Yesterday’s release of the Treasury’s budget surplus at -$129 billion begs the question: How is the budget doing under President Obama compared to past presidents?
Here’s the comparison.
Total Budget Deficit by U.S. President
The first graphic is the total cumulative federal deficit by president.
Unsurprisingly, the sitting president and congress look quite weak. Over the past 68 months of Obama’s presidency, the cumulative total of the monthly budget position is a deficit of $6.0 trillion.
The $6.0 trillion accumulated under Obama’s tenure is more than twice as much as the total amount accumulated under the three previous presidents that served at least 68 months combined (Bush I is excluded because he was defeated in his reelection bid).
Under Bush II’s Administration, total monthly deficit was $1.4 trillion at 68 months; Reagan was $941 billion at this point; and Clinton had $600 billion overspent).
Is the problem on the expenditure or revenue side?
Here’s that look. (As a note for economists: the rankings don’t change when adjusting for inflation.)
The first figure is spending by U.S. president.
Unsurprisingly in light of the deficit numbers, the Obama Administration has been the worst at controlling expenditures. Through the first 68 months of his presidency, the current Administration has spent about $20 trillion.
Prior to Obama, through the first 68 months of their presidencies, Bush II had spent $12.8 trillion and Clinton had expended $8.7 trillion.
Here’s the revenue side (i.e. taxes paid).
Taxes paid are the highest under Obama at $13.9 trillion. Under Bush II through the first 68 months, that number was $11.3 trillion and $8.1 trillion under Clinton.
So, is there a revenue or expenditure problem?
In terms of action, the question, of course, is political, and therefore lacks a non-partisan answer.
On the economics end, there is an answer.
The following graphic has on the vertical axis year-over-year growth in employment.
On the horizontal axis is either outlays as a percentage of GDP (left figure) or revenue as a percentage of GDP (right figure).
Both are negatively related – downward sloping line – meaning that an increase in either outlays as a percentage of GDP or revenue as a percentage of GDP are correlated with slower job growth.
The trade-off is unsurprising.
The more the government spends, the more crowding out and unproductive activity there is, thus slower job growth.
On the right had side chart, the more the government taxes, the less individuals want to work, thus slower job growth.
But, which is worse? Expenditures or revenues?
The answer is the magnitude of the slope of the line.
In the left side chart, government expenditures reduce year-over-year employment growth by -0.25. The -0.25 means that for every 1% increase in government spending as a percentage of GDP, job growth falls from say 2% to 1.75% (i.e. -0.25*1%).
The right side chart has an effect of -0.16, meaning that when taxes rise as a percentage of GDP by 1%, job growth drops by -0.16, or from say 2% to 1.84%.
Economists have, of course, spent many hours delving into more intricate details of the relationship. The basic findings are generally akin to what is represented above, which mean that the U.S. has an expenditure problem more so than a revenue problem. Reducing expenditures further would improve the long-term U.S. job outlook.