The big question for the White House on the news that the deficit shot up by 15.7% over FY2010’s first six months will be this: How can we show we inherited this deficit?
The US budget deficit shot up 15.7 percent in the first six months of fiscal 2011, the Treasury Department said Wednesday as political knives were being sharpened for a new budget battle.
The Treasury reported a deficit of $829 billion for the October-March period, compared with $717 billion a year earlier, as revenue rose a sluggish 6.9 percent as the economic recovery slowly gained pace.
There is one way to sidestep the obvious implications — claim that the deficit number is somehow not real:
The Treasury argued that the pace of increase in the deficit was deceptive because of large one-off reductions in expenditures made during the first half of fiscal 2010, compared with previous and subsequent periods.
Those included a $115 billion reduction in funds spent on the Troubled Asset Relief Program (TARP) — the financial institution bailout program — in March 2010.
Agence France Presse isn’t exactly buying it. They note that spending increased across most sectors of the government, including Defense, Social Security, and health care spending. In fact, Social Security tipped over into monthly deficits last year, which means that SSA has to cash in its Treasury bonds in order to meet benefit obligations. Since Treasury doesn’t actually have money in the safe, we have to sell more bonds — in other words, borrow — to pay off the bonds cashed in by SSA. That also adds to the deficit and to the debt service, which not surprisingly also sharply rose.
When Obama and the Democratic Congress first ran a trillion-dollar deficit in FY2009, Obama claimed that he’d “inherited” the deficit, even though the budget that created it was passed by a Democratic Congress and signed into law by Obama himself in March 2009, after Democrats played keep-away from George Bush through continuing resolutions. When the deficit got deeper in FY2010, Obama claimed it was because he had inherited an unprecedented financial crisis, although he was certainly in Washington when it happened and wasn’t a big surprise. (It was in all of the papers. I checked.)
So now that we have deficits still going up, how will Obama shift the blame this time?