\jeff{krimmel}

Tightening Our Fiscal Belts

President Bush nominated Rob Portman today to be the new director of the Office of Management and Budget. This post was vacated when Josh Bolten, the former director, replaced Andy Card as President Bush’s chief of staff last month.

One of Mr. Portman’s statements struck me as fairly interesting:

“Now is not the time to risk losing ground by raising taxes,” he said. “Instead we must continue pro-growth policies and tighten our fiscal belts in order to cut the deficit in half by 2009.”

We’re running record deficits, but now is “not the time to risk losing ground by raising taxes”. Instead, Mr. Portman recommends we “tighten our fiscal belts”. Those sound like pretty promising statements on their face, but the past five years have taught us in no uncertain terms that this administration has no idea what the phrase “tighten our fiscal belts” means.

I finally got frustrated enough with all of this that I examined the fiscal year 2007 budget from the Office of Management and Budget and found a set of historical tables listing all of the United States’ annual deficits and surpluses. I then found the historical consumer price index (CPI) for each year from the Department of Labor’s Bureau of Labor Statistics. I used the CPI for each year to normalize that year’s deficit or surplus in terms of 2005 dollars.

Want to see the results? They’re shown in in the following plot. (Click the plot to see the full-sized image.)

What do we see? We had massive deficits upon entering World War II. After that? Presidents Reagan, Bush (41), and Bush (43) have run deficits like no other president in the past sixty years. In fact, I would say they have perfected the art of running the massive budget deficit.

We also see how out of the ordinary President Clinton’s surpluses were. The United States had surpluses before President Clinton, but they were neither as strong nor as long-lasting as President Clinton’s.