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Partisan Economics

Steve Benen, writing for the Rachel Maddow blog, boasts about deficit reduction in Barack Obama's presidency. Responding to Republican criticism that the deficit is "out of control", Benen asserts, "Keep in mind, in the Obama era, the deficit has shrunk by $1 trillion."

But has it, really?

Benen's own chart accompanying his post appears to throw his claim into doubt.

Although the deficit has been shrinking since 2009, the 2015 deficit is about equal to that of 2008. What we see is a ballooning deficit in 2009, followed by a slow, steady march back to the 2008 level. FY 2009 was the last budget signed by President George W. Bush before he left office. It contained no major changes in tax policy, so why did we see such a sharp increase in the deficit?

Short answer: the housing crisis. About half of the 2009 deficit can be directly attributed to the $700 billion bank bailout approved by Congress in October, 2008 following the mortgage default crisis. Much of the rest of the deficit can be attributed to reduced revenues due to the economic slowdown that the housing crisis provoked, and to Barack Obama's economic stimulus package which created additional spending on top of the previously approved budget.

For a broader picture, take a look at this chart from Statista.

Here we can see that the $460 billion threshold from 2008, which we finally returned to in 2014 and 2015, is itself an anomalously large deficit—in large part due to the beginnings of the mortgage crisis. And the $440 billion deficit in 2015 looks like the high water mark for the foreseeable future; the best estimates for FY 2016 (which just ended September 30) and the next five years all show larger deficits than that.

Undaunted, Benen pushes forward and declares:

As a percentage of the economy, the deficit is now down to just 2.5%, which is below the average of the past half-century, and down from 9.8% when the president took office.

And while this is good news, it's still measured against the anomalous 2009 budget, the biggest deficit as a percentage of GDP since World War IIMeasured against the historical average, a deficit of 2.5% is nothing to brag about. The three decades following the end of World War II featured only four years with a deficit as high as 2.5% of GDPtwo of which are the endpoint years of 1946 and 1975, so if I wnated to cherry-pick 1947 to 1974, I could say only two budgets in 28 years had such a high deficit.

We live in an era where it is easy for partisan media such as MSNBC and Fox News to spin the statistics to support their ideologies. This mindset may enable partisans to feel superior to their opponents, but it can hide the fact that the real progress has yet to be made.

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