Tag Archives: deficit

Down is Up

The vast majority of Americans believe that the deficit has soared in the Obama era. Late last year, a Bloomberg Politics Poll found that 73% of the public believes the deficit has gotten bigger over the last six years. (This belief appears to be founded in equal parts upon a campaign of intentional disinformation and a conviction among rightwing conservatives that Obama is the AntiChrist determined to destroy America.)

The latest Congressional Budget Office projections tell a rather different story:

The budget deficit for 2015 is expected to drop to roughly $425 billion, according to a report released Friday by the nonpartisan Congressional Budget Office (CBO).

That’s down from the $486 billion the CBO projected in March. If it drops to $425 billion by the end of the fiscal year on Sept. 30, it would be a seven-year low for the government’s annual budget shortfalls.

Another Bloomberg poll found that only 6% of Americans are aware that the deficit is shrinking. So 94% of Americans are totally unaware that we have seen a $1 trillion dollar– that’s trillion with a “t” – deficit reduction since Obama took office.

As Steve Benen has written, this seems like the sort of development Tea Partiers and the Beltway’s Very Serious People should consider an extraordinary accomplishment. And I’m sure they would–If anyone other than Obama had accomplished it.

Correcting My Goof

A few days ago, I reported that the deficit and debt had steadily declined during Obama’s tenure. A reader pointed out that although we have seen the deficit dramatically reduced, so long as there is any deficit at all, the debt continues to grow.

He was absolutely right, of course–my mind was evidently elsewhere when I wrote that particular sentence. (It is a bit worrisome that, as I grow older, my mind increasingly takes these small trips to…somewhere.) The question that naturally arises, then, is: as the Obama Administration increasingly tames the deficithow worried should we be about the debt?

Paul Krugman has the answer to that question.

About those projections: The budget office predicts that this year’s federal deficit will be just 2.8 percent of G.D.P., down from 9.8 percent in 2009. It’s true that the fact that we’re still running a deficit means federal debt in dollar terms continues to grow — but the economy is growing too, so the budget office expects the crucial ratio of debt to G.D.P. to remain more or less flat for the next decade.

Things are expected to deteriorate after that, mainly because of the impact of an aging population on Medicare and Social Security. But there has been a dramatic slowdown in the growth of health care costs, which used to play a big role in frightening budget scenarios. As a result, despite aging, debt in 2039 — a quarter-century from now! — is projected to be no higher, as a percentage of G.D.P., than the debt America had at the end of World War II, or that Britain had for much of the 20th century.

So perhaps we need not freak out about the debt, but still, it would be nice to eliminate it entirely. (Had W. left Clinton’s tax rates in place and not taken us into a costly and unnecessary war of choice, the debt was on track to disappear…but that was then and this is now…). So how much pain would we need to endure now in order to at least stabilize the debt–to keep it at its current ratio to GDP? Krugman has that information also:

Still, rising debt isn’t good. So what would it take to avoid any rise in the debt ratio? Surprisingly little. The budget office estimates that stabilizing the ratio of debt to G.D.P. at its current level would require spending cuts and/or tax hikes of 1.2 percent of G.D.P. if we started now, or 1.5 percent of G.D.P. if we waited until 2020. Politically, that would be hard given total Republican opposition to anything a Democratic president might propose, but in economic terms it would be no big deal, and wouldn’t require any fundamental change in our major social programs.

These facts would be comforting–if the people screaming bloody murder over the terrible, horrible, menacing debt were genuinely concerned about fiscal policy–and not motivated by partisan rancor or personal gain.



I remain convinced that America has two deficits–one fiscal, and one informational. The economic deficit is important, but the deficit in basic understanding of the world we inhabit is arguably the bigger problem.

Case in point, as Steve Benen reports at Maddowblog: debates about the deficit.

As it happens, the budget deficit is getting smaller. In fiscal year 2010, which was President Obama’s first full fiscal year in office, the budget deficit was $1.3 trillion. In fiscal year 2013, the Congressional Budget Office projects the deficit will be $845 billion. That’s a 35 percent decrease in terms of dollars, and it’s even bigger—41 percent—if you are computing the deficit as a share of the GDP. The percentage drop is even bigger—roughly 50 percent—if you start from fiscal year 2009, which overlapped the final year of the Bush presidency and the first year of Obama’s.

The fact that the deficit is declining is not reason to ignore it, of course, but its size and trajectory are important factors–or should be–in any economic analysis, including proposals about appropriate measures to address it.

The problem is, when Bloomberg News commissioned a survey asking Americans whether they believed the budget deficit was growing or shrinking, just six percent answered the question correctly. Ninety-four percent had no clue. (Of the clueless, 62 percent actually thought the deficit was growing.)

So far as I know, Bloomberg didn’t ask a related question, of equal importance. It would be interesting to determine the percentage of Americans who could explain the difference between the deficit and the national debt.

For that matter, it would be interesting to know what percentage of our elected officials could correctly answer either of those questions.


Burning Down the Village to Roast a Pig

One of my favorite lines from a Supreme Court decision was delivered in the opinion striking down the mis-named “Internet Decency Act.” The Court compared the measure to burning down a village to roast a pig.

The “pig” this time is the budget deficit, which is unquestionably a very significant problem. Unfortunately, Congress is attacking America, not the problem.

Any credible economist will confirm that even if we zeroed out all discretionary spending–that is, if we spent only on the military and entitlements, and absolutely nothing else–we would not erase the deficit for twenty-plus years. (Actually, we would never erase it, because that would destroy the economy and lose billions in tax revenues.) If we are to get the budget balanced, we must couple responsible, judicious spending cuts (including military cuts) with measures to grow the economy and increase tax revenues. We might begin with rolling back the Bush tax cuts on the wealthiest 2% of Americans.

Instead, Congress is merrily proceeding to destroy civil society.

There has been a lot written about the effect of defunding Planned Parenthood on the health of poor women, and about the effort to kill public broadcasting. Those proposals are in the news. But another proposed cut that has been less discussed would defund the single most successful civic education program we have. The “savings” wouldn’t pay for a single fighter jet, but the cost would be incalculable.

The program is “We the People.” In a 2010 study conducted for the Center for Civic Education, students who completed We the People were far and away more knowledgeable about the country’s democratic principles and institutions compared to their peers.

We the People national finalists also were:

* More likely to register to vote, write to a public official, investigate compelling political issues, participate in lawful demonstrations, and boycott certain products or stores.

* More likely to agree that keeping up with political affairs, influencing the political structure, developing a meaningful philosophy of life, becoming a community leader, and helping others in need are of strong to absolute importance.

* More likely to agree that people should be able to express unpopular opinions and that newspapers should be able to publish freely, without government interaction.

As a graduate student who has worked with the program put it in an email to me:

“It’s mind boggling to me that right now, when we need it most, the best program in the country on educating citizens would be eliminated. This is very real, as the Center for Civic Education had to cancel the We the People – Frontiers partnership. Frontiers is a 70+ year old organization providing civic engagement opportunities to the African American community. Four years ago, we teamed up with them to provide We The People to their inner-city and urban club students on nights and weekends, since their schools are no longer teaching civics. These kids traveled to Birmingham, Alabama, competed in We the People competition and experienced the civil rights movement first-hand, learning from Foot Soldiers who marched when they were their age. That event was scheduled to take place in July and has been cut. 600+ inner-city and urban youth from around the country have already been hurt by this, not to mention the millions more in the future who may never know We the People.”

I wonder what those who are stoking the fire will do when our civic village is gone.

Moral Deficit

There are plenty of issues that people of good will see differently.

For example, most Americans—at least the ones I know—consider themselves fiscal conservatives, but that doesn’t mean they necessarily agree about which policies are fiscally responsible. Depending upon their understanding of economics, some people will argue that now is the time to cut back spending to concentrate on deficit reduction; others insist that cuts now will delay economic recovery and reduce tax receipts–that we should spend to stimulate the economy and create jobs, because more jobs will both reduce government expenditures and generate more tax revenues with which to pay down the deficit. Both groups want to reduce the deficit; it’s an honest disagreement over the best way to do so.

Other disagreements are harder to understand.

The Zadroga 9/11 Health and Compensation Act would pay health care costs for 9/11 first responders who were sickened by toxic fumes and debris when the Twin Towers fell.  I don’t use the word “hero” very often, but that’s what these firefighters, police officers and medics were. They braved the inferno in order to rescue those inside, and they are now suffering from injuries and illnesses caused by that desperate effort. It passed the House with 90% of Republicans opposed. Then Senate Republicans refused to allow a vote on it, because “it would add to the deficit.”

Concern for the deficit would have been more believable had GOP Senators not been holding this and other measures hostage to their insistence that the richest 2% of Americans retain the favorable tax rates they received from George W. Bush.

Extending those rates would cost many billions more than providing much-needed medical care for first responders. Marginal rates are at historic lows: in 1945, the rate was 91% of every dollar earned over 200,000; in 1982, 50% of everything over 106,000; in 1993, 39.6% of earnings over 250,000.  It is now 35% of everything over 357,700. If the Bush tax cuts expire, rates will revert to 1993 levels. Those levels would remain very low by historical standards, but even so, expiration would generate billions to reduce the deficit.

Republicans argue that low taxes on the wealthy spur job creation. The evidence for that assertion is mixed, to put it mildly. If we really want to encourage job creation, we’d be better served giving businesses tax credits for new jobs.

The income gap between rich and poor in this country is wider than it has been since the gilded age. Joblessness is at its highest point since the Depression. These indicators are warning signs, not just for our economic health, but for our civic well-being.

Denying first responders desperately needed medical treatment so that millionaires won’t have to endure a 4.6% marginal tax rate increase cannot be excused as a good-faith policy dispute. It is, quite simply, disgraceful.

Americans are facing two kinds of deficits right now: monetary and moral. Ultimately, our fiscal problems—difficult as they seem—may be easier to resolve.