Rep. Price: $1.5 Trillion Deficit Estimate Due To "Democrats' Gross Mismanagement"

January 26, 2011 5:25 pm ET

The Congressional Budget Office released today a Budget and Economic Outlook report for 2011 through 2021, and many Republicans as well as Democrats have responded appropriately to its conclusion that we can expect a $1.5 trillion budget deficit for 2011. Rep. Tom Price (R-GA), on the other hand, went ahead and ignored the substance of the report to attribute the expected deficit to "the pursuit of a big government agenda" and "the gross mismanagement of our nation's finances." Yet the CBO report itself explained that expected deficits are largely the result of the recession.

Rep. Price Blames Democrats' "Big Government Agenda" For CBO's $1.5 Trillion Deficit Estimate

Price Blames Democrats' "Big Government Agenda" For CBO's $1.5 Trillion Deficit Estimate. From a release titled "Price Decries Democrats' Gross Mismanagement of Nation's Finances" on Price's House website:

House Republican Policy Committee Chairman Tom Price, M.D. (R-GA) issued the following statement after the Congressional Budget Office released a report estimating the budget deficit for 2011 to be close to $1.5 trillion.

"Today's CBO projections underscore what Republicans have been telling the Obama Administration and its allies in Congress: the pursuit of a big government agenda is reckless, irresponsible and unsustainable," said Chairman Price. "This report is a reflection of the gross mismanagement of our nation's finances. It should make every American think twice about the latest calls by the president to increase spending at a time when Washington can clearly not afford to pay its bills. A thinly-veiled effort to continue growing the size of government will undermine our efforts to reduce the federal budget deficit. [Tom.House.gov release, 1/26/11]

The Recession And Bush-Era Policies, Not "Gross Mismanagement," Responsible For Deficit

Today's CBO Report: Surge In Budget Deficits And Pre-Recession Budget Imbalances A Result Of The Recession. From the CBO's Budget and Economic Outlook report summary:

The United States faces daunting economic and budgetary challenges. The economy has struggled to recover from the recent recession, which was triggered by a large decline in house prices and a financial crisis-events unlike anything this country has seen since the Great Depression.

For the federal government, the sharply lower revenues and elevated spending deriving from the financial turmoil and severe drop in economic activity—combined with the costs of various policies implemented in response to those conditions and an imbalance between revenues and spending that predated the recession—have caused budget deficits to surge in the past two years.  [Congressional Budget Office, January 2011]

CBPP: Deficit Grew By $3 TRILLION Because Of Policies Passed From 2001 To 2007. According to the Center on Budget and Policy Priorities: "Congressional Budget Office data show that the tax cuts have been the single largest contributor to the reemergence of substantial budget deficits in recent years. Legislation enacted since 2001 added about $3.0 trillion to deficits between 2001 and 2007, with nearly half of this deterioration in the budget due to the tax cuts (about a third was due to increases in security spending, and about a sixth to increases in domestic spending)." [CBPP.org, accessed 1/31/10, parentheses original]

The Bush Tax Cuts Are The Primary Driver Of Federal Budget Deficits Over The Next Decade. Below is a chart from CBPP showing the deficit impacts of war spending, financial recovery spending, the recession itself, and the Bush tax cuts:

Description: CBPP

[CBPP.org, 6/28/10]

Government Response To Crisis Helped Bring Economy Back From The Brink

Today's CBO Report: Recent Policies Should Help Raise GDP. From the CBO's Budget and Economic Outlook report summary:

Although recent actions by U.S. policymakers should help support further gains in real (inflation-adjusted) GDP in 2011, production and employment are likely to stay well below the economy's potential for a number of years. CBO expects that economic growth will remain moderate this year and next. As measured by the change from the fourth quarter of the previous year, real GDP is projected to increase by 3.1 percent this year and by 2.8 percent next year. That forecast reflects CBO's expectation of continued strong growth in business investment, improvements in both residential investment and net exports, and modest increases in consumer spending. It also includes the impact of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (referred to in this report as the 2010 tax act), enacted in December, which provides a short-term boost to the economy by reducing some taxes, extending unemployment benefits, and delaying an increase in taxes that would otherwise have occurred in 2011. [Congressional Budget Office, January 2011]

Most Expenditure Increases Are In Mandatory — Not Discretionary — Spending. From the CBO's Budget and Economic Outlook report summary:

By CBO's estimates, federal revenues in 2011 will be $123 billion (or 6 percent) more than the total revenues recorded two years ago, in 2009. The continued slow improvement in economic conditions is anticipated to boost revenues from individual income taxes, corporate taxes, and other sources by nearly $200 billion between those two years; however, revenues from social insurance taxes are projected to decline by more than $70 billion relative to their level two years ago, mostly as a result of a one-year reduction in payroll taxes included in the 2010 tax act.

Spending, for the most part, has been growing faster than revenues. ... According to CBO's projections, mandatory spending excluding outlays for the TARP will increase by $191 billion (or 10 percent) between 2009 and 2011. Significant growth in many areas-in particular, for Social Security, Medicare, and Medicaid-is expected to be offset only partially by reductions in outlays for other programs, primarily for Fannie Mae, Freddie Mac, and deposit insurance. [Congressional Budget Office, January 2011]

Much Of The Discretionary Spending Increase Is Due To The Recovery Act. From the CBO's Budget and Economic Outlook report summary:

Discretionary spending will increase by an estimated $137 billion over the two-year period; about one-third of that increase stems from funding provided by the American Recovery and Reinvestment Act of 2009 (ARRA). In addition, outlays for net interest will rise by an estimated $38 billion from 2009 to 2011, mostly because of substantial increases in borrowing. [Congressional Budget Office, January 2011]

  • Recovery Act Helped Avert A Major Depression. According to the New York Times: "Like a mantra, officials from both the Bush and Obama administrations have trumpeted how the government's sweeping interventions to prop up the economy since 2008 helped avert a second Depression. Now, two leading economists wielding complex quantitative models say that assertion can be empirically proved.In a new paper, the economists argue that without the Wall Street bailout, the bankstress tests, the emergency lending and asset purchases by theFederal Reserve, and the Obama administration's fiscal stimulus program, the nation'sgross domestic productwould be about 6.5 percent lower this year. In addition, there would be about 8.5 million fewer jobs, on top of the more than 8 million already lost; and the economy would be experiencingdeflation, instead of low inflation. The paper, byAlan S. Blinder, a Princeton professor and former vice chairman of the Fed,andMark Zandi, chief economist atMoody'sAnalytics, represents a first stab at comprehensively estimating the effects of the economic policy responses of the last few years. 'While the effectiveness of any individual element certainly can be debated, there is little doubt that in total, the policy response was highly effective,' they write." [New York Times7/27/10, emphasis added]
  • CBO: The Recovery Act Created Jobs, Lowered Unemployment, And Boosted GDP. According to the nonpartisan Congressional Budget Office:

CBO estimates that ARRA's policies had the following effects in the third quarter of calendar year 2010:

  • They raised real (inflation-adjusted) gross domestic product by between 1.4 percent and 4.1 percent,
  • Lowered the unemployment rate by between 0.8 percentage points and 2.0 percentage points,
  • Increased the number of people employed by between 1.4 million and 3.6 million, and
  • Increased the number of full-time-equivalent (FTE) jobs by 2.0 million to 5.2 million compared with what would have occurred otherwise. (Increases in FTE jobs include shifts from part-time to full-time work or overtime and are thus generally larger than increases in the number of employed workers). [CBO, November 2010]
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