Tuesday, February 24, 2009

Lotterman: GOP says they're the fiscally responsible party, history disagrees

Idaho Statesman

Republicans opposed to the Obama administration's fiscal stimulus bill fretted noisily about "spending money we don't have" and "passing a burden on to our grandchildren."

Their concern for fiscal prudence is laudable, but not credible, given the past 60 years. While Republicans had a deserved reputation for fiscal probity from Lincoln through Nixon, their contempt for balanced budgets since 1981 is at the root of our national debt problems.

In response to questions from readers about the size and history of the national debt, I made some simple tabulations. I took the gross federal debt listed in the 2009 Economic Report of the President, the last one prepared by the George W. Bush administration. To its data for 1940 through 2008, I added the Bureau of Public Debt's estimate of the debt as of Feb. 15.

I then adjusted it for inflation, using the consumer price index. (Using a different, broader index, the GDP deflator, would be slightly better, but it does not go back to 1940.) To make comparisons with current legislation simple, I converted all the figures to December 2008 dollar equivalents.

Plotted against time, it shows the national debt increased five times during World War II. Immediately after the war, austere budgets reduced it somewhat. But then there was a remarkable period, fiscal years 1948 through 1981, during which the inflation-adjusted national debt remained nearly constant. It was $2.2 trillion (in 2009 dollars) in 1948 and $2.3 trillion in 1981, 33 years later.

This spanned the administrations of four Democratic presidents - Truman, Kennedy, Johnson and Carter - and three Republicans - Eisenhower, Nixon and Ford. Democrats controlled both houses of Congress for 29 of these years and Republicans for four. During this time, Congress was never split between the two parties, as it has been for 16 of the 28 years since then.

People commonly believe a free-spending Lyndon Johnson ballooned the national debt with new social programs while fighting a war in Vietnam.

Kennedy-Johnson deficits were large compared to those of Truman and Eisenhower, who had both reduced the debt in real terms. But these deficits were small enough that with prevailing price increases, the inflation-adjusted debt remained about constant.

Only four-tenths of 1 percent of our 2009 debt comes from Kennedy-Johnson era deficits. Together, Nixon and Ford contributed 3.3 percent, while Carter reduced the real debt slightly.

The big increases began with Ronald Reagan who, like Franklin Roosevelt, was elected on a platform of stopping his predecessor's reckless spending. Nearly 24 percent of our current debt comes from his presidency. George H.W. Bush contributed another 13.6 percent and Bill Clinton added 4.8 percent.

George W. Bush is the champ, however. More than 36 percent of the total came from deficits between his first budget year, fiscal 2002, and February 2009.

Remember that presidents are not dictators. They don't control taxing and spending. They can only propose legislation and then sign or veto whatever bills Congress passes.

So while the three most recent Republican presidents oversaw deficits equal to nearly 74 percent of our debt, they should not bear all the blame alone.

The larger irony is that many of the congressional Republicans most vocal in recent weeks about the perils of deficit spending were among the most enthusiastic supporters of lower taxes and higher spending since 1981. Their sudden conversion to fiscal rectitude is dramatic, but not very convincing.

Economist Edward Lotterman teaches and writes in St. Paul, Minn. Write him at ed@edlotterman.com.

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