First, a chart from a recent G-20 report:

The notable item here is revenue loss, i.e., lower tax revenues and higher transfer payments (e.g., unemployment insurance) arising from the economic downturn. Note also the relatively minor item, fiscal stimulus.

Next, from the Center for Budget and Policy Priorities, a diagram based on CBO data projecting the sources of U.S. federal deficits over the next ten years:

So, to be clear, far and away the biggest contributor to our fiscal woes is the Bush tax cuts. Nothing comes close. The second biggest contributor is the economic downturn and consequent loss of revenues. The third biggest contributor is the wars in Iraq and Afghanistan, another Bush policy. The fourth biggest contributor—and hardly worth mentioning in this context—is the fiscal stimulus. And the fifth biggest contributor—and definitely not worth mentioning in this context—is the TARP.

I would divide the sources of deficits into three categories (in order of decreasing importance):

1. Permanent spending and/or taxation decisions, e.g., entitlement programs or permanent tax cuts (which most of the Bush tax cuts threaten to become).

2. General economic conditions.

3. Temporary spending and/or taxation decisions, e.g., wars, the stimulus, and the TARP.

The effects of these three sources of deficits on the long-term fiscal outlook are not straightforward. In particular, temporary deficit spending can, in certain circumstances, improve our long-term fiscal position through its positive effect on general economic conditions. Those circumstance exist particularly when interest rates are historically low, as now, so that there’s no possibility of crowding out of private investment and when demand is severely depressed, as now, so that there’s no near-term prospect of inflation.

There’s a (I suppose) human tendency to attribute fiscal conditions exclusively to decisions of politicians, neglecting the often larger role of background economic conditions. The irony is that imposing austerity and cutting stimulus, as seems to be in the cards these days, will almost certainly worsen our long-term fiscal position. So why would this be happening? Well, because (a) it’s evidently impossible to teach Americans this moderately subtle point about macroeconomics, and (b) cynical politicians will relentlessly exploit Americans’ ignorance on the matter.