As liberals grapple with the reality that the nation’s welfare state is financially unsustainable, they’ve renewed the myth that all would be swell if President George W. Bush hadn’t squandered the surpluses that were projected a decade ago.
This argument received a boost over the weekend with an article by the Washington Post’s Lori Montgomery, who wrote, “The nation’s unnerving descent into debt began a decade ago with a choice, not a crisis.”
The reality is a bit more complicated.
To start with, it’s important to emphasize that the projected surpluses were just that — projections. As the Congressional Budget Office cautioned in its January 2001 report on which Montgomery based her piece, “considerable uncertainty” surrounded them.
The CBO wrote that, “the U.S. economy and the federal budget are highly complex and are affected by many economic and technical factors that are difficult to predict. As a result, actual budgetary outcomes will almost certainly differ from CBO’s baseline projections.”
As it turned out, the Sept. 11 attacks further weakened an economy already shaken by the bursting of the tech bubble, and led to an increase in defense spending after a decade of historically low military spending resulting from the post-Cold War “peace dividend.”
By January 2002, before the Iraq war and before the second round of Bush tax cuts, the CBO had already slashed the projected 10-year surplus from $5.6 trillion to $1.6 trillion. While it’s true that 30 percent of that reduction was attributed to the June 2001 Bush tax cuts, 40 percent was linked to the economic downturn, and the rest was due to increased spending and debt service costs.
This isn’t to defend Bush’s profligacy. No doubt, when the world suddenly changed, he should have dropped the Medicare prescription drug plan and trimmed other parts of the budget to accommodate new war-related spending. Especially if he wanted to keep tax rates low.
Had spending stayed at projected levels from 2001 through 2010 — even with the tax cuts and two economic shocks — the budget would have remained roughly in balance over the period, with cumulative deficits of just $144 billion. In reality, deficits were $4.7 trillion.
At the start of the Bush presidency, the CBO projected that spending would be under $2.6 trillion in 2011, but the government is now expected to spend over $3.6 trillion this year.
While the CBO projected surpluses to continue in the near-term, it noted that even if those surpluses (which turned out to be unrealistic) were “saved,” it would have only allowed us to delay, rather than avert, the entitlement crisis.
The CBO explored the issue at length in an October 2000 report, noting, “Under most of the assumptions CBO used, a fiscal imbalance eventually develops whether or not surpluses are realized. If the nation’s leaders do not change current policies to eliminate that imbalance, federal deficits are likely to reappear and eventually drive federal debt to unsustainable levels.”
In other words, even if the Bush tax cuts never passed, if Sept. 11 had never happened, if Bush had never invaded Iraq or Afghanistan, if two recessions had not occurred, it wouldn’t have spared liberals from having to confront the fiscal nightmare caused by an overly generous welfare state.
Philip Klein is a senior editorial writer for The Washington Examiner.