To solve a problem requires knowing that problem: analyzing it,
diagnosing it and then treating it. Yet when it comes to the
deficit, Washington is woefully ignorant. A Bloomberg Government
study, “What Really Caused the Mounting Federal Deficit”,
provides a non-partisan assessment of why the deficit
deteriorated from an average of 1.9 percent of gross domestic
product per year in the three pre-financial crisis years, to 9.3
percent per year in 2009 through 2011. The Bush tax cuts and the
wars in Iraq and Afghanistan cannot be blamed, nor can stimulus
measures taken by the Bush and Obama administrations. The
biggest cause of the 7.4 percentage point deterioration in the
deficit was the economy itself, the study finds. The downturn
brought on by the financial crisis was responsible for 4.5
percentage points, or 60.8 percent, of the increase. Tax revenue
went down, and spending on areas such as income support went up.
Only 24.3 percent of the deterioration was caused by specific
stimulus measures, both on the s