Some historians still argue about the impact of FDR’s New Deal, so don’t expect debate over President Barack Obama’s legacy to end anytime soon.
With so much of Obama’s tenure having been devoted to recovery from the Great Recession, many assessments are focusing on the economy. But if you, like me, sighed every time you walked into high school economics class, you know that subject can be complex.
Readers told me they were confused by the praise some commentators gave Obama for cutting the federal deficit while others criticized him for increasing the debt. Their confusion was due to thinking the debt and the deficit are the same thing. They’re not.
The deficit is the difference between what the country spends and its available revenue. Think of the difference between what you owe on your credit card and the cash you have to pay it off. That difference is your deficit. People who complain that the government should be run more like a household don’t realize that, in some ways, it is.
The deficit when Obama became president in 2009 was $1.16 trillion and it grew to $1.59 trillion in 2010 due to tax credits and other stimulus measures the government took to escape the recession. But the Congressional Budget Office estimates that the deficit for the current fiscal year will be $559 billion. Obama’s cutting the deficit in half is certainly worthy of applause. But as his critics eagerly note, it’s only part of the story.
There’s also the debt, which includes the current deficit; past deficits; other debts, including money the government loans itself by taking money out of the Social Security Trust Fund; and spending that may have originated in budgets prior to Obama’s administration.
The federal debt in 2009 was $10.6 trillion, but it’s about $19.7 trillion today. Some economists say Obama should only be held responsible for $6.6 trillion of the $9 trillion increase because of the deficit reduction during his two terms. Either way, $19.7 trillion is a lot of money. How could the debt be so large if Obama cut the deficit?
Economists will likely laugh at this simplistic analogy, but again, think of your household budget. You don’t have the cash to buy a new car, so you borrow it. Then you refinance your house to lower your monthly mortgage payments. That improves your cash to debt ratio, which reduces your deficit. But the cost of the new car and to refinance your mortgage increased your debt. See; you, too, can act like a treasury secretary.
Despite the huge debt, Obama didn’t spend money like a sailor on leave. He tried to stimulate the economy with cash infusions. The stimulus package, with its tax cuts, extended unemployment benefits, and funding for public works projects added $787 billion to the national debt between 2009 and 2012. The Bush tax cuts extended by Obama added another $858 billion to the debt in 2011 and 2012. Meanwhile, company shutdowns and job losses were taking a big bite out of tax collections.
The price tag was high, but spending the country out of the recession worked. While many European nations continue to flounder, the U.S. economy under Obama has added jobs for 75 consecutive months, a stretch longer than any since the 1970s. The country was losing 700,000 jobs a month when Obama took office.
Job creation might have been even stronger if an ideologically persistent Congress didn’t cut the federal budget when it would have been more helpful to keep government workers employed and contributing to the economy’s recovery. A Brookings Institution study concluded that the budget cuts reduced economic growth up to 2 percent a year between 2011 and 2014. It said the cuts did little to reduce the nation’s long-term debt.
A panel of economists surveyed by the Wall Street Journal gave Obama high marks for stabilizing the economy after the recession. But they criticized the regulations he tried to impose on Wall Street and banks after the meltdown for inhibiting growth. The economists, however, reserved their harshest criticism for Congress, saying it allowed the tea party’s influence to wither bipartisanship and enact short-term economic policies that did more harm than good.
Actually, much of the regulation that should have been imposed on the financial industry for birthing the recession hasn’t been implemented. In any case, it’s time to focus on the future, not the past.
The election is over; it’s time to stop spouting malarkey about Obama leaving America in terrible shape. This is still, by far, the greatest nation, militarily and economically, in the world. But to continue to be great, the new president and Congress must accept reality and build on that foundation, instead of trying to denigrate it.
Harold Jackson is the editorial page editor for the Philadelphia Inquirer. Readers may email him at [email protected]. Column courtesy of the Associated Press.