Deficit Attention

Posted Feb. 07, 2010, at 7:20 p.m.

Exit polls in last month’s special U.S. Senate election in Massachusetts that saw Scott Brown win the seat last held by the late Sen. Ted Kennedy revealed, among other trends, that voters are worried about federal deficit spending. Presumably, that anxiety led them to send a Republican to the Senate, bucking a decades-long trend of choosing Democrats.

The deficit — from spending that exceeds tax revenue — indeed should be worrisome. A proposal in Congress to create a commission to study the matter has the support of three of the four in Maine’s delegation to Washington, although it was rejected by the Senate. Rep. Chellie Pingree is the lone opponent. “The best way to reduce the deficit is to grow the economy,” she said. Although a commission would be helpful, that simple statement contains a profound but often overlooked truth — shortfalls, whether in Washington or Augusta, have as much to do with the economy as fabled “out-of-control” government spending.

When fewer people are working, when people are spending less, and when businesses are earning less profit, tax revenues decline. Clearly, the worst recession since the 1930s has devastated government budgets. The recession began in December 2007, so the decline has run for eight full quarters. Of course, it legitimately can be asserted that if the federal and state governments took on fewer activities, the hurt would be less severe.

But there appears to be a persisting rewriting of recent budget history. When he was elected in 2000, President George W. Bush inherited a budget surplus. He argued, persuasively, that it proved that federal taxes were too high. When the economy began to slow in late 2000, he argued that tax breaks were needed to spur growth. The tax breaks, which mostly benefited the wealthiest Americans, were approved. And so was a $900 billion (over 10 years) Medicare prescription drug benefit. And two wars.

The result was the $236 billion surplus Mr. Bush inherited became a $1.3 trillion deficit with which President Barack Obama began his tenure.

The exit polls in Massachusetts showed even more anxiety about the loss of jobs. The argument could be made (and has been, by Nobel Prize-winning economist Paul Krugman) that another federal stimulus is needed to prime the job-creation pump. And therein lies the dilemma — borrowing for another stimulus, or any job-targeted federal spending, will drive up the deficit.

President Obama’s pledge to reorder the nation’s priorities resonated with voters in 2008. He promised to shift the tax burden back to those earning $250,000 or more, and work at reducing costs that affect the middle class, such as health care, child care and college tuition. Like a sailboat running into the wind, the ship of state is on a long tack, approaching the rocky deficit shoals. In time, a growing economy will fill the sails again. And it is then that Congress and the White House must focus on reducing the deficit.

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