The Incredible Shrinking Budget Deficit

Discussion in 'Politics' started by AK Forty Seven, May 16, 2013.


    The Incredible Shrinking Budget Deficit


    For four years, during and in the wake of the recession, the federal budget deficit ballooned to more than $1 trillion. But because of belt-tightening in Washington and a strengthening economy, it has started shrinking — and fast.

    The number crunchers at Goldman Sachs have lowered their estimates of the deficit both this year and next, on the back of higher-than-expected revenues and lower-than-projected spending. Analysts started the year projecting that the deficit in the current fiscal year would be about $900 billion. Earlier this year, they lowered the estimate to $850 billion. Now they have lowered it again, to $775 billion, or about 4.8 percent of economic output.

    “Spending in the fiscal year to date is lower than a year ago and the nominal growth rate is lower than it has been in decades,” the Goldman economists wrote in a note to clients. “Revenues have also exceeded expectations, with a 12 percent gain fiscal year to date. What is more notable is that the strength in revenues preceded the payroll tax hike at the start of the year, and the spending decline does not seem to reflect sequestration, which has just started to take effect.” To translate: the deficit could come in even smaller than currently anticipated because of spending cuts and higher tax rates.

    On the face of it, this sounds like something to applaud: The growing economy is bolstering tax revenue and reducing the need for spending on programs like unemployment insurance. Washington has gotten its act together. The budget is finally coming back into balance. Indeed, Goldman now expects the budget deficit to fall to just 2.7 percent of economic output by the 2015 fiscal year. Many economists consider budget deficits that small to be sustainable — particularly if the federal government is investing in public goods like schools and roads — with the accrued debt paid off by later years’ economic growth.
  2. Rising revenues to shrink deficit rapidly through 2015: CBO

    WASHINGTON (Reuters) - The deficit is shrinking considerably more quickly than previously thought, the Congressional Budget Office said on Tuesday in a report that could sap Congress' sense of urgency to find further budget savings.

    In one fell swoop, the non-partisan budget referee slashed its deficit forecast for the current fiscal year by $203 billion from estimates made in February to $642 billion - making it the smallest budget shortfall since 2008.

    The CBO said the deficit will fall to $378 billion by 2015 with no congressional action - a sharp contrast to the $1 trillion recession-driven deficits in each of President Barack Obama's first four years in office.

    The revisions are driven largely by rising tax revenue from individuals and corporations as the economy sputters back to life. They also reflect stronger contributions to U.S. Treasury coffers from government-run mortgage finance groups Fannie Mae and Freddie Mac.

    "Because revenues, under current law, are projected to rise more rapidly than spending in the next two years, deficits in CBO's baseline projections continue to shrink, falling to 2.1 percent of GDP by 2015," the CBO said in its report.

    That level is considered easily sustainable by budget analysts, who said the report will blunt Republican arguments that rising federal debt levels will soon crush the economy.

    "I would say that removes any sense of crisis, and the risk is that Washington starts to get complacent," said Greg Valliere, chief political strategist at Potomac Research Group, an investment advisory firm in Washington. "It does change the psychology in this town."

    Representative Chris Van Hollen, the top Democrat on the House Budget Committee, took the opportunity to argue against further deep spending cuts.

    "We must avoid austerity measures that would slow job growth in the short term as we also work to reduce the long-term deficit in a balanced way," he said in a statement.

    The deficit debate has already faded in Washington's consciousness in recent weeks amid brighter economic news and rising government receipts. An anticipated summer fiscal showdown between Democrats and Republicans over raising the debt limit continues to slip, and the CBO said in the report that the Treasury now may be able to go without an increase until November.

    On Wednesday, the majority House Republicans are expected to meet to plot strategy on how best to approach the debt limit in light of the improving deficit picture.
  3. Not many presidents leave office with a smaller deficit then they came into office with(One President even came into office with balanced budget and left with a trillion dollar deficit)

  4. Lucrum


    You forgot to mention the incredible still increasing debt.

  5. Obama will cut the trillion dollar deficit he received from Bush by around half,Hillary will balance the budget like her husband did when a republican president left him huge deficits and then she will start paying down the debt.Thank God for Democratic Presidents :)
  6. Tsing Tao

    Tsing Tao

    Considering it was the republicans who forced the sequester, and the debt continues to rise (with all the printing the Federal Reserve is doing to fund it), it's not surprising you consider this a job well done. You're about as intelligent as a farm animal.

    Let us not forget about all those promises in the first term that never happened re: the budget. Wait, I forgot, there isn't a budget.
  7. Lucrum


    ...congress forced him to?

  8. The CBO said the deficit will fall to $378 billion by 2015 with no congressional action - a sharp contrast to the $1 trillion recession-driven deficits in each of President Barack Obama's first four years in office.

  9. Actually they were against the Clinton tax increases that helped balance the budget just like Obamas Congress is against the taxes he raised to help lower the deficit
  10. Yep, this has been all over the news. However, this little band of unmerry men have much deeper issues at the core of their lil tirades.:)
    #10     May 16, 2013