What’s really causing the federal deficit?

Data show Bush tax cuts, war spending are major factors

What’s really causing the federal deficit? Is it, as Republicans charge, President Obama’s spending on stimulus programs? Or is it due to policies enacted during the tenure of President Bush, such as the wars in Iraq and Afghanistan and the tax cuts of 2001 and 2003?

The Center for Budget and Policy Priorities, a Washington, D.C.-based policy studies nonprofit, has crunched the numbers for us. As the chart shows, the deficit for FY 2009-10 was $1.4 trillion, the largest relative to the size of the economy since the end of World War II. And it’s clear that stimulus funding was a significant contributor to that deficit.

But, as the chart also shows, the stimulus effort will end this fiscal year, but the deficit will remain—and far and away the bulk of it will be due to Bush’s tax cuts and war funding. The loss of revenues due to the economic downturn is the third major cause.

Source: CBPP analysis based on Congressional Budget Office estimates.