Fareed Zakaria: Bush Tax Cuts Are Largest Cause Of Budget Deficit

February 14th, 2010 8:40 PM

CNN's Fareed Zakaria on Sunday demonstrated just how ignorant most media members are of how the federal budget works.

During the most recent installment of "Fareed Zakaria GPS," the host actually said, "[T]he Bush tax cuts are the single largest part of the black hole that is the federal budget deficit."

Before we examine the staggering stupidity on display here, let's first look at exactly what Zakaria said (video embedded below the fold with transcript):

FAREED ZAKARIA, HOST: Now, for our "What in the World?" segment.

What got my attention this week was something I heard last Sunday from two very prominent people on another program on another network. The guests were Henry Paulson, the former secretary of the Treasury, and Alan Greenspan, the longtime former chairman of the Federal Reserve.

About two-thirds of the way through the interview, David Gregory, the moderator of "Meet the Press," asked Paulson about the deficit and how serious a problem it is.


HENRY PAULSON, FORMER TREASURY SECRETARY: It is by far the most serious long-term challenge we as a nation face. All these other issues, or economic issues, are minor compared to that. Is it's very, very difficult to get Congress to act on anything that's big and difficult and controversial, if there's not an immediate crisis.


ZAKARIA: And then Gregory asked Greenspan. And Greenspan agreed with Paulson. And I agree with Paulson. And it's the same thing Paul Volcker said earlier in the program.

Leaders in Washington have to find the courage of their convictions to deal with the deficit. Right?

Now, the next topic Gregory asked about was taxes. Listen again.


DAVID GREGORY, HOST, "MEET THE PRESS": Part of the fix here, according to the budget, has to do with the issue of taxes. Here's how the "Wall Street Journal" put it in a headline on Tuesday. And that is that the wealthy face a tax increase. Those Bush era tax cuts are going to be allowed to expire by this administration.

Secretary Paulson, is that a bad idea?

PAULSON: Well, I've got to say, anything right now that is going to -- that is going to, in effect, be a tax increase has got to be -- is going to be questioned. And an expiring tax cut is a tax increase.


ZAKARIA: And what does Chairman Greenspan think?




ZAKARIA: So, after emphatically espousing the view that Congress has got to come together and tackle the deficit, Paulson and his partner in the hot seat cannot muster the courage to suggest letting the tax cuts expire.

Now, please understand that the Bush tax cuts are the single largest part of the black hole that is the federal budget deficit. Letting them expire would take rates back to where they were under Bill Clinton, when the economy grew very robustly. And cutting the deficit without any tax increases would require massive cuts in middle class programs that would never pass.

Now, remember, neither Paulson nor Greenspan is currently in elected office, or even unelected office. They don't need to pander, and yet they do. That is a symbol of Washington. Even they can't muster the courage of their convictions to say, "Yes, we have to increase some taxes in the face of deficits larger than at any point since World War II."

And if these two men, with nothing to lose, can't bring themselves to even say it, how can we expect elected politicians to actually do it? For shame.

Actually, the shame is all Zakaria's, for the ignorance on display was astounding.

In fiscal 2000 before the Bush tax cuts, our government brought in $2.025 trillion in unified revenues while spending $1.789 trillion. Seven years later, before the recession hit, we received $2.568 trillion, a 27 percent increase. BUT, our expenditures rose to $2.729 trillion, a 53 percent rise.

What this means is that our spending grew at TWICE THE RATE as tax receipts.

And Zakaria and his ilk blame deficits on tax cuts!

To further illustrate the stupidity on display, even with tax cuts, receipts grew faster than the rate of inflation. BUT, if our elected officials would have kept spending to the rate of inflation during this period, our outlays in 2007 would have totaled $2.154 trillion resulting in a surplus of $414 billion!

Now, let's look at what a recession and an almost unprecedented explosion in expenditures has done.

In 2009, we brought in $2.105 trillion in tax receipts. Bear in mind that even with a recession this was still greater than BEFORE the Bush tax cuts were implemented. BUT, we spent $3.517 trillion, or 97 percent more than BEFORE the Bush tax cuts. 

If spending had been kept at the level of inflation during this period, outlays would have been $2.229 trillion producing a deficit of only $124 billion INSTEAD of the $1.413 trillion we generated.

As such, the next time someone tells you our current budget woes are all because of Bush's tax cuts, remind them that we're spending twice as much as we did back then with expenditures actually having grown at four times the rate of inflation...but don't hold your breath they'll understand your point.