Debt, Deficits, and Deception

Here it comes—an avalanche of misleading and mistaken “facts” about President Obama’s budget.

Last week, the House and Senate Budget Committees approved versions of the fiscal 2010 budget resolution, working from an extraordinary proposal by Barack Obama [4]. The House version is fairly close to what the President proposed, while the Senate bill is a bit different—but still 98 percent of what the President requested. This week, the budget will come to the floor of the House and Senate, including votes on a series of amendments to slash or weaken progressive programs.

Senator Judd Gregg laid out the conservative talking points against the Obama budget during the Republicans’ Saturday radio address [5]:

What concerns many of us are [Obama’s] proposals in the budget he recently sent to the Congress that dramatically grow the size and cost of government, and move it to the left.

It is our opinion that this plan spends too much, taxes too much, and borrows too much….

In the next five years, President Obama’s budget will double the national debt; in the next ten years it will triple the national debt….

His budget assumes the deficit will average $1 trillion dollars every year for the next 10 years and will add well over $9 trillion dollars in new debts to our children’s backs.

He is proposing the largest tax increase in history, much of it aimed at taxing small business people…and a massive new national sales tax on your electric bill…

The mud of fabrication and misinformation is so deep, we’ll have to peel it off in layers.

Huge Hypocrisy

First and foremost, conservatives are being supremely hypocritical about deficits and debt because their deficits caused the current national debt. Ronald Reagan’s tax cuts for the rich and profligate military spending tripled the national debt. George W. Bush’s tax cuts for the rich and war spending doubled the national debt. In fact, nearly 80 percent of the current debt—about which conservatives now bitterly complain—was caused by the three most recent conservative presidents [6]: Reagan, Bush Senior, and Bush Junior.

Adding insult to injury, Republican budgets have been notorious for containing gimmicks designed to hide the full extent of their irresponsibility—the most egregious was funding the Iraq war with special appropriations outside of the budget.

This year, President Obama changed all that. His budget described a comprehensive plan covering 10 years. It included contingency funds that may or may not have to be spent. It was, quite simply, the most honest budget ever proposed.

So if you hear someone attack the Obama budget because of the deficits it honestly lays out, first say, “Where were you and your deficit-hawk arguments when George W. Bush turned Bill Clinton’s $200 billion budget surplus into a $1 trillion budget deficit?”

Revenue Ruse

Now come the three big lies about revenues. Obama is not “proposing the largest tax increase in history.” He is proposing to restore a measure of tax fairness by letting George W. Bush’s tax cuts for the rich expire next year. He is proposing to return to the tax policies that were in place during America’s great economic expansion of the late 1990s. Under the Obama program, only the rich will see their taxes increase—those with incomes over $250,000 per year. For all the rest of us, our tax rates will decline. In fact, Obama’s plan will deliver the largest middle-class tax cut in history.

Similarly, Obama’s plan is not “aimed at taxing small-business people.” This talking point is based on a fictional definition of a small businessperson invented by the Bush Administration and explained in footnote 1 of this paper [7]. Even using that definition, less than 9 percent of Americans with small-business income make more than $250,000 a year. Only 2 percent are in the top two tax brackets. So at least 91 percent, and more likely 98 percent, of them will see no tax increase at all.

And I’ll bet you’re wondering, what is this “massive new national sales tax on your electric bill”? There is none. This is right-wing framing for the “cap-and-trade” system that experts insist is the only practical way to get a handle on global warming. This system forces companies to pay for their pollution, thereby encouraging clean, green technologies.

So to review the conservative tax trickery, the truth is that Obama’s budget delivers a substantial tax cut to 95 percent of Americans. The only ones who will see their taxes increase are the wealthy—and the corporate polluters!

Debt Double-Talk

We are currently in the worst economic downturn since the Great Depression. Basic macroeconomics tells us that the time to cut deficits is during an economic boom. During a recession, the deficit must increase in order to save jobs and halt the downward slide.

Dean Baker explains [8]:

In this context we are supposed to be up in arms over the deficit projections for 2013 or 2019? This is a bit like someone complaining about the lawn not being mowed at a time when the house is on fire, it’s just not the first priority. And the media all seem to go along with the charade…

The moral to this story is that the economy must take priority, not only because the state of the economy is what most directly determines people's well-being, but also because the state of the economy will be the most important determinant of the deficit.

The experience of the 1990s provides an example of exactly this sort of story. In January of 1994 the Congressional Budget Office projected that the deficit in 1999 would be $204 billion or 2.4 percent of GDP. This projection incorporated the impact of President Clinton’s tax increase and spending cuts.

It turned out that there was a surplus of $125 billion in 1999, or 1.4 percent of GDP. This shift from deficit to surplus of 3.8 percentage points of GDP (equivalent to $540 billion in 2009) was not caused by further spending cuts or tax increases; it was caused by the strong economic growth of the period.

If we spend to build the American economy, long-term deficits will go down. If we don’t spend, the recession will linger and deficits will skyrocket. It’s as simple as that.

And that brings us to the false argument that cutting the current budget is good for “our children.” If we don’t invest in our nation’s infrastructure, if we don’t restructure the pathetic economy handed down to us by George W. Bush and his conservative allies, if we don’t create a sustainable health care system, if we don’t take necessary steps to achieve energy independence and fight global warming—then we will be placing a terrible burden on our children. For them, and for us, we’ve got to change course, now.

Absurd Alternative

President Obama challenged his conservative opponents to put up their own budget proposal—or shut up.

After a great deal of hoopla, House Republicans called a press conference [9]last Thursday to issue a 19-page document [10] that they called an alternative budget. But the document contained no spending amounts or deficit projections. None. It’s a phony budget.

No doubt the GOP will offer one or more alternative budgets on the House and Senate floors later this week. No doubt they will be just like the alternative Republican stimulus packages [11]in February—full of tax cuts for the rich and spending cuts for the rest of us.

The bottom line is: Conservatives caused this mess and now are running away from any responsibility for cleaning it up.

Contact Congress!

Your Senators and Representative will vote on the Budget Resolution within days. Please click here [2]to go to a web page set up by the Campaign for America’s Future that makes it easy for you to contact your members of Congress. Tell them to stand up for Obama’s budget—and oppose all weakening amendments.