There they go again

THERE THEY GO AGAIN…. The lead overnight story on Mark Halperin’s “The Page” features a photo of President Obama alongside U.S. currency. The text reads, “Red Ink Nation: Obama presides over $1.4 trillion deficit.”

The front page of the Washington Post tells readers, “Record-High Deficit May Dash Big Plans; $1.4 Trillion in Red Ink Means Less to Spend On Obama’s Ambitious Jobs, Stimulus Policies.” The New York Times‘ front page says, “$1.4 Trillion Deficit Complicates Stimulus Plans.”

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Let’s set the record straight here. The Treasury Department officially announced that the federal budget deficit for fiscal year 2009 was $1.4 trillion. While that’s hardly good news, it’s worth remembering that the Office of Management and Budget had projected a deficit for FY09 of $1.8 trillion. As Dean Baker explained, “Given the new information about the deficit, a more reasonable headline would have been, ‘Lower Than Expected Deficit Leaves Room for Stimulus,’ since the government can now spend $200-$400 billion and still have a lower debt than what was projected just two months ago.”

Second, while a $1.4 trillion deficit is unprecedented in size, as Paul Krugman explained in August, “it’s not horrific either by historical or international standards.” This chart, published by the WaPo today, shows the debt as a percentage of GDP, and adds some helpful perspective.

Third, let’s give credit where credit is due. Halperin’s report makes it seem as if the Obama administration deserves blame for the huge budget shortfall. That’s demonstrable nonsense. The Center for American Progress’ Michael Ettlinger and Michael Linden recently explained, “The policies of the Bush administration, which included tax cuts during a time of war and a floundering economy, are clearly the primary source of the current deficits. The Obama administration policies that are beginning to give the economy a needed jumpstart — the American Recovery and Reinvestment Act in particular — place a distant third in contributing to the 2009 and 2010 deficit numbers.”

Specifically, 40% of the fiscal deterioration we’re seeing — the single largest contributing factor — can be attributed to Bush policies. Another 12% comes from Bush’s financial rescues, while 20% are the result of the economic crisis. What’s President Obama’s share? Just 16% of the total, most of which is the result of new spending that was necessary to prevent a depression. Indeed, blaming Obama is backwards: “[P]roperly accounted for, the deficit actually goes down when you compare Obama’s budget proposals to current policy, not up.”

And finally, let’s also not forget that it only makes sense to run large deficits given the circumstances. We’re dealing with an economic collapse and two wars, following eight years in which we were led by “the most fiscally irresponsible president in the history of the republic.”

Bush inherited the largest budget surplus in American history and turned it into the largest deficit in American history. Obama, in contrast, found a fiscal fiasco waiting on his desk on his first day on the job. Before anyone blasts the president for the mess, perhaps they ought to grab a mop.