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By Richard Rubin August 6, 2008

Right, but tax cuts were a major factor, too

Faced with new projections showing a $482-billion federal budget deficit for 2009, Sen. John McCain tried to pin the blame on spending increases.

"It wasn't taxes, it was spending. We presided over the largest increase in the size of government since the Great Society and we mortgaged our children's futures, to the great disgrace of the Republican Party. We let earmarking and corrupt spending get to the point where we mortgaged our kids' futures," he said on CNN's Larry King Live.

McCain is right when he argues that higher government spending caused most of the current gap between what the government collects and what it spends, according to an analysis of Congressional Budget Office data. But it's the federal budget, so it's not quite that simple.

In January 2001, CBO, the official scorekeepers of such things, projected government surpluses far into the future: $573-billion in 2007, $635-billion in 2008 and $710-billion in 2009.

Things didn't turn out so rosy. Earlier this year, CBO broke out the factors that have contributed to the transformation from surplus to deficit. For fiscal year 2007, almost all of the $735-billion change was due to "legislative" factors, and just $12-billion was due to economic and technical factors. In other words, Congress did it.

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But measuring how much of the legislative changes were due to taxes and how much were due to spending is trickier. When the government spends more than it takes in, it borrows the remainder, and the interest charges are due in subsequent years. CBO doesn't parcel out the interest costs to the tax and spending sides of the budget, but the liberal Center on Budget and Policy Priorities does.

Their nitty-gritty calculation requires the quadratic equation, but the bottom line is McCain is right. For fiscal year 2007, 58 percent of the legislatively caused deterioration came from spending and 42 percent came from tax cuts. This year, taxes make up 52 percent of the change, because of those tax-rebate checks. But that's a temporary blip. In 2009, according to the projections, tax cuts' share of the blame will drop to 44 percent while spending's portion will rise to 56 percent.

One other note: all spending isn't equal. The Center on Budget and Policy Priorities analysis found that most of the spending increase didn't come from the earmarks or domestic programs that McCain complains about. It was defense and homeland security.

Until the rebates temporarily changed the equation, spending increases did cause the majority of the deficit. But tax cuts aren't blameless, either. We find McCain's claim to be Mostly True.

Our Sources

Congressional Budget Office, Baseline Budget Projections, April 4, 2008, accessed Aug. 6, 2008

Congressional Budget Office, Budget and Economic Outlook, Fiscal Years 2002-2011, accessed Aug. 6, 2008

Congressional Budget Office, unpublished spreadsheet, Changes in CBO's Baseline Projections of the Surplus Since January 2001

Center on Budget and Policy Priorities, unpublished spreadsheet

Interview with Richard Kogan, senior fellow at the Center for Budget and Policy Priorities, Aug. 5, 2008

Interview with Diane Lim Rogers, chief economist at the Concord Coalition, Aug. 5, 2008

Interview with Maya MacGuineas, president of the Committee for a Responsible Federal Budget, Aug. 6, 2008 (Note: McGuineas was McCain's Social Security adviser in 2000, but is not part of this campaign)

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Right, but tax cuts were a major factor, too

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