Press Coverage then and now

This graphic from the Heritage Foundation shows actual and projected deficits at the federal level. During the Bush Administration there was a lot of journalistic howling about the huge increases in the level of deficit and debt. They look pretty pale (even in the graph) compared to the Obama Administration's numbers. Yet, the press has accepted these huge increases with nary a peep.

The Obama people could counter with at least three counter explanations to justify these new projections. 1) The current deficits (Because of the economic situation) are mandatory - the Bush deficits were created by discretionary activities (especially the war they did not agree with). 2) When (that should be an if) the economy recovers the projections will look a lot better. 3) Longer term investments (like infrastructure) have been neglected by recent administrations and these types of "investments" will pay off in the long term (think buying a bridge that will last for years).

The reality is that even if economic conditions are as bad as the Administration claims they are (which is a highly questionable assumption) a good deal of this additional spending will not help change the situation (that assumes of course that you believe the additional spending will have a positive effect).

The dynamics of reduced deficits depend on two highly questionable assumptions. First, that the additional spending now will create long term and dynamic economic growth. Remember, a good deal of the Obama administration's dream list of policies (for example the increase in capital gains rate) are likely to dampen economic growth. Depending on the type of regulation imposed on the financial system - those policies could also significantly restrict the upside during recovery. But second, any assumption about future growth must be conditioned on the long term fixed costs in debt service added by these huge deficits. Our amount of borrowing, and thus our amount of debt repayment requirements, will go up significantly.

The third justification could even have some truth to it, but only if a significant proportion of the new spending were dedicated to long term capital projects. That simply does not seem to be the case.

This is not a case for an alternative to the current Administration. While the McCain people had some good ideas (especially key elements of the health plan which their candidate seemed incapable of explaining) it is likely that they would have been as exuberant as Obama's people in proposing big new and costly programs.