The deficit for FY 2013, which ended on September 30, was $680 billion. To economists, what matter is not the amount of the deficit, but what percentage of GDP it represents. In this case, it’s 4.1% of GDP.
For FY 2009, the deficit was 10.1% of GDP. So the deficit has fallen by more than half.
Right now, our most immediate concern is (or should be, GOP) jobs, not the deficit. Yes, we have longer-term deficit problems, but the most important thing to do now is not to make those future deficits worse by failing to create jobs. To the extent we do that, we generate more tax revenue and we reduce demand for unemployment benefits, Medicaid, and food stamps, so the government automatically gets more and spends less without cutting the safety net or raising taxes.
I’m tired of hearing that the economy isn’t producing jobs because business lacks confidence in President Obama. Yes, companies are sitting on a ton of cash rather than adding to payroll, but this failure to hire would be the same if Romney were in the Oval.
If England used to be a nation of shop keepers, the U. S. has become a nation of middle managers. While it’s easy to calculate out how many people it takes to produce Fords on an assembly line, it’s not as straightforward to figure out how many people you need in cubicles writing reports and emails to each other.
As the economy has come back, a lot of jobs have been eliminated, as companies realized that they didn’t need all the people they had before the meltdown. To some extent, they made bigger profits because people who kept their jobs were so grateful and terrified that they were willing to do a job-and-a-half rather than complain. But remaining workers also found themselves able to get more done because meetings were shorter and there were fewer co-workers up and down the chain of command to deal with by memo or email or office visit. Businesses realized that before the meltdown, they had a lot of employees who may have looked busy, but weren’t terribly productive.
When the economy tanked, our private sector was over-staffed, as we typically complain that the government is. Companies that find themselves under-staffed are hiring (people doing a job-and-a-half won’t do that forever), but they won’t let themselves become over-staffed any time soon. A lot of jobs are just gone for now, regardless of who controls Congress or the White House.
The misguided GOP focus on deficits and austerity in the U. S. is messing up the whole world’s economy. From the NYT*:
“The Europeans lately have slightly eased their austerity policies, after four years of deep spending cuts and rising taxes that many economists blame for keeping the Continent in recession long after America’s ended.
“And the Obama administration, after years of pressing Europe to adopt American-style stimulus measures, is now presiding — if reluctantly — over European -style austerity that is measurably slowing its recovery. …
“The new reality in the Unites States reduces the president’s already limited leverage in his fiscal debate with Europeans…even as Europe’s woes continue to act as a drag on its trading partners, including the United States.”
I would force every Republican member of Congress to write “Keynes was right” on the blackboard 1,000 times.
* “Lines Blur in U.S.-Europe Debate on Austerity,” Jackie Calmes
Consumer confidence is at its highest level since February 2008.
Housing prices in 20 major cities jumped 10.9% in the past year, the biggest annual increase since April 2006.
We know the deficit is looking much, much better than expected, as recovery brings more revenue to the government.
So for 2014, the GOP is left trying to sabotage Obamacare and trying to milk all the mileage they can out of the Benghazi, IRS, and reporter (AP/Fox’s James Rosen) “scandals.” I remain unconvinced that any of these is really a true scandal.
There is some really good news out of Washington, if you look under the rocks of Benghazi, the IRS, and the AP.
The budget deficit is projected to drop to $642 billion for FY 2012, which ends on September 30. That’s a whopping $200 billion less than the CBO estimated in February, when it adjusted the deficit downward to account for sequester spending cuts and 2012 tax increases. This new projection comes strictly from higher-than-expected tax revenue. This will be the first time the deficit has been under a trillion since 2009.
Things are so rosy that the deficit might be only a smidge over 2% of GDP by 2015, compared to more than 10% of GDP back in 2009.
In fact some economists, like Jared Bernstein, think the deficit may be coming down too quickly, keeping unemployment high.
From “The 1 Percent’s Solution,” Paul Krugman, NYT:
“Thus, the average American is somewhat worried about budget deficits, which is no surprise given the constant barrage of deficit scare stories in the news media, but the wealthy, by a large majority, regard deficits as the most important problem we face. And how should the budget deficit be brought down? The wealthy favor cutting federal spending on health care and Social Security — that is “entitlements” — while the public at large actually wants to see spending on those programs rise.
“You get the idea: The austerity agenda looks a lot like a simple expression of upper-class preferences, wrapped in a facade of academic rigor. What the top 1 percent wants becomes what economic science says we must do.
“[T]he years since we turned to austerity have been dismal for workers but not at all bad for the wealthy, who have benefited from surging profits and stock prices even as long-term unemployment festers.
“And this makes one wonder how much difference the intellectual collapse of the austerian position will actually make. To the extent that we have policy of the 1 percent, by the 1 percent, for the 1 percent, won’t we just see new justifications for the same old policies?”
“Yes, total debt in the U.S. economy, public and private combined, has risen dramatically relative to G.D.P. No, this doesn’t mean that we as a nation have been living far beyond our means, and must drastically tighten our belts. While we have run up a significant foreign debt (although not as big as many imagine), the rise in debt overwhelmingly represents Americans borrowing from other Americans, which doesn’t make the nation as a whole any poorer, and doesn’t require that we collectively spend less. In fact, the biggest problem created by all this debt is that it’s keeping the economy depressed by causing us collectively to spend too little, with debtors forced to cut back while creditors see no reason to spend more.
“So what should we be doing? By all means, let’s restore the kind of effective financial regulation that, in the years before the Reagan revolution, helped deter excessive leverage. But that’s about preventing the next crisis. To deal with the crisis that’s already here, we need monetary and fiscal stimulus, to induce those who aren’t too deeply indebted to spend more while the debtors are cutting back.
“Unemployment, not excessive money printing, is what ails us now — and policy should be doing more, not less.” Emphasis added.