Wednesday, January 16, 2013

DEBUNKING THREE BIG BUDGET MYTHS

Only because so many people still don't get it (you know who you are), let's debunk some budget myths with graphs (again).

Myth #1: Since entering office President Obama is the biggest spender in modern American history.

Hmm, our national debt has climbed to more than $16 trillion under President Obama. This is serious stuff. OK, let's take a look ...


While spending trends from the Bush administration continue (he left trillion dollar deficits), new spending under President Obama has not followed the pattern from the previous administration.

More to the point, new spending programs under President Obama doesn't come close to what previous presidents from our generation initiated. Indeed, new federal spending under President Obama is growing at its slowest levels since President Eisenhower.

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Myth #2: We don't have a revenue problem, we have spending problem.

Wow, this sounds serious too. I say we take a look at the evidence ...



Irresponsible tax cuts have an impact. The Bush era tax cuts coupled with the impact of the two recessions dropped our national income by almost one-third. This would be the equivalent of someone earning $61,800 per year seeing their yearly income drop to $43,200 a year (and then going on a spending binge). This would hurt.

So, yeah, irresponsibly cutting taxes didn't do anyone a favor (except for the richest Americans, of course).

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Myth #3: President Bush only added $4 trillion (actually, $4.9 trillion) to our total national debt in 8 years, while President Obama has done far worse in just 4 years.

For the record, I had one seriously clueless person write that President Bush's budgets only added $2 trillion to our national debt. Yikes.

With this kind of confusion, we're going to need two graphs.

First, people forget - or flat out ignore - that the CBO projected $5.6 trillion in budget surpluses by 2011. This means we could have paid off (or paid down) or national debt, perhaps by last year. Guess what happened? The Bush administration happened ...


So, in reality, not only did President Bush squander $5.6 trillion in projected surpluses during his administration, but he added an additional $4.9 trillion to our national debt with his unfunded spending programs. In my math book, that's a $10.5 trillion unfunded spending binge (even more if you play more budget math games).



As most of us know, we're still trying to deal with President Bush's economic mess, which fits nicely into the GOP's larger political playbook.

But let's be clear here. President Bush screwed up our national finances, big time.

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OK, some bonus graphs, courtesy of Barry Ritholtz ...

Below, in the left bar, is what we spent in 2012.

Below, in the right bar, is the national income we derived from taxes and fees during 2012.

So, yeah, we don't have a spending problem. We actually have a spending and revenue problem. And it didn't start with President Obama.




For those who might not understand how to read this stuff ... federal spending (orange line) and national income (grey line) since 1960 are represented by the graph on the right.

Be sure to note when national income and spending begin to split widely (Hint: Early 1980s and early 2000s).

- Mark

OK, two more graphs, and that's it.

Take a look at what's happened to corporate America's tax contribution as a percentage of national GDP since the 1950s ...


... and then take a look at how much individual income taxes as a percentage of GDP have grown (or declined if you're a millionaire) ...



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