Monday, March 11, 2013

Red Up, Blue Down...with a time lag

A few people have asked me what my deficit graph looks like when it is modified to include congressional control. So I have recolored it, with red being Republican control of the Presidency, House, and Senate, blue being full Democratic control of all three, and pink and purple,  representing Republicans or Democrats holding any two of the three, respectively.

This isn't as clear cut as the presidential chart, which simply showed upward trends every time Republicans captured the presidency, and flat or declining deficits under Democratic presidents. So how can we interpret this new chart? If you look carefully, you can break this chart down into six regions

1: A more or less flat region pre-Reagan, under mostly or full Democratic control

2: A huge rise during a period of Republican dominance. Note that this was during an economic boom, which normally will bring down deficits. A deficit increase during a boom is indicitive of highly irresponsible fiscal behavior.

3: Another period of relative deficit calm under full or partial Democratic dominance, with a downward trend at the end

4: Another period of partial Republican control, where deficits indeed fell during a boom but then rose again during a relatively modest slowdown.

5: A period of full Republican control, where defcits were stubbornly high despite an economic strong period. Again, this is highly indicative of fiscal irresponsibility

6: A period of full or partial Democratic control, early in which an absolute economic bomb went off, sending the deficit into the stratosphere, followed by gradual recovery despite a weak economy

There is only one area on this chart that reflects remotely well on Republicans, which is the late Clinton era. Deficits were brought down, though much of this was a natural consequence of the end of the cold war plus an economic boom, and very little due to the painful process of spending cuts and tax increases. Also note that this was largely illusiory, and deficits bounced back to their previous levels after the tech-bubble pop. In contrast, there are two regions that look awful for Republicans - the Reagan budget disaster and the Bush era, both of which saw high deficits despite a strong economy.

As for Democrats, deficits have been stable or declining every time they had partial or full control, with one exception - the epic bust of 2008. A lot comes down to how you assign blame for this. Is it plausible to blame it on the 110th congress, where Democrats seized control of both the House and Senate after four years of Republicans having full control of the government. Not really. The housing bubble was already at its peak, Wall Street had already placed its trillions upon trillions of dollars worth of bets, the wars already launched, the tax cuts already enacted. The bills adopted by the 110th were all run-of-the-mill spending bills until the economic bomb burst half way through their second year.  To the extent you can blame the economy on the government, it is clearly Bush and his two Republican congresses that own the majority of what happened shortly after they were removed from power.

Alternatively, you can look at the chart another way. Every time Republicans gain power, deficits start rising a few years later. For Democrats, it is the reverse. Please vote accordingly.

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