Having entered the White House in the midst of the Great Recession, then President Obama spent much of his time in office trying to deal with the weakened economy. Tax cuts and stimulus spending measures contributed to high federal deficits for several years.
Diane Lim, a principal at District Economics Group and former chief economist for The Concord Coalition, discussed those years and the challenges they brought in her latest “Economist Mom” segment on “Facing the Future.”
She joined Chase Hagaman and Concord Coalition Executive Director Robert L. Bixby to discuss fiscal and economic policies during the Obama administration. The previous Economist Mom segment focused on fiscal policies in the Clinton and George W. Bush administrations.
In response to the Great Recession, Washington under the Obama administration began stimulus spending to kickstart the economy.
This, along with other policies and revenue losses from the economic slowdown, led to a budget deficit of $1.41 trillion, or 9.8 percent of the economy, in 2009. In 2010 the deficit was $1.29 trillion, amounting to 8.7 percent of the economy.
To put the nation on stronger fiscal footing and bolster investor confidence that the U.S. could manage its growing debt, Obama created the bipartisan National Commission on Fiscal Responsibility and Reform, known colloquially as the Simpson-Bowles commission.
“To their credit,” Bixby said, political leaders thought “it would be more credible -- when doing something in the short term that increased deficits -- if it was clear to financial markets and other nations we could get our fiscal house in order for the long term.”
The Simpson-Bowles plan included sweeping reforms on both spending and revenues that would have addressed our fiscal future. Although the plan received a majority of support from the commission members, Obama and other leaders in both parties failed to act on it.
Lim said there was “no political backup from members of Congress to follow through with a grand-bargain type of plan.” She said that intense partisanship often led to lawmakers opposing policies simply based on who suggested them, rather than opposing or supporting the measures based on their merit.
Democrats, who had previously been outspoken against Bush-era tax cuts, found themselves in control of both houses of Congress and the presidency.
“All the complaints about the irresponsibility of the Bush tax cuts seemed to disappear once it was President Obama who largely supported continuing most of the Bush tax cuts,” said Lim.
In fact, Bixby pointed out, Obama wanted to extend the tax cuts to more middle-class taxpayers. Obama incorporated income levels in his definition of “middle class” that irked some Democrats, who thought this definition included individuals they considered “wealthy.”
Bixby also said most opponents of the Bush tax cuts fell silent during the Great Recession, as many realized increasing taxes during a recession can be detrimental.
Hagaman hosts “Facing the Future” each week on WKXL, NHTalkRadio.com (N.H.), which is also available via podcast. Join him and his guests as they discuss issues relating to national fiscal policy with budget experts, industry leaders, elected officials and candidates for public office. Past broadcasts are available here. You can now subscribe to the podcast on iTunes, Google Play or through RSS.