affairs on President Obama. One headline proclaims, “Obama is destroying America.” Another article says, “No American president comes close to the national debt and economic destruction Obama has wrought.”
This exaggerated writing style demonstrates three rather simplistic assumptions:
First, the belief that whatever happens during a given president’s administration can be credited or blamed on that president. But presidents, governors and CEOs frequently have to deal with the consequences of decisions made before they entered office.
A second assumption is that everything that happens is somebody’s fault. While individuals make important decisions that have future consequences, recessions, business cycles, wars, technological changes, and free markets often display a will of their own.
A third unstated assumption in these letters is that presidents are omnipotent. You can almost imagine the president, behind a curtain, like the Wizard of Oz, manipulating levers controlling inflation, unemployment, the growth of GDP and the stock market.
Partisans on the extreme right blame the economy on President Obama.
But people who are serious about public policy look for causes, not blame. It doesn’t take a rocket scientist to determine the sources of our deficits and debt. The numbers are very large.
The first source of our debt is the George W. Bush-era tax cuts that drove down revenue even as spending was increasing. The deficits started immediately after the tax cuts.
President Obama supported a renewal of the middle class tax cuts, so his fingerprints are now on that policy, too, though he opposed the extension to wealthy taxpayers.
The second source of deficits
was the adoption of a new ongoing Medicare drug entitlement. Unlike Social Security and Medicare, no special tax was established for the drug benefit, so we are borrowing to pay for it. President George W. Bush signed it, though many Democrats supported it, too.
The third source of deficits is the two wars. My parents were members of the World War II generation. My dad served in the Pacific. The Greatest Generation paid around 40 percent of the costs of the war through taxes and borrowed the rest. But they borrowed from themselves through the purchase of Liberty Bonds. After the war, they taxed themselves to pay off the bonds.
The only people sacrificing today are the men and women in uniform and their loved ones back home. The rest of us aren’t even paying taxes to fund the wars. This is probably the first time in history a nation went to war and cut taxes at the same time. We are paying for the wars with debt, much of it financed by foreigners.
The fourth source of the deficits is the economy itself. The Great Recession began in December 2007. By the time President Obama was inaugurated in January 2009, the economy was losing 750,000 jobs a month!
Recessions create a double-whammy effect on budgets. Demands on the government for unemployment compensation and other safety-net programs skyrocket, just as tax revenues plunge because people are unemployed.
Other causes of the deficits include the Troubled Asset Relief Program established by the Bush administration. That $700 billion was used to lend money and to purchase stock. Current estimates are that the total cost of saving the world’s banking system will be around $25 billion, after the securities are liquidated.
President Obama’s stimulus plan was around $800 billion in combined spending and tax cuts over three years. Numerous studies suggest that the unemployment rate would have peaked between 12 percent and 14 percent without the stimulus. How much was saved by a couple of million people working and paying taxes instead of drawing unemployment? It’s hard to say.
There’s plenty of blame to go around for those who like to play pin-the-tail-on-the-donkey (or elephant).
There is a problem with the “whatever happened on your watch” school of thought, the “everything is somebody’s fault” assumption, and the “president is the Wizard of Oz” fantasy. These beliefs lead you to conclude that all we need to do to improve things is change personnel.
This is not how the world works.
• Mickey McGuire, a retired high school social studies teacher, is among a select group of local residents with columns in the Tracy Press.