Washington Isn't Spending Too Much; It's normal for deficits to rise during a downturn.The real fiscal challenge is decades down the road.
The Iowa caucuses presented the full range of views of the Republican hopefuls. When it came to fiscal strategy, however, there was almost no daylight among them. Each candidate decried the rise of government spending and wants to cut taxes.</br></br>Again and again they noted that spending under President Obama rose to 25% of the economy in 2009, the highest in decades and well over the 20%-21% norm of the last 30 years.</br></br>To hear the GOP candidates tell it, this fact explains the deficit, explains America's long-run fiscal problem, and explains why new taxes cannot be tolerated. Congressional Republicans have the same outlook. The deficit is up thanks to government spending, so we must cut spending right now in every form.</br></br>Yet the long-run fiscal problem facing the country--which is real--has almost nothing to do with the reasons that the deficit is currently large or that spending is abnormally high. They are high for the same reason taxes are abnormally low: because of the economic downturn. We should debate the real issues, not try to pretend the recession never happened.</br></br>The Congressional Budget Office forecast a $1.2 trillion deficit before the Obama administration even came into office. The stimulus added only around $250 billion a year, and more than one-third of that came from tax cuts, especially the tax credit in the stimulus bill's "Making Work Pay" provision.