In a sign that the historical revisionists and Barack Obama legacy builders at the Associated Press, aka the Administration's Press, may have shifted their operation into high gear for the final weeks of the midterm election campaign, Andrew Taylor has written that "Obama inherited a trillion-dollar-plus deficit" after the 2008 financial crisis."
The occasion for Taylor's tripe is the Congressional Budget Office's release of its final Monthly Budget Review for fiscal year 2014. In the report, which the AP has almost always ignored in every other month in favor of waiting for the official Monthly Treasury Statement issued shortly thereafter, the CBO estimates that the year's budget deficit will come in at "only" $486 billion. A grab of Taylor's original full five-paragraph blurb, which has since been revised while still containing the "inherited" claim, follows the jump:
It's as if Obama wasn't sworn into office until October 1, 2009 instead of January 20.
For the record, the reported fiscal 2009 budget deficit through the year's first four months, i.e., as of January, 2009, was $396 billion.
But that figure was wildly overstated because of artificial non-cash accounting entries relating to the Troubled Asset Relief Program. Tim Geithner's Treasury Department decided to treat TARP using "investment accounting." Such accounting ordinarily doesn't recognize gains until they are realized in cash, and avoids recognizing losses until it is clear that they will occur. Despite those accounting guidelines, Treasury recorded TARP-related losses of roughly $150 billion in fiscal 2009, and spread them throughout the fiscal year's first four months, adding them to "outlays."
This move served two purposes. First, it enabled the administration to push more bad news into a year (fiscal 2009) which everyone knew would be disastrous. As a result, after taking in "gains" from investments as it became clear that the losses wouldn't materialize, it could then show improvement. It didn't work out that way, because the administration moved the spending spigots to full throttle. As I showed in a column posted elsewhere in early 2011, proper accounting would have shown that the fiscal 2010 deficit was actually worse than fiscal 2009. (At that time, I believed that the artificial losses booked totaled $115 billion. They ended up being closer to $150 billion.)
By putting the artificial losses into the fiscal year's first four months, Treasury's move accomplished a second purpose, namely masking the explosion in real spending which occurred as soon as Obama took office.
So Obama really "inherited" a genuine deficit of about $246 billion through year's four months (the reported $396 billion less the $150 billion in artificial losses). If the deficit had continued at that rate for the rest of the year, the full-year deficit would have been about $740 billion. But that ignores the fact that of the year's remaining 8 months, three (April, June and September) are months where the highest tax collections occur. If Obama had run the government on fiscal autopilot for the rest of the year, the deficit could have been as "low" as $600 billion.
But Obama didn't do that. Even before he took office, he frightened businesses throughout the land by taking the side of workers who occupied Republic Window and Door in Chicago in December 2008, saying they were "absolutely right" to carry out their illegal actions. Intimidated bankers literally gave the workers the money they demanded to make the problem go away.
Obama's statement and the incident's ultimate result sent a clear signal to business that his administration would be hostile to business and the rule or law. Business investment, already shrinking, shriveled even further. Retrenching companies fired far more workers than they would have otherwise. Accordingly, tax collections declined by far more than they would have without the clearly expressed hostility.
After Obama took office, he pushed through a stimulus plan which probably spent $200-$300 billion of its total anticipated $800 billion during the next eight months.
Instead of the $600 billion or so deficit one might have expected, the deficit came in at $1.4 trillion. The $800 billion difference between what could have occurred and what did occur roughly consisted of the following:
- $150 billion artificial accounting entries booking TARP losses which never took place.
- $250 billion in new stimlulus spending.
- A $150 billion further reduction in collections beyond what would have occurred if Obama hadn't clearly signaled his intention to make the rule of law whatever he wants it to be.
- $250 billion in other spending by federal departments finally freed from any kind of fiscal constraints.
No, Andrew Taylor. Barack Obama did not "inherit" a trillion-dollar deficit. He created it — and three more of them after that.
Things have gone downhill so badly in the past six years that an AP reporter can actually call people who think $500 billion deficits are dangerous and want to do something about it "deficit hawks." No, Andrew. They're "sensible people."
Cross-posted at BizzyBlog.com.
