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Who's really to blame?

August 26, 2011

The U.S. economy is wearing lead boots, standing in quicksand, wearing a suicide vest... and Americans just want to know who put us here so we can figure out whose advice to ignore.

The 2008 financial crisis which started this whole mess was caused by the wildly irresponsible mortgage policies of the federal government, which in turn were promulgated by Democrats who turned Fannie Mae and Freddie Mac into Mr. and Mrs. Santa Claus. We know that much.

For anybody who's forgotten that part of our history, or never learned about it, watch this video of Democrats like Barney Frank shutting down every attempt by Republicans and financial experts to avert the impending disaster:



Then read this report (also referenced here), which details Democrat responsibility for the housing bubble.

That's water under the bridge at this point. Now the problem is government spending. The federal government's deficits are so extraordinary in size that they're crowding out private spending, stifling business activity, and actually preventing economic recovery. The result is a faltering economy, the downgrading of U.S. Treasury securities, and frightening growth of government power over everyday lives and businesses.

The question is: Who's to blame for these gargantuan federal deficits?

If you listen to President Obama talk – any talk, any subject, anywhere – you'll surely hear him blame the whole mess on his predecessor. That's his favorite shtick. He's like a little kid who points a finger at his brother when he gets in trouble.

“Mommy, it wasn’t me! Bush did it!”

Back in March of 2010, I wrote a column titled "The pig bomb" which pointed that finger right back at Obama, and the column was amazingly prescient. I mentioned the Chinese threat to stop buying our Treasury Notes – which started happening eight months later – and I mentioned the possible downgrade of our securities, which seemed far-fetched at the time but actually happened earlier this month.

Give me credit for being right. In fact, this website has a rather amazing record for being right, no matter what the subject. Go back and check for yourself. Forget about Warren Buffet – the "Oracle of Omaha" – who hasn't been right about anything since buying Coca-Cola stock in 1988, and get your advice here, from the "Augur of Reno" instead.

(Okay, maybe it’s not a great nickname, but it’s all I could think of on the spur of the moment.)

There’s one thing I don’t like about that column from March of 2010: it concentrates too much on Obama and not enough on the real culprits. Presidents aren’t dictators, and constitutionally have limited power when it comes to spending money. They possess the greatest bully pulpit in the history of the world, and when their own party holds the majority in Congress they exert considerable influence, but in the final analysis the House allocates the money and decides how it will be spent, the Senate offers input and gets to vote, and the president merely has the passive choice of signing bills or vetoing them... and even then, a veto can be overruled.

I rebuilt the chart from “The pig bomb” to reflect the influence of the two political parties on the fiscal policies of the federal government, this time concentrating on Congress, which holds the purse strings. The chart now starts with fiscal year 1981, Reagan’s first year as president, and is very revealing:


The red bars represent years when we had a Democrat-controlled Congress, while the blue bars represent years when we had a Republican-controlled Congress. Even with a first glance, it’s obvious there are upward bulges in deficit spending whenever Democrats control both houses of Congress – an obscene and calamitous bulge starting with the Pelosi/Reid Congress of 2007.

Conversely, there are downward slopes in the amount of the deficit whenever Republicans control both houses.

Look at the numbers underneath the chart. (Click on the chart to see the numbers.) Diametrically opposite things happen when the two political parties retake Congress. The Democrats celebrate by starting a spending orgy with their very first budget, whereas the Republicans act like responsible adults and establish a pattern of consistent reductions in deficit spending.

The numbers don’t lie. They come straight from the U.S. Treasury itself.

Retaking Congress has happened two times for each party since 1981. The Democrats took control from a neutral (split) congress in 1987 and took control from Republicans in 2007. Because of the way the federal budget process works, their first-year budgets were for fiscal years 1988 and 2008. The Republicans took control from Democrats in 1995 and took control from a neutral congress in 2003, so their first-year budgets were 1996 and 2004.

Here's what happened in each of those years:
1988 - In the Democrat first-year of 1988, the deficit increased by 12.04%. By the final year of the Democrat regime (1995), the deficit was 25.01% higher than the neutral congress of 1987.

1996 - In the Republican first-year of 1996, the deficit decreased by 10.81%. By the final year of the Republican regime (2001), the deficit was 52.61% lower than the Democrat congress of 1995.

2004 - In the Republican first-year of 2004, the deficit did not decrease, admittedly, but those were extraordinary times with the war in Iraq and reconstruction expenditures ramping up to full speed. In spite of that, and also in spite of the war in Afghanistan, the Republican congress’s first-year deficit was only 7.36% higher and by the end of the Republican regime (2007), the deficit was 9.79% lower than the neutral congress of 2003. They decreased deficits while lowering income tax rates and waging two wars on the opposite side of the planet.

2008 - In the Democrat first-year of 2008 (Pelosi and Reid), the deficit increased by 103.14%. The final year of the Democrat regime (2011, the current fiscal year which ends September 30, 2011), the deficit will be approximately 328.42% higher than the Republican congress of 2007.
So the question is answered. Who’s to blame? Pelosi and Reid are to blame, along with the rest of the Democrats in Congress.

And did you notice another thing in the data? Bill Clinton runs around playing his own version of the Blame Bush Game, bragging that he left Bush with a federal budget that was running a surplus. However, the Treasury data clearly shows that there was no surplus. There hasn't been a surplus since 1956, when Eisenhower was president. The Republican congress came close in fiscal year 2000, getting the budget deficit under eighteen billion dollars (that's less than 1% of this year's Pelosi/Reid deficit), but the notion that the government ever had a surplus during the Clinton presidency is pure fiction.

Some things never change. Even in retirement, Clinton is an habitual liar.

"We have the Bill of Rights. What we need is a Bill of Responsibilities." – Bill Maher



From Reno, Nevada, USA       


Followup:

October 18, 2011

Now that fiscal year 2011 is over, I've updated the chart of U.S. deficits for the last thirty years:


Turns out I significantly overestimated the deficit for 2011, even though I was writing my column barely over a month before the end of the year. Blame it on my growing cynicism about the CBO, which always seem to grossly underestimate deficits.

The basic message of the chart is not affected. You can still see the obvious deficit bulges when Democrats take over Congress, and the obvious decreases in deficits when Republicans take charge. (All numbers except the FY2012 estimate - which is the official CBO estimate as of October 4 multiplied by 120% - come straight from the U.S. Treasury.)
August 27, 2011 - I have a co-worker who always talks about Clinton running a surplus. She drives me crazy. I'm gonna print your chart and pin it to her cubicle wall. Not only is the Clinton "surplus" a fantasy, but when you look at it (like you did) from the point of who was controlling Congress, the numbers tell a completely different story. - Bev G., Illinois

August 27, 2011 - Well there you go again.....trying to present the precise facts as truth. Now I understand why you truth teller types are called racist, terrorist, homophobes. This video is clearly a thinly veiled attempt to portray The honorable Barney Frank as a miscreant. Barney Frank a miscreant please? Whats next? Something as equally ridiculous like Custer was a lousy general? - JK, Missouri



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