What’s Driving the Federal Deficit? Not the Recovery Act

Thursday, June 9, 2011 at 8:27 PM by

Federal policymakers are arguing about how to best tackle the growing deficit. Most of these discussions have centered on the concept of cutting spending, and to a lesser extent increasing revenue. The actual factors causing the federal deficit haven’t come up much in these conversations, but a recent analysis by the Center on Policy and Budget Priorities (CBPP) shows that the Recovery Act is not among the deficit’s major contributors in the long term.

CBPP’s chart, below, makes it possible to view the deficit’s contributing factors in just a glance. The answer to the question “What’s driving the federal deficit?” turns out to be “mainly the Bush tax cuts, and to a lesser degree the economic downturn and the wars in Iraq and Afghanistan.”

The Recovery Act’s contribution to the deficit was fairly substantial in the two-year period after the legislation was enacted, as the federal government increased its spending through a mixture of tax credits, aid to those negatively affected by the recession, and fiscal relief to states. But most provisions in the Recovery Act were short-lived, designed to provide a temporary boost to the economy and lessen the effects of the recession.

The Recovery Act and financial rescues such as the Troubled Assets Relief Program (TARP) together will make up less than 10 percent of the $20 trillion in debt that the U.S. is on track to owe by 2019. In contrast, the Bush tax cuts and the wars in Iraq and Afghanistan make up more than half the total debt.

Tamarine Cornelius

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