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The Unavoidable Deficit

By       Message Craig Harrington       (Page 1 of 1 pages)     Permalink

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The political right in this country has been quick to jump on the Obama administration for creating what it sees as irresponsible debt obligations. What they are quick, and indeed happy, to ignore is the incredible strain put on this economy during the past eight years.

The unfunded spending and tax-cuts of the Bush administration not only decreased government revenue, they increased outlays and made the economy dependent on foreign loans. These policies were fine in a time of opulence, but now the entire nation is paying the price for them.

The nonpartisan, non-profit Economic Policy Institute published a comprehensive overview of the state of America's deficit in an August 14th policy brief. This brief details the gradual collapse of fiscal discipline in Washington beginning with the 2000 election and continuing through to today.

When President Bush took office in 2001 the United States was in an era of surpluses. Bush's first year in office was one where his administration combined policies with those already in place - as is the case with every presidential changeover.

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At the time this country boasted a $281 billion surplus, representing 2.8 percent of GDP.

In 2009 the combined Bush-Obama budget is strapped with a $1.67 trillion deficit, representing an 11.9 percent chunk of our Gross Domestic Product.

The EPI assessment shows that 42 percent of this nearly $2 trillion budget swing was the direct result of legislation. Roughly 14 percent of the deficit is the result of the 2001 and 2003 Bush tax cuts, the rest were spending provisions, wars, etc.

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An additional 42 percent was a result of recessionary factors such as lower income and thereby lower tax revenue.

Perhaps the most startling evidence was that only 7.6 percent was a result of the American Recovery and Reinvestment Act. The stimulus and bailouts which have been attacked by Republicans as "growing the debt" were in fact the smallest single factor in our deficit accumulation.

The largest debt-producing arm of the economic rescue was the Fannie-Freddie rescue organized by then Secretary Henry M. Paulson.

The wars, the tax cuts, the expansion of government during the Bush administration and the six years of Republican held Congress were much more significant than anything done by the Democratic Congress or Obama White House.

Had the Bush administration merely continued the policies put in place by its predecessor, the Congressional Budget Office projected a $710 billion surplus by 2009 - more than enough extra cash to pay for universal health care.

Instead, after witnessing the "Dot.com bubble" and then building an even more astounding "Housing bubble," this country is saddled with unprecedented shortfalls.

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Craig Harrington is pursuing a degree in History and Political Science at The Ohio State University. He is also a journalist for EconomyInCrisis.org.

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