“On Dec. 20, the Brookings Institution economist Justin Wolfers sent out this provocative post on Twitter: â€œThe decline in the budget deficit since 2009 is the largest four-year improvement since the demobilization from WWII.â€
I was aware that the deficit was declining sharply, both in nominal terms and as a share of the gross domestic product, but hadnâ€™t thought much about the magnitude. Mr. Wolfers, whose partner Betsey Stevenson is a member of President Obamaâ€™s Council of Economic Advisers, is correct, as the data show. Fiscal year 2014 began on Oct. 1.
On net, President Obamaâ€™s policies have added far less to the deficit than commonly believed, and much of that stemmed from extending the Bush tax cuts for two years past their original expiration date in 2010. Even after they were finally allowed to expire at the end of 2012, Mr. Obama allowed many of them to stay in place permanently, reducing revenues and raising the deficit.
Those who care about where the deficits came from need to look at the legacy of the Bush tax cuts, which are far more to blame than anything President Obama has done, as I have previously documented. A common trick in Republican budget analyses is to pretend that Mr. Obama is responsible for all of Mr. Bushâ€™s policies.