From Clive Crook of The Financial Times:
It is worth remembering where the blame for this neutering of fiscal policy lies: squarely with the Bush administration. At the start of this decade, the budget stood in surplus to the tune of 2.4 per cent of GDP. On unchanged policy, this was expected to grow to a surplus of 4.5 per cent of GDP by 2008. This year’s actual deficit of 3 per cent of GDP therefore represents a worsening of more than 7 per cent of GDP, or roughly $1,000bn. Almost all of this deterioration is due to policy: to tax cuts, spending increases, and their associated debt-service costs.
That projected surplus was a priceless gift to the White House. It offered the Bush administration ample scope for outlays on homeland security and other unforeseen priorities, and moderate tax cuts as well, all within a budget balanced over the course of the business cycle. Instead, the administration knowingly opted for outrageous fiscal excess – adding insult to injury with its phony tax-cut sunset provisions, designed for no other purpose than to disguise the long-term fiscal implications. Eight years on, this startling record of fiscal irresponsibility has all but taken fiscal policy off the table as an available response to the slowdown.
The US economy had better have luck on its side. Luck is about all it has left.
Depressing, indeed. And yet, somehow, the Republican Party still sells itself as the party of fiscal rectitude and financial propriety. George Bush even had the benefit of a compliant Congress for most of his disastrous term, and still managed to destroy the economy. Let us hope we can recover in our lifetime.