Bush Policies And Recession Caused Debt To Skyrocket

Prior To President Obama’s Inauguration, President Bush Had Already Created A Projected $1.2 Trillion Deficit For Fiscal Year 2009. From the Washington Times:  “The Congressional Budget Office announced a projected fiscal 2009 deficit of $1.2 trillion even if Congress doesn’t enact any new programs. […] About the only person who was silent on the deficit projection was Mr. Bush, who took office facing a surplus but who saw spending balloon and the country notch the highest deficits on record.” [Washington Times, 1/8/09]

NYT: President Bush’s Policy Changes Created Much More Debt Than President Obama’s. The New York Times published the following chart comparing the fiscal impact of policies enacted under the Bush and Obama administrations:

[New York Times, 7/24/11]

Recession Added Hundreds Of Billions In Deficits By Increasing Spending On Safety Net While Shrinking Tax Revenue. The Center on Budget and Policy Priorities (CBPP) explains: “When unemployment rises and incomes stagnate in a recession, the federal budget responds automatically: tax collections shrink, and spending goes up for programs like unemployment insurance, Social Security, and Food Stamps.” According to CBPP: “The recession battered the budget, driving down tax revenues and swelling outlays for unemployment insurance, food stamps, and other safety-net programs. Using CBO’s August 2008 projections as a benchmark, we calculate that the changed economic outlook alone accounts for over $400 billion of the deficit each year in 2009 through 2011 and slightly smaller amounts in subsequent years. Those effects persist; even in 2018, the deterioration in the economy since the summer of 2008 will account for over $300 billion in added deficits, much of it in the form of additional debt-service costs.” [CBPP.org, 11/18/10; CBPP.org, 5/10/11, citations removed]

Over The Coming Decade, The Bush Tax Cuts Are The Primary Cause Of Federal Budget Deficits. The Center on Budget and Policy Priorities prepared a chart showing the deficit impact of the Bush tax cuts (orange), the Iraq and Afghanistan wars, the recession itself, and spending to rescue the economy:

[CBPP.org, 5/10/11]

CBPP: Bush Tax Cuts And Wars Are Driving The Debt. According to the Center on Budget and Policy Priorities:

The complementary chart, below, shows that the Bush-era tax cuts and the Iraq and Afghanistan wars — including their associated interest costs — account for almost half of the projected public debt in 2019 (measured as a share of the economy) if we continue current policies.

[Center on Budget and Policy Priorities, 5/20/11]

Capps’ Votes Were To Prop Up The Economy And Prevent Default

To support the claim that “Capps voted to take $6 trillion from our children and grandchildren to pay for failed Washington policies that are simply not working,” the ad cites Roll Call Vote #519 on 7/23/08; Roll Call Vote #681 on 10/3/08; Roll Call Vote #70 on 2/13/09; Roll Call Vote #988, on12/16/09; Roll Call Vote #48 on 2/4/10; and Roll Call Vote #690 on 8/1/11.

Capps Voted To For A Bill To Prop Up The Housing Market

Vote #519 on July 23, 2008, was the Foreclosure Prevention Act of 2008.

Foreclosure Prevention Act Was Designed To Help People Avoid Losing Their Homes And Help Faltering Housing Market. From the Los Angeles Times: “Congress sent President Bush legislation Saturday designed to help homeowners avoid foreclosure, spur home buying and prop up struggling mortgage giants Fannie Mae and Freddie Mac. The president intends to sign the bill as soon as he receives it. It is the government’s most sweeping response yet to the nation’s housing crisis. […] The bill passed Saturday, the American Housing Rescue and Foreclosure Prevention Act, contains a key provision allowing the Federal Housing Administration to guarantee up to $300 billion in lower-cost mortgages — provided that lenders accept significant losses. The provision is expected to help at least 400,000 homeowners.” [Los Angeles Times, 7/27/08]

Foreclosure Prevention Act Also Bolstered Fannie And Freddie. From CNNMoney: “To help stabilize markets, which were shaken in the past few weeks by steep declines in the stock prices of Fannie Mae and Freddie Mac, Treasury Secretary Paulson asked Congress on July 13 to give the Treasury power to provide a liquidity and capital ‘backstop’ for the two companies. Fannie and Freddie guarantee the purchase and trade of mortgages and own or back $5.2 trillion in mortgages. The bill allows Treasury over the next 18 months to offer Fannie and Freddie an unlimited line of credit and the authority to buy stock in the companies if necessary.” [Money.CNN.com, 7/24/08, stock market tags removed]

Foreclosure Prevention Act Passed The House With Bipartisan Support And Was Signed Into Law By President Bush. The Foreclosure Prevention Act of 2008 passed 272-152, with 227 Democrats and 45 Republicans voting “aye.” President George W. Bush signed it into law. [H.R. 3221, Vote #519, 7/23/08; Money.CNN.com, 7/30/08]

Bipartisan Bank Bailout Helped Prevent Even Deeper Financial Collapse 

Vote #681 on October 3, 2008, was the Emergency Economic Stabilization Act Of 2008, or the bank bailout.

Rescue Efforts Helped Avert “Great Depression 2.0.” From Bloomberg: “The U.S. response to the financial crisis probably prevented a depression, slowed a decline in gross domestic product and saved about 8.5 million jobs, economists Alan Blinder and Mark Zandi said. Policies including the government fiscal stimulus, bailouts of financial companies, bank stress tests and the Federal Reserve’s purchase of mortgage-backed securities to lower interest rates ‘probably averted what could have been called Great Depression 2.0,’ Blinder and Zandi said in a report dated yesterday. Without those measures, the U.S. would have deflation, they said.” [Bloomberg, 7/28/10]

On National Television, “President Bush Strongly Urged Lawmakers To Pass His Administration’s $700 Billion Bailout For The Financial Markets” In 2008. As reported by MarketWatch: “President Bush strongly urged lawmakers to pass his administration’s $700 billion bailout for the financial markets on Wednesday, spelling out dire risks to the U.S. economy if Congress doesn’t act quickly. ‘We’re in the midst of a serious financial crisis,’ Bush said in a nationally televised address. ‘Our entire economy is in danger,’ as a result of the credit crunch, he said, and inaction on the plan could result in a ‘long and painful recession.’” [MarketWatch.com, 9/24/08]

Congress Passed The Bailout With Significant Bipartisan Support. According to the New York Times: “The Senate approved the bailout measure on Oct. 1, 2008, on a bipartisan vote of 74 to 25. The House initially rejected the proposal, but under prodding from the White House and leading members of both parties, House members ultimately voted 263 to 171 for the bill, with 91 Republicans joining 172 Democrats in backing it; 108 Republicans and 63 Democrats voted no.” [New York Times, 7/11/10]

Bailouts Have Not “Added Significantly To The Debt.” An analysis by FactCheck.org concludes “it’s not the case at all” that the bailouts “added significantly to the debt.” According to the Congressional Budget Office: “CBO estimates that the net cost to the federal government of the TARP’s transactions, including the cost of grants for mortgage programs that have not been made yet, will amount to $32 billion. CBO’s analysis reflects transactions completed, outstanding, and anticipated as of February 22, 2012. That cost stems largely from assistance to American International Group (AIG), aid to the automotive industry, and grant programs aimed at avoiding home foreclosures: CBO estimates a cost of $56 billion for providing those three types of assistance. But not all of the TARP’s transactions will end up costing the government money. The program’s other transactions with financial institutions will, taken together, yield a net gain to the federal government of about $25 billion, in CBO’s estimation.” [FactCheck.org, 6/15/12; Congressional Budget Office, 3/28/12]

“Failed” Recovery Act Created Jobs, Boosted GDP, And Cut Taxes

Vote #70 on February 13, 2009, was for H.R. 1, the Recovery Act.

Recovery Act “Succeeded In…Protecting The Economy During The Worst Of The Recession.” From the Center on Budget and Policy Priorities: “A new Congressional Budget Office (CBO) report estimates that the American Recovery and Reinvestment Act (ARRA) increased the number of people employed by between 200,000 and 1.5 million jobs in March. In other words, between 200,000 and 1.5 million people employed in March owed their jobs to the Recovery Act. […] ARRA succeeded in its primary goal of protecting the economy during the worst of the recession. The CBO report finds that ARRA’s impact on jobs peaked in the third quarter of 2010, when up to 3.6 million people owed their jobs to the Recovery Act. Since then, the Act’s job impact has gradually declined as the economy recovers and certain provisions expire.” [CBPP.org, 5/29/12]

At Its Peak, Recovery Act Was Responsible For Up To 3.6 Million Jobs. According to the nonpartisan Congressional Budget Office:

CBO estimates that ARRAs [sic] policies had the following effects in the third quarter of calendar year 2010:

• They raised real (inflation-adjusted) gross domestic product by between 1.4 percent and 4.1 percent,
• Lowered the unemployment rate by between 0.8 percentage points and 2.0 percentage points,
• Increased the number of people employed by between 1.4 million and 3.6 million, and
• Increased the number of full-time-equivalent (FTE) jobs by 2.0 million to 5.2 million compared with what would have occurred otherwise. (Increases in FTE jobs include shifts from part-time to full-time work or overtime and are thus generally larger than increases in the number of employed workers). [CBO.gov, 11/24/10]

Recovery Act Included $288 Billion In Tax Cuts. From PolitiFact: “Nearly a third of the cost of the stimulus, $288 billion, comes via tax breaks to individuals and businesses. The tax cuts include a refundable credit of up to $400 per individual and $800 for married couples; a temporary increase of the earned income tax credit for disadvantaged families; and an extension of a program that allows businesses to recover the costs of capital expenditures faster than usual. The tax cuts aren’t so much spending as money the government won’t get — so it can stay in the economy.” [PolitiFact.com, 2/17/10]

Capps Voted To Raise The Debt Limit And Avoid Default

Vote #988 on December 16, 2009, was for H.R. 4314, a bill that raised the federal debt limit. Vote #48 on February 2, 2010, was for a Pay-As-You-Go rule coupled with an increase in the debt ceiling. Vote #690 on August 1, 2011 was on the Budget Control Act of 2011.

H.R. 4314 Raised The Debt Limit Enough To Get Through Mid-February 2010. From CNNMoney: “The House on Wednesday narrowly passed a $290 billion increase to the amount of debt the Treasury is allowed to have. Currently, the debt ceiling is set at $12.104 trillion, and if the Senate passes the House-approved increase, it would rise to $12.394 trillion. The increase would cover Treasury’s borrowing needs through Feb. 11, 2010. That is a far cry from the $1.9 trillion increase that lawmakers last week said they wanted to pass. […] As of Tuesday, the amount of debt subject to the limit on Treasury’s books was $12.016 trillion. If the debt ceiling isn’t increased by the end of this year, the nation could default on its debt. That would unleash a chain of events that could devalue U.S. bonds and seriously harm the nation’s reputation with creditors around the world. In short, it’s not something lawmakers can afford to let happen.” [Money.CNN.com, 12/16/09]

Vote #48 Instated A Rule Requiring New Spending Be Offset And Was Coupled With Debt Limit Lift. From The Hill: “House Democrats on Thursday cleared a massive $1.9 trillion increase to the debt limit and a statutory pay-as-you-go bill aimed at preventing even more red ink. A procedural motion on the increase in the debt ceiling to roughly $14.3 trillion barely passed on a 217-212 vote. No Republicans voted to move forward with the increase, which was opposed by 37 Democrats, most of them in swing districts who face tough races in November. A vote to clear the pay-go bill and the debt increase passed on a wider margin, 233-187, again only with Democratic support. The measure, approved by the Senate last week, will now go to the president’s desk. The pay-go bill would require that any new mandatory spending, such as new tax cuts or entitlement programs, be offset with revenue through tax hikes or spending cuts. Democrats called it a necessary step toward more balanced budgets, and said it was in place during the 1990s, when the government ran surpluses.” [The Hill, 2/4/10]

The Federal Budget Control Act Was A Last-Minute Deal To Raise The Debt Ceiling That Also Created The Deficit Reduction Super Committee. From PolitiFact: “Last year, the United States government was reaching its legal debt limit, which meant Congress had to authorize a higher level for borrowing. Raising the debt limit (also called the debt ceiling) was in some ways symbolic: Congress has the power of the purse, and the decisions to spend the money had already been made. In prior administrations, Congress approved higher debt limits with some partisan sniping (including from then-Sen. Obama against President George W. Bush) but without too much fuss. But in the summer of 2011, House Republicans insisted that actual spending cuts go along with an increase to the debt limit. House Speaker John Boehner led negotiations with the Obama White House, and at first the two sides seemed to be moving toward a wide-ranging overhaul of the federal budget, referred to in the media as a ‘grand bargain.’ The closed-door negotiations fell apart, though. […] Republicans and Democrats came to a less ambitious agreement to raise the debt limit through the Budget Control Act of 2011. The law found approximately $1.2 trillion in budget cuts spread over 10 years. But it also directed Congress to find another $1.2 trillion through a Joint Select Committee on Deficit Reduction. This 12-member committee became known as ‘the super-committee.’” [PolitiFact.com, 9/21/12]

Failure To Raise The Debt Limit Could Have Had Severe Economic Consequences

Debt Ceiling Does Not Determine U.S.’ Debt Level; It Is “A Limit On The Ability Of The Federal Government To Pay Obligations Already Incurred.” According to the Government Accountability Office: “The debt limit does not control or limit the ability of the federal government to run deficits or incur obligations. Rather, it is a limit on the ability to pay obligations already incurred. While debates surrounding the debt limit may raise awareness about the federal government’s current debt trajectory and may also provide Congress with an opportunity to debate the fiscal policy decisions driving that trajectory, the ability to have an immediate effect on debt levels is limited” [GAO.gov, 2/22/11]

Failure To Raise Debt Ceiling Could Have Resulted In Default Or Had Other Severe Economic Consequences. From CNNMoney: “A failure to raise the debt ceiling would likely send shockwaves through the underpinnings of the financial system — and possibly ripple out to individual investors and consumers. The federal government would be forced to prioritize its payments. It would risk defaulting on its financial obligations. And if that happens, credit rating agencies would downgrade U.S. debt.” [Money.CNN.com, 7/21/11]

Debt Limit Has Been Raised Over 90 Times Since 1940. From the Center on Budget and Policy Priorities: “Before World War I, Congress generally had to approve each separate issuance of federal debt. Since then, the limit has evolved into an overall dollar cap on the amount of debt the federal government can incur.  Since 1940, Congress has enacted 91 separate increases in the statutory debt limit, an average of one every nine months (though individual increases lasted anywhere from three days to eight years).” [CBPP.org, 7/21/11]