Joseph E. Stiglitz and Linda J. Bilmes: The $10 trillion hangover ... Paying the price for eight years of BushRoundup: Historians' Take
In the eight years since George W. Bush took office, nearly every component of the U.S. economy has deteriorated. The nation’s budget deficits, trade deficits, and debt have reached record levels. Unemployment and inflation are up, and household savings are down. Nearly 4 million manufacturing jobs have disappeared and, not coincidentally, 5 million more Americans have no health insurance. Consumer debt has almost doubled, and nearly one fifth of American homeowners are likely to owe more in mortgage debt than their homes are actually worth. Meanwhile, as we have reported previously, the final price for the war in Iraq is expected to reach at least $3 trillion.
As bad as things are, though, this is just the beginning. The Bush Administration not only has depressed the economy and racked up unprecedented debt; it also has made expensive new commitments to the Medicare Part D prescription drug program, to disability compensation and education benefits for veterans, to replenishing the military equipment consumed in the wars in Iraq and Afghanistan, and simply to paying interest on the debt itself.
The president is not solely to blame for American profligacy, of course. Congress approved inequitable tax cuts and spending binges, and the Federal Reserve and other regulators, along with the mortgage industry and millions of consumers, share responsibility for the housing collapse. Nonetheless, the outgoing administration has made a series of unwise economic choices that together will add up to a burdensome legacy.
Using conservative assumptions, we calculate that the bill for Bush-era excess—the total new debt combined with the total new accrued obligations— amounts to $10.35 trillion. This legacy will have long-term consequences for America’s prosperity, but it also will weigh heavily and immediately on the Obama Administration, which will need to spend money fast to get the economy moving again.
When George W. Bush took office, he inherited a budget surplus of $128 billion and a bright fiscal future. The Congressional Budget Office, the nonpartisan government agency responsible for estimating future expenditures and revenues, projected a cumulative budget surplus of about $5.6 trillion between 2002 and 2011, if the country stayed on track—which of course it did not. What happened instead was that the administration successfully pushed for not only two rounds of massive, inequitable tax cuts but also a 59 percent surge in government spending. The result has been the largest budget deficits in U.S. history, and estimates of the current deficit are climbing even as we go to press. In September, before the financial meltdown, the CBO projected the deficit for fiscal 2009 to reach $438 billion—about the same level as it was in 2008—but in October, Peter Orszag, the director of the CBO, predicted the deficit would reach $750 billion, and we believe that number could go higher still. Such increases are the result of several factors:...