Commenter James asked me to take a look at a couple of verdicts from PolitiFact on the State of the Union and the Republican response. He disagrees with their verdicts. Let’s take a look.
PolitiFact gave Representative Paul Ryan, who delivered the Republican response, a full “True” rating for his statement that “The debt will soon eclipse our entire economy.” James reckons that PolitiFact is relying on an inflated measure of the debt rather than what is really owed.
I agree with PolitiFact, though. In some cases, what’s known as gross federal debt isn’t relevant. But I think it is here because it takes into account the money owed to the Social Security and Medicare trust funds—money that has been borrowed by the government to subsidize deficit spending for three decades.
The government owes that money to pensioners, and the money to repay that will have to come from somewhere: either via new taxes or by cuts to programs (unless we get some supercharged economic growth).
If I pledge to pay for my girls’ college eighteen years from now, it doesn’t necessarily have any immediate budgetary impact on me. But it should, unless I want to face a crisis down the line. And I’ll have something of a “political” problem on my hands if I break my promise to my kids. So that’s a liability I have to pay for sooner or later. Same goes for the trust funds.
The irony here is that it’s usually conservatives who claim that the Social Security Trust Fund doesn’t really exist. They sure want to count it to help their case for slashing government spending.
Frontline put it this way in a similar discussion:
But if the publicly held debt represents the impact of government borrowing on the current economy, then intra-governmental debt represents the future promises we have made. Due to the retirement of the baby boomers and rising health care costs, under some projections Medicare and Social Security will run out of money. If this happens, the trust funds for those programs will have to start cashing in those I.O.U.s, and to pay them the government will need to borrow more from the public. Or it could raise taxes to cover the shortfall, or it could make cuts to the programs to make them less expensive. If our future economy grows more robustly than expected, it will be easier to pay for these commitments, but the intragovernmental debt is not simply going to evaporate.
Viewers are entitled to know that the country faces both an immediate and a long-term debt challenge. If we were not as clear as we should have been about this distinction in our broadcast, we nonetheless stand by our decision to highlight what we consider to be the true dimensions of the problem by using the gross debt figure of $10 trillion — now more than $11 trillion — and counting.
And The Nation‘s William Greider said this to our Trudy Lieberman last month:
There are simple facts that should be reported: 1) Social Security never contributed a dime to the deficit; 2) Social Security softened the impact of the Reagan deficits by building up a surplus; 3) the federal government borrowed the money and spent it on other things; 4) the federal government has to pay this money back because it really belongs to the working people who paid their FICA deductions every pay day. The elites in both parties know the day is approaching when the federal government has to come up with the trillions it borrowed from the workers.
But James also points out that PolitiFact only gave President Obama a “Half True” for his statement that “We are living with a legacy of deficit-spending that began almost a decade ago,” and PolitiFact does indeed go too far there.
Here’s what they say:
His comment had a partisan undertone. By saying deficit spending began almost a decade ago, he is referring to the presidency of George W. Bush. We wanted to review the history of deficit spending and put Obama’s statement in a bit of perspective…
But the nation’s debt did not begin under President Bush. The historical data show the government ran deficits from at least 1970 to 1998. (The CBO’s most recent summary of historical data only goes back to 1970.) So that includes deficits under Republicans Richard Nixon, Ronald Reagan and George H.W. Bush, as well as Democrats Jimmy Carter and Bill Clinton (for much of his presidency).
So Obama isn’t telling the full story by saying the legacy of deficit spending began a decade ago. It goes back even farther than that.
They’re missing the boat here. Obama was clearly talking about the current deficit problems, which were created by George W. Bush, beginning with his unpaid-for tax cuts ten years ago and his unpaid-for wars in Iraq and Afghanistan that continue to this day. That legacy continued through his 2007-2009 recession. The vast majority of the bailout costs are Bush’s, as is the lost economic growth.
While it’s true that if we had no accumulated national debt, the current deficit problems would appear somewhat less pressing, it’s hard to believe that $1.3 trillion annual deficits could ever seem underwhelming, even if we had started from a base of zero.
And anyway, again, what Obama’s clearly referring to in that passage is how much of that $1.3 trillion resulted from policies he inherited from Bush that were put in place beginning a decade ago. For the analysis there, we turn to The New York Times‘s economics columnist David Leonhardt, who ran the numbers a year and a half ago on who was responsible for how much of the deficits.
Recall, back when Bush took office, the CBO projected average surpluses from 2009 to 2012 of $850 billion a year. So, 2010’s deficit wasn’t just a $1.3 trillion shortfall; it was a $2.2 trillion swing from what it could have been if Bush hadn’t taken the cushion away (I might add, and this is pretty crucial: Those huge surpluses would have eaten up most of the national debt PolitiFact is concerned about).
Of that swing, Leonhardt found $673 billion a year caused by Bush programs, $479 billion caused by the recession on Bush’s watch, $185 billion by the bailouts he instigated, and $232 billion by programs and/or wars he initiated and Obama either agrees with or can’t back out of (those numbers need to be updated a bit, but not that much).
That’s the legacy of deficit spending Obama is talking about. It adds up to $1.6 trillion of that $2.2 trillion swing. Wipe out just half of that number—or even just the $673 billion Bush is directly and inarguably responsible for—and the current problem becomes much more manageable.
And Obama the crazed “socialist” spender? Leonhardt found his policies added just $200 billion to the deficit—the vast majority of which was spent trying to keep Bush’s recession from becoming the sequel to the Great Depression.
So yes, what the president said there in the State of the Union is all true.
Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR’s business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.