Blame for the National Debt
By James D. Agresti
November 5, 2012
Politicians, activists, and college professors have made a virtual cottage industry of assigning blame for the national debt to various presidents, but the vast majority of these analyses fail to pass even basic standards of intellectual honesty or academic rigor. This is because they use misleading measures of debt or fail to account for primary factors that drive the debt.
The most common flaw of such analyses is that they assign debt to presidents while completely ignoring the effects of Congress. This is ironic given that the Constitution vests Congress with the powers to tax, spend, and pay the debts of the federal government. Bills passed by Congress to carry out these functions must either be approved by the President, or in the case of a veto, the bills must be passed by two-thirds of both houses of Congress. Thus, it typically takes three to tango on the national debt: the House, Senate, and President.
Nevertheless, Republicans point the growth in national debt under Obama without mentioning that they have controlled the House of Representatives for the past 22 months. Meanwhile, Democrats point to budget surpluses under Clinton while failing to mention that the national debt rose more rapidly under Bill Clinton with a Democratic House and Senate than it did with George W. Bush and a Republican House and Senate.
There are many ways to quantify the national debt, and no single measure accounts for every relevant aspect of it, but the ratio of gross national debt to the size of the U.S. economy (GDP) is a logical and evenhanded metric during times of low-to-moderate inflation. This is because it accounts for population growth, some effects of inflation, and the relative capacity of the government to service the debt. By this measure, Barack Obama with a Democratic House and Senate presided over the fastest accumulation of debt in modern history, out-borrowing George W. Bush with a Republican House and Senate at a pace of more than ten to one.
However, this does not tell the whole story. The sizes of Congressional majorities directly impact the power of political parties to enact agendas. In this respect, President Obama and Congressional Democrats in 2009-2010 possessed more political power to affect the debt than any party in recent history. During this time, Obama enjoyed a 79-seat Democratic majority in the House and an effective 18- to 20-seat majority in the Senate. Obama’s House majority was greater than that of any president since Bill Clinton in 1993-1994, and Obama’s Senate majority was greater than that of any president since Jimmy Carter in 1977-1980.
However, this too does not tell the whole story because other factors also impact the national debt, such as legislation passed by previous congresses and presidents, economic cycles, terrorist attacks, natural disasters, demographics, and the actions of U.S. citizens and foreign governments. As Obama and his supporters point out, Obama inherited a recession. Yet, they neglect to mention that so did Ronald Reagan and George W. Bush.
Assuming it can even be done, to isolate and accurately quantify the relative responsibility of specific people for the factors listed above and their effects on the national debt would probably require a book-length treatment of each factor. For these reasons, it is more informative to ask, “What is to blame for our national debt?” instead of “Who?” Here, we have some clear-cut answers in the form of federal data from various agencies, the full ranges of which are cited below.
U.S. Bureau of Economic Analysis data shows that from 2009 through 2011, the federal government spent about 50% more than it collected in revenues, amounting to shortfalls that are roughly twice as large as any since World War II (graph below). In 2011, federal spending (measured as a portion of GDP) was 17% higher than it has been on average for the past 40 years, while revenues were 9% lower. What are the components of these increased expenditures and reduced revenues? Here again, we have clarity.
With regard to expenditures, a rapidly increasingly share of federal spending has gone to social programs (such as Medicare, education, and food stamps), which now comprise more than 60% of all federal expenditures (graph below). Moreover, other than interest on the national debt, nearly all future long-term growth in federal spending projected by the Congressional Budget Office (CBO) stems from the “government’s major health care programs: Medicare, Medicaid, the Children’s Health Insurance Program (CHIP), and the insurance subsidies that will be provided through the exchanges created under the Affordable Care Act [a.k.a. Obamacare].”
With regard to revenues, CBO’s estimates of federal tax burdens show that households at all income levels are paying a smaller portion of their income in federal taxes than they have on average for the past 31 years (graph below). More specifically, in 2009, households in the bottom 20% of the U.S. income distribution paid an 85% lower tax rate than they have on average for the past three decades, the second-lowest income group paid a 44% lower rate, the middle-income group paid a 32% lower rate, the second-highest income group paid a 23% lower rate, and the highest-income group paid a 9% lower rate. However, because the highest-income group earned significantly more than the other income groups, about 32% of the total tax dollars saved accrued to the upper 20% of income earners.
To summarize, the largest culprit in the rise of the national debt is increased federal spending, mainly due to social programs. Secondarily, federal revenues are down as a consequence of lower tax receipts from all income groups. In this regard, it is important not to confuse lower tax revenues with lower marginal tax rates. As federal data going back to 1950 shows, tax revenues and marginal tax rates don’t necessarily correspond—and tax policies that allow for a robust economy can result in more tax revenues with lower marginal tax rates.
These data on federal spending and revenues are the concrete causes of the national debt, and if one is looking for someone to blame or someone to remedy the problem, it ultimately boils down to those who have the most power to control these factors: American citizens who exercise their right to vote.
Quote: “As Obama and his supporters point out, Obama inherited a recession. Yet, they neglect to mention that so did Ronald Reagan and George W. Bush.”
And Republicans also conveniently neglect to mention this, as those recessions were smaller than the current one.
This is true of the recession that Bush inherited but not necessarily of the one inherited by Reagan, which saw higher unemployment and far higher inflation than the recession inherited by Obama: http://www.washingtontimes.com/news/2012/jul/30/no-excuse-for-bad-policies/
Regardless, this is precisely why the very next sentence of the article states, “Assuming it can even be done, to isolate and accurately quantify the relative responsibility of specific people for the factors listed above and their effects on the national debt would probably require a book-length treatment of each factor.”
Democrats fail to mention this is the worse recovery of a recession ever, if you can even call it a recovery..
You have to be smart enough to know it was no typical recession that President Obama had at the start of his term. that makes a big difference
This is a well written article. It is truly a pity that it will have little effect on people’s opinions of spending policy. I find it ironic that the military always ends up in the crosshairs for spending cuts when it’s the social programs that are breaking the budget’s back…
Funniest thing I’ve seen in a while happened last week. A friend of mine opened their first real paycheck and the look of elation shifted to confusion then dismay as they looked at all that was coming out of it… They were like “Medicare? I don’t get medicare. Why am I paying for medicare?” And suddenly they understood the real story on how all of those social programs are paid for…(On a side note, they are no longer an Obama supporter…)
Derp derp derp…duuuuh…derp derp derp. Did you tell your friend that they are paying for the Medicare they will receive when they retire? Did you not know that? Medicare is for retirement & disability? If your friend becomes disabled and/or when your friend retires, they will receive Medicare. Did you know that Medicare was implemented by Congress under Johnson, not Obama? Do you know that old people live longer than they did when Medicare was implemented?
Actually, they’re NOT paying for the Medicare they receive when they retire, they’re paying a portion of what people TODAY are taking out of the system as it continues to hemorrhage other people’s money. It’s not a personal medical savings account, which would be more responsible (but which Dems seem to keep shooting down initiative on … oh that’s right… it would cut into Democrat power, and that’s what this is all about… not helping people who are sick.)
first paycheck? gives an indication of age. ask anyone today that is approaching or at retirement age and has seen their 401K crash, the housing market crash, the job market crash whether or not they are grateful that they paid into SS. at least they will have something.
What about types of recessions? Was Reagan’s a worldwide financial crisis, limited to the US, or a combination of both?
Great analysis and presentation, Jim!
I’ll have to rack my brain to specifics, but Chart 2 (Federal Expenditures by Function) completely dismantles the narrative that social program spending cuts are irrelevant to a balancing the federal budget. I’d swear that I have heard for years – even from economic “experts” appearing on conservative talk shows – that the social program category of costs is dwarfed by debt servicing and other non-discretionary spending that is essentially fixed, and cutting them is more based on principle (“we can’t afford them”) than on them actually being the difference between surplus and deficit.
A great rejoinder also to the “peace” crowd who want the defense budget moved to education and have the US Army hold bake sales.
Keep up the good work.
First article I read on this site and I think it’s great. I wish more of our political discussions were based on this type of analysis.
I wonder if you could comment on the first graph that shows expenditures as a % of GDP. I find it interesting that in 1929 expenditure were 2.5%, post WW2 they were 15%, and today we’re at about 22%. Ignoring the short-term “blips” what fundamentally has caused this increase over time? Social Programs? Is there any research on what the right % should be?
Also, I suspect that there are Republican supporters who could do without Social Programs and they would be just fine. But, I think that is a small % of the poplulation. I think the majority would be just as upset as Democrats if these programs were cut. Cutting social programs in my opinion is a reaction to a problem. I would like to hear more thoughts/ideas about how we improve economic opportunities for all so that more people can come off of social programs.
With the nat’l debt as high as it is, I for one would like to know who we are borrowing from. I still haven’t found that info anywhere in my research, shoddy as that may be.
Just Facts has published that data here: http://www.justfacts.com/nationaldebt.asp#ownership
I wonder where you got your”truth” the fact is EVERY republican President since Nixon has raised the debt. Ronald (do I know you?) Reagan tripled the debt. Bush #1 tripled it again and Bush the 2nd (deficits don’t matter) tripled it again. The debt comes from the idea of “Starve the Beast”. Well the Beast is starving and it is eating the Republican party. There is a feeling in this country that the right doesn’t care about you if you are not one of the privileged class.Everything they want to cut hurts either kids,the sick,the poor and/or the old. I am by no means a rich man,however I pay taxes and vote. I believe we must cut the debt. The difference is I believe we should start at the top and move down instead of the other way.The problem with that is the republicans would have to do something their corporate owners won’t allow.They have been bought by the Sheldon Adelsons,Karl Rove and their money machine. They have given up their responsibility to the American people and have given it to Grover Nordquist.The Republicans I must say stay bought.
Why would you come to a site called justfactsdaily.com and spit talking points? Did you not read the article?
Pointing fingers as to the cause of debt is irrelevant at this point. What is needed is a solution this requires BOTH cuts to federal spending (including entitlements) and more tax revenue. The Republican argument that we can resolve growing public debt merely by deep spending cuts is absurd. It’s much like saying that you can pay off your credit card debt simply by cutting up your credit card. Even if federal spending was cut to zero, the debt would still increase by over $1 Billion a day on interest alone. I think its time we become realistic about what has to happen to reduce our debt and accept that we will all have to give something up in order to do it.
You wrote that the national debt rose faster under Clinton than under Reagan or George W. Bush. Talk about misleading. Maybe it did for a short period of time then much of the rest of the time the total National debt was being paid down and was FALLING. Also, Obama inherited basically a Crisis.
Being fair, any politician should have been given a free pass for a year or two, from either party. But now Obama is raising the national debt, both more and faster than any other president.
Looks like a balanced budget amendment is the only thing that will work.
Do we think it is a clue that virtually no politician from either party is really pushing this?
i ask–what has contributed to the increase in social program spending? could it be the millions that no longer have jobs and must rely on social programs to feed and house themselves? could it have something to do with the steep decline in wages for working Americans? wages decline but the cost of everything else goes up.
I enjoyed the article but it also seems to eliminate from the discussion the role of the filibuster. How often did the Democrats try to get rid of the Bush tax cuts only to be thwarted by a filibuster?