Fiscal Relativity

There was an interesting dispute between Karl Rove and David Axelrod in January. Rove, the erstwhile Bush adviser, wrote in the Washington Post that Democrats "will run up more debt by October than Bush did in eight years." Axelrod responded to this assertion with a strident broadside, writing that "of all the claims Rove made, one in particular caught my eye for its sheer audacity and shamelessness." He added, "There's an old saying that everyone is entitled to his own opinions, but not his own facts. The next time Karl Rove would like to offer us some advice, I'd urge him to take that to heart." Axelrod went on to indict the Bush administration as the worst deficit criminals in history.

Which gentleman is better supported by the facts? The chart below sheds some light on the question.

For a budget guru, there are two ways to score a presidency. The first--identified on the chart as "debt added"--would be simply to take the national debt when a president leaves office and subtract from it the national debt that existed when the president took office. The difference, by definition, is the debt that was added on that president's watch.

The second method--on the chart, "debt surprise"--would be to compare the debt that exists when a president leaves office with the debt that nonpartisan forecasters at the Congressional Budget Office projected would exist eight years after the president took office.

As can be seen in the first two bars in the chart, for Bush, the two methods give strikingly different answers. In 2001, when he took office, the CBO projected that there would be large surpluses in 2008 and that the national debt would decline steadily. Those surpluses never appeared, in part because of Bush's profligate spending and tax cuts and in part because hopes of economic growth were disappointed. The sum of money that the U.S. owed to all lenders increased on Bush's watch by almost $5 trillion more than the CBO expected in 2001. But since the CBO started with a forecasted surplus, the actual increase in U.S. debt was much smaller, a bit more than $2 trillion.

Hassett Figure - National Debt Increase Under Bush and Obama

When Obama took office, the CBO already knew that the economy was terrible, so it projected large deficits. The national debt has increased by more than expected, but only by $1.47 trillion more. The absolute increase in the debt over that same time, however, was a whopping $3.5 trillion. So if you think that presidents should be scored by what actually happened, Rove wins. If you think they should be scored relative to expectation, Axelrod does.

The final bar in the chart, however, might quiet any celebration in the West Wing. For effect, Rove compared eight years of Bush with two years of Obama.

An apples-to-apples comparison would roll Obama's policies forward for a hypothetical eight years, and compare that record to Bush's. By that metric, Axelrod loses the argument either way.

Kevin A. Hassett is a senior fellow and the director of economic policy studies at AEI.

Photo credit: iStockphoto/DNY59

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About the Author

 

Kevin A.
Hassett
  • Kevin A. Hassett is the State Farm James Q. Wilson Chair in American Politics and Culture at the American Enterprise Institute (AEI). He is also a resident scholar and AEI's director of economic policy studies.



    Before joining AEI, Hassett was a senior economist at the Board of Governors of the Federal Reserve System and an associate professor of economics and finance at Columbia (University) Business School. He served as a policy consultant to the US Department of the Treasury during the George H. W. Bush and Bill Clinton administrations.

    Hassett has also been an economic adviser to presidential candidates since 2000, when he became the chief economic adviser to Senator John McCain during that year's presidential primaries. He served as an economic adviser to the George W. Bush 2004 presidential campaign, a senior economic adviser to the McCain 2008 presidential campaign, and an economic adviser to the Mitt Romney 2012 presidential campaign.

    Hassett is the author or editor of many books, among them "Rethinking Competitiveness" (2012), "Toward Fundamental Tax Reform" (2005), "Bubbleology: The New Science of Stock Market Winners and Losers" (2002), and "Inequality and Tax Policy" (2001). He is also a columnist for National Review and has written for Bloomberg.

    Hassett frequently appears on Bloomberg radio and TV, CNBC, CNN, Fox News Channel, NPR, and "PBS NewsHour," among others. He is also often quoted by, and his opinion pieces have been published in, the Los Angeles Times, The New York Times, The Wall Street Journal, and The Washington Post.

    Hassett has a Ph.D. in economics from the University of Pennsylvania and a B.A. in economics from Swarthmore College.

  • Phone: 202-862-7157
    Email: khassett@aei.org
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    Phone: 202-862-5862
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