TARP), Medicare and stimulus packages, the total cost of Bush's new policies during his eight-year term of office were about $5 trillion; Obama's new policies have cost about $1.4 trillion. Further, Obama's major expenses were temporary - the stimulus is over now – while Bush's are recurring, meaning this chart is understating their true cost.
So the most sensible response would be to scrap the unfunded tax cuts; alas, the Tea Party and the rump Republican Party won't countenance this, reinforcing the impression this has less to do with the deficit per se, than using the US economy as a tool to fatally weaken President Obama and hang the consequences.
But this constant finger-pointing ignores the simple truth that its not "Obama's deficit" or "Bush's deficit" - it's America's.
The US needs to bring down the deficit and debt with a mix of spending cuts and tax rises - that's the only mathematically feasible way. Then, if the Republicans are truly serious about running a tight fiscal ship, they should push for adoption of legislation that Warren Buffet expounded on CNBC recently: "I could end the deficit in five minutes. You just pass a law that says that anytime there is a deficit of more than 3% of GDP, all sitting members of Congress are ineligible for re-election."
Unfortunately, none of the above is likely to come about anytime soon.
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