Iraq and Afghanistan and the federal deficit

Factual Questions
1

My understanding is that because Iraq and Afghanistan during the Bush administration were funded by special appropriations bills, rather than the federal budget, their spending didn’t count on the official budget deficit, because they weren’t part of the budget. But that they generated national debt in the same way that the federal budget deficit does, because T-bills needed to be issued to cover that special appropriations. Is this correct?

It’s also my understanding that the Obama administration felt that this practice was a deceptive accounting trick, and put war spending back on the general budget.

So at this point, while we’re spending no more money than we did before (those war appropriations were added to the national debt either way), suddenly 200-300 billion dollars was added to the federal deficit basically instantly. Is that right?

What year’s deficit were these numbers first reflected in? 2009 sees a huge increase in deficit, on account of the stimulous, the worst of the economic crisis, etc. Is part of the sudden spike of the deficit partly due to this accounting change? Or did the change happen after this, so that when the budget deficit was reduced in the following years, this change actually masked some real deficit reduction?

2

You’re off on several points. The Federal deficit counts every dollar as it is spent, regardless of whether the dollar was approved by the normal budget process, by emergency supplemental appropriations bills, or by long-standing mandatory programs like Medicare and the like.

Putting the war budget into the annual budget request had zero impact on the deficit.

See here for a few more details.

3

Could you explain what this means then?

From here

4

When the President makes his budget request, there’s usually a spate of negative articles and news-reports on the amount of deficit spending included. Putting the war-spending in a separate supplemental request made the deficit numbers reported by the media a little smaller. This bugged Democrats, who of course wanted Bush to “own” the deficits he created as much as possible. As a result, Obama made a semi-big deal of ending the practice.

But as Ravenman says, the supplemental spending request was just a minor bit of spin. The CBO and other agencies and organizations that calculate deficits just use total expenditures, so other then making the reporting during one or two particular news-cycles somewhat less negative, it didn’t change anything.

5

The spending was not so much “off the books” in a secret ledger sort of way, but it allowed the Bush administration to report a “better” budget deficit number each year than what was truly hitting the overall debt.

6

Each year in February, the President submits a budget request to Congress. In most years (but not recently so much), Congress takes the request, makes adjustments, and passes a “budget resolution” which principally does three things: estimates spending and revenues (but does not lock them in or approve them, it’s only estimates); sets a spending cap for appropriations bills, and one other thing that isn’t important right now.

Under Bush, the annual budget request did not contain war spending. War spending would be requested a few months later and approved by a supplemental appropriations bill that was not included in the spending caps or the spending estimates that appeared in the budget resolutions mentioned above. This process did not break any rules or laws, but many questioned whether it was a good way of doing business.

Consequently, when Obama took office he began to request war spending in his February budget requests.

As far as the cost of war being “kept off the books,” under Bush, it was the case that in February each year, one would know how much had been requested by the White House for transportation, Medicare, education, non-war defense, and any other program… but no idea how much the war would cost. So, I suppose one could say that at that point, war spending was “kept off [those particular] books.”

However, by the end of the year (figuratively speaking), the government accounts for ALL spending, regardless of the source of the spending, in calculating the deficit. In this respect, war funding has never been “off [those] books.”

On preview: fiddlesticks is simply wrong. Again, all war spending, just like spending on anything else, is and has always been calculated in the deficit numbers.

7

In fact, the war deficit may have been significant and not reported in the regular budget numbers - but as mentioned, the final total - “THE DEFICIT” included the war spending. So spring budget numbers, with rojected deficit for “this budget” - smaller deficit, does not include war spending. End of year deficit number - bigger, includes war spending.

I think the problem is more a GD issue - should the government have spent its way out of this Great Depression like it did in 1933? Or turned off the taps and let the economy heal itself like Herbert Hoover did in 1929? the war deficit war large, but the amount spent on stimulus is equally large. Note the Bush tax cuts are given almost as much blame in the NYTimes article in case the issue is not GD enough.

See the graphics:
http://www.nytimes.com/2011/07/24/opinion/sunday/24sun4.html?_r=0

8

Right, that’s basically it. It was a way to simply leave out some spending when talking about “total” spending for the year. No accountant ever left it out, just a few politicians in speeches. Every penny spent is included in debt and deficit reports.

9

No, I think that’s what he was saying too.

10

Actual past or present spending is counted toward the deficit, but what about future spending? IIRC, one complaint is that GWB’s people issued rosy projections about future deficits which assumed that “Supplementary Spending” for the Foolish Wars would be zero! It was no secret that this was being done. Still, the reliance on prevarication and obfuscation did not endear.

11

Exactly. That’s what was happening, more or less.