Commentary Magazine


Deconstructing the Deficit

The New York Times this morning had an op-ed piece “deconstructing” “How the Deficit Got This Big.” According to the article, the fault lies (are you sitting down?) with George Bush, not Barack Obama. The article, using Congressional Budget Office figures, scores the cost of the Bush tax cuts at $1.812 trillion, the Iraq and Afghanistan wars plus new defense spending at $1.469 trillion and TARP at $224 billion.

One can argue about whether the defense outlays were necessary, but the other two figures are nonsense. As to TARP, while the Treasury disbursed that amount of money, it received assets–mostly preferred stock and warrants–in exchange. The CBO regarded the subsidy cost of TARP (roughly the difference between the money paid out and the value of the assets received) at about $64 billion as of December 31, 2008. Much of the TARP money has now been repaid, with interest, and the net cost to the Treasury is much, much lower than the original disbursal figure. Charging the gross figure to George Bush’s account is a gross distortion of reality.

And the tax cut figure comes from a static analysis. It is based on the assumption that cutting tax rates has no effect on the economy, and therefore is a pure cost to the government in lost revenue (or, as liberals would have it, a tax giveaway to the rich). But the economy began to accelerate at exactly the moment the tax cuts went fully into effect (not likely to be a coincidence–its happened every time we cut marginal rates) and government deficits declined from $377  billion in 2003 to $162 billion in 2007 (and then rebounded in the economically dreadful year of 2008 to $410 billion). The article essentially argues that  except for those dreadful tax cuts for the rich, the budget in the middle Bush years would have been in splendid surplus. I don’t know anyone who believes that.

And, thanks to the boom, unemployment was reduced in those years by one-third, both swelling tax revenues and shrinking expenditures in unemployment  insurance.

Deconstruction is a philosophical technique coined by the French thinker Jacques Derrida in 1967 that, as far as I can figure out, allows the practitioner to twist words so they mean whatever they find convenient at the moment. Their prose is extraordinarily incomprehensible. (What do you get if you cross a deconstructionist with a Mafioso? You get someone who makes you an offer you can’t understand.) The Times article, at least, is crystal clear in its meaning. Unfortunately, it is crystal clear tendentious twaddle.