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Manhattan Institute

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Obama's Fiscal Legacy: A Comprehensive Overview of Spending, Taxes, and Deficits

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Obama's Fiscal Legacy: A Comprehensive Overview of Spending, Taxes, and Deficits

October 4, 2017
EconomicsTaxBudget

Abstract

The end of the Obama presidency now allows for an overall assessment of taxes, spending, and deficits during his years in office. The analysis in this paper begins with the 10-year budget baseline that Obama inherited in January 2009 and measures subsequent tax and spending changes through the January 2017 baseline released as he left office. The data come from more than 20 Congressional Budget Office baseline updates over the administration’s eight years, supplemented with the line-item scores of approximately 110 major bills that Obama signed into law.

Key Findings

  1. The cumulative 2009–19 budget deficits are set to end up at $8.93 trillion—$4.6 trillion higher than projected for the same time period when Obama took office.
  2. The economy grew more slowly over this decade than was projected in 2009. Yet far from deepening the budget deficits, the slower economic recovery and technical changes saved $400 billion over the decade relative to the January 2009 baseline, as lower tax revenues were offset by lower interest payments on the national debt, the result of recession-dampened interest rates.
  3. New legislation cost $5.0 trillion over the 2009–19 period. However, $4.1 trillion of this “cost” came from basic extensions of expiring taxes including the Bush-era tax cuts. Economic stimulus added $2.0 trillion in spending, and discretionary spending caps and mandatory sequestrations saved $800 billion.
  4. The Affordable Care Act reduced the 2009–19 budget deficit by $275 billion, as its tax increases and Medicare cuts exceeded the cost of new health benefits. But the health law has made balancing the long-term budget more difficult by using most of the tax increases and Medicare cuts to finance a new entitlement rather than deficit reduction.
  5. Virtually all net spending increases during the Obama administration were enacted during 2009–10, when Democrats controlled Congress. During the following six years, with a Republican House and eventual Republican Senate, $889 billion in net spending cuts were enacted, excluding legislation that simply extended expiring policies.
  6. Obama leaves behind a budget with higher entitlement spending, lower discretionary spending, and (temporarily) lower net interest costs than originally projected. The ballooning national debt leaves taxpayers liable for exorbitant debt service costs when interest rates return to normal levels.

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Brian M. Riedl is a senior fellow at the Manhattan Institute. Previously, he worked for six years as chief economist to Senator Rob Portman (R-OH) and as staff director of the Senate Finance Subcommittee on Fiscal Responsibility and Economic Growth. Follow him on Twitter here

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