The debt was $10.626 trillion on the day Mr. Obama took office. The latest calculation from Treasury shows the debt has now hit $14.639 trillion.
It’s the most rapid increase in the debt under any U.S. president.
The national debt increased $4.9 trillion during the eight-year presidency of George W. Bush. The debt now is rising at a pace to surpass that amount during Mr. Obama’s four-year term.
But this is politically powerful only because it’s equally analytically flawed.It ignores key facts about the nature of government debt. For instance the nominal size of the debt isn’t important except as compared to the concurrent size of the economy — the debt-to-GDP ratio. Additionally, if growth of debt over time is what you’re interested in, then the key question is percent-growth, not nominal growth.
Dean Baker of the Center for Economic Policy Research — who tracks economic illiteracy in the media — explained these and other problems.
“First off, if you want to be at all serious you’d be looking at debt to GDP ratios,” he told TPM. “Obviously debt to GDP did rise very rapidly [in Obama’s first years], so that probably is true.” If, however, you look at the more accurate figure — percentage point change in the debt to GDP ratio — Obama’s not doing so poorly compared to Presidents Reagan, Bush, and Bush II, all of whom presided over large percentage point increases in the country’s debt to GDP ratio.
But the biggest problem, according to Baker, is that the report treats as a partisan issue the question of what caused the growth in debt. From CBS:
Mr. Obama blames policies inherited from his predecessor’s administration for the soaring debt. He singles out:
* “two wars we didn’t pay for”
* “a prescription drug program for seniors…we didn’t pay for.”
* “tax cuts in 2001 and 2003 that were not paid for.”
He goes on to blame the recession, and its resulting decrease in tax revenue on businesses, for making fewer sales, and more employees being laid off. He says the recession also resulted in more government spending due to increased unemployment insurance payments, subsidies to farms and funding of infrastructure programs that were part of his stimulus program.
“It’s acting like Obama’s sort of pulling this out of the hat,” Baker said. “That’s not an arguable point. It is the recession.” And Obama inherited the structural deficits as well. To claim that’s debatable is like saying Obama “blames” darkness on the night.
Jim Horney, who heads up the fiscal policy shop at the liberal-leaning Center on Budget and Policy Priorities, backed this up with figures (PDF). “In January 2009, under the Congressional Budget Office’s projections that assumed a continuation of then-current policies (2001 and 2003 tax cuts extended, etc.), the debt held by the public was projected to increase by more than $2.3 trillion and gross debt was projected to increase by about $2.7 trillion,” Horney told TPM.
So, whether you look at debt held by the public or gross debt, the deficits projected under CBO’s economic forecast in January 2009 and the assumption of no change in policies in place when Obama took office account for about 2/3 of the increase in debt. And a substantial part of the increase above what CBO projected in January 2009 is due to the economic downturn being significantly worse than CBO projected in January 2009 (although CBO has estimated that the policies that were adopted after January 2009 – [the stimulus bill, etc.] – actually improved the economy relative to what would have happened without any change in policies).
Only a small part of Obama’s inherited shortfall came from the 2008 bank bailouts, which though large, were quickly recouped and at this point, taken in isolation, have cost the country very little. Obama more directly owns other chunks of the debt — attributable largely to the stimulus, the tax deal and arguably his continuation of the wars. But the figures are fairly small compared to the overall debt, the vast bulk of which was baked into the cake when he took office.
On top of this, the CBS report compares Obama to George W. Bush, who inherited two very different economies and budgets. Bush inherited a surplus, and, soon after his inauguration, a recession, which he used as an excuse to enact massive, long-term tax cuts that ate into deficits long after that recession was over, and into Obama’s term. Obama inherited a record deficit in 2009, with an economy in complete free fall.
There are smaller problems with the report, too. Both Baker and Horney note that the more appropriate measure of debt is not the gross debt — i.e. the sum of debts government owes to both creditors and to itself — but simply the former. This is better known as debt held by the public, and it excludes debt owed to Social Security. But it turns out not to make a substantial difference.
“Since the President was inaugurated, debt held by the public has increased just under $3.7 trillion (note, that in this case, using debt held by the public does not dramatically change the story – but it is the right number to use),” Horney notes.
That won’t stop partisans from trumpeting misreported bad news, but it’s always worth keeping in mind.
This story has been updated.
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