Deficit Paradigm Shift Approaching
The arguments over the federal budget deficit may be about to turn a corner, of sorts. Republicans have been expecting a gigantic budget fight to happen anywhere from now to the middle of the summer, forced by the deadline of the debt ceiling. This fight may not actually happen, though, and it's for a fairly stunning reason: earlier projections of when we would hit the debt ceiling are proving pessimistically wrong, and we may not actually hit it until October -- which is into next year, in budgeting terms (the federal fiscal year starts on the first of October). This could shift the entire paradigm of the political battle over the deficit and debt from one of pointing fingers of blame to one of scrambling to claim credit for policies that "are now working." Which will -- if it happens as now predicted -- make for an interesting change in the debate's dynamic, to say the least.
In President Obama's first year in office, the federal budget deficit was $1.413 trillion dollars. Republicans and Democrats can squabble over who was more at fault for this, President Bush (who was responsible for the budget in place, from a month before the election happened to October of 2009), or President Obama (who passed a rather large stimulus in the spring of 2009). Beyond such arguments, here are the subsequent numbers: 2010's deficit was $1.294 trillion, 2011's was $1.3 trillion exactly, and 2012's was $1.087 trillion.
But this year the deficit is most likely going to be a lot lower than projected. The most optimistic number I've heard recently is $775 billion, in fact. While this is still a whale of a lot of money, it is $638 billion less than in 2009. That's a pretty astounding turnaround, by anyone's measure. It's not quite what Obama promised when he was originally running for president, but it's pretty close to "halving the deficit" in his first term in office. And if the projections keep falling, he could indeed be within striking distance of cutting the deficit in half.
Of course, in Washington (as elsewhere) success has many fathers while failure is an orphan, which is another way of saying Republicans certainly aren't going to let Obama claim all the credit for such good news. But it will indeed change the parameters of the debate.
The reason the deficit is falling so fast is multifaceted, which will just lend itself to political demagoguing from both sides. The biggest reason the deficit is shrinking is that the American economy is finally recovering, meaning more tax revenues are coming in. More people working means more paying taxes, and more business activity means more taxes coming in to the federal coffers. Of course, even though everyone agrees this is the main reason for a falling deficit, both sides will claim credit for it.
The secondary reasons the federal deficit is shrinking are all the budget deals that have been cobbled together since Obama took office. This includes a mix of both tax hikes and spending cuts. Taxes have risen on the ultra-wealthy, and taxes rose this year on all workers because the "payroll tax holiday" came to an end. Obama and the congressional Republicans have agreed upon two rounds of budget cuts, the most recent of which is the sequester taking effect this year. More tax revenues are coming in, taxes have gone up, and less spending is going out -- all of which combines to shrink the deficit.
Naturally, both sides in the political debate will be arguing that their policies are the ones that are working, while the other side's are just making the problem worse. They wouldn't be politicians if they didn't make this case, right?
The truth is it is a mix of policies -- some well-intentioned, some reactionary, and some downright boneheaded -- which have combined to put us where we now find ourselves. Putting all of those arguments aside, though, it certainly will be interesting to see how this all plays out in this summer's budget fights and out on the campaign trail next year. If the unemployment figure continues to slowly improve, we could be at around six percent in the 2014 campaign season. With more people working and with the Great Recession fading into memory, the campaign may not center itself around the economy as much as the last few elections have. Politicians may be battling for credit instead of blame for the economy, to put this another way.
Which would, indeed, be a refreshing change. It might also stop the austerity freight train in its tracks. If Republicans don't have "trillion dollar deficits" to bludgeon Democrats with, it might change the nature of the discussion. While not many in the chattering classes inside the Beltway have really noticed it yet, the ground is shifting significantly under the entire deficit/debt/budget debate. When the final figures for the year are in, though, people are going to have to pay attention. It may take another four or five months before the politicians wake up to it (and with profuse apologies to Bob Dylan), but the paradigms they are a-changin'.
-- Chris Weigant
Follow Chris on Twitter: @ChrisWeigant
While not many in the chattering classes inside the Beltway have really noticed it yet, the ground is shifting significantly under the entire deficit/debt/budget debate.
I am constrained to point out that the reasons for this are not likely budget-related, but rather a sizable terrorist attack on US soil and explosive details regarding the complete, utter and systemic failure of the Obama Administraton before, during and after the 9/11 attacks on US interests in Benghazi...
On the flip side, ANY news that is better than expected is ALWAYS welcome news..
At least to a political agnostic such as myself...
Michale
At least to a political agnostic such as myself...
Oh, I don't think so ...
Oh, I don't think so ...
Of course you don't.. :D
Michale
You don't think so because you are looking at it from the position of a political advocate..
It's like a devout religious people who see agnostics/atheists/whatever as spawns of satan..
I hate to put it in the context of religious fanaticism because it's so damn insulting, but it's the best analogy I can find..
Anyone who doesn't toe the Party line "must" be for the enemy... In the case, the "enemy" is anyone Right Wing..
In other words, people project their biases onto other people. They can't imagine people out there who hold BOTH ideologies in contempt and disdain..
Now, granted, in my case, I hold MORE contempt and disdain for Democrats/Leftists.
But there is a good reason for that... :D
Michale
Now, granted, in my case, I hold MORE contempt and disdain for Democrats/Leftists.
Present company definitely excepted, of course.. :D
Michale
CW,
Nice article but you actually underestimate how much the deficit has come under control (which of course is at the expense of jobs - about 1% additional unemployment has been caused because of budgetary measures recent estimates indicate).
The classic mistake you have made is not to account for the time value of money, that is assuming that $1 in 2013 is the same as $1 in 2009 - which even people completely unaware of basic economics understand.
A more consistent way of viewing the budget then which accounts for this is in terms of % of GDP. Obama inherited a deficit that was just above 10% of GDP. Estimates of 2013 indicate this will likely be around 5% of GDP, going down to 4% by 2014 and 2.5% by the end of 2015.
Particularly given the revenue constraints imposed on him by Republicans, this is a good result. Of course these as just estimates and could turn out to be better or worse than budgeted...
the paradigms they are a-changin'
Ahahahahahah.
More tax revenues are coming in, taxes have gone up, and less spending is going out
Maybe we need a term like Obamaconomy!
:)
-David
p.s. Hope everyone's been on board for the stock ride!
IRS apologizes for targeting conservative groups
WASHINGTON (AP) — The Internal Revenue Service inappropriately flagged conservative political groups for additional reviews during the 2012 election to see if they were violating their tax-exempt status, a top IRS official said Friday.
Organizations were singled out because they included the words "tea party" or "patriot" in their applications for tax-exempt status, said Lois Lerner, who heads the IRS division that oversees tax-exempt groups.
In some cases, groups were asked for their list of donors, which violates IRS policy in most cases, she said.
http://bigstory.ap.org/article/irs-apologizes-targeting-conservative-groups
Well, iddn't this interesting...
Michale
Maybe we need a term like Obamaconomy!
I am all for that!!!
We can tie it to Obama just like we tied that Train Wreck that is ObamaCare to Obama... :D
Michale
Michale [1] -
What are you even talking about? How does Benghazi even enter into a discussion on the deficit? I mean... WTF?
michty6 -
Well, I didn't want to be accused of "fudging the figures" (which does happen when you start saying things like "in 2013 dollars"), so I just went to the government site and took down the exact figures.
I had thought there was some sort of 6 month figure released (for Q1 and Q2 of FY2013), but that would have been the end of March, and I haven't heard an official figure in the news yet. Maybe I'm just remembering this wrong, and there are no "6 mo" figures released, though...
David -
OK, I admit that even I cringed a little when typing that last line. Heh. Profuse apologies to Bobby Zimmerman...
-CW
So, since the economy is getting better, can we all agree that Obama's and the Democrat's fear-mongering was completely and utterly WRONG and was simply a perfect example of the politics of fear??
Michale
So, since the economy is getting better, can we all agree that Obama's and the Democrat's fear-mongering was completely and utterly WRONG and was simply a perfect example of the politics of fear??
Nope. Like I said before just because the numbers are ok doesn't mean the deficit reduction measures enacted by Congress haven't affected them.
In fact it is estimated that unemployment would be a full 1 point lower without them at 6.5%:
http://www.nytimes.com/2013/05/09/us/deficit-reduction-is-seen-by-economists-as-impeding-recovery.html?pagewanted=1&_r=0
And by the way the fear-mongering was on both sides - apparently the tax raises in January on 'job creators' (lolololol I still laugh at this ridiculous term) were going to wreck the economy... Oh wait February 2013 (pre-sequester) was the best month of job growth in 3 years.
CW
What are you even talking about? How does Benghazi even enter into a discussion on the deficit? I mean... WTF?
Other than the fact that I love talking about Benghazi, ya mean?? :D
Other than the fact that the prevailing opinion about Benghazi was A> It was a non-issue, nothing important at all and/or B> It was only an election issue that would disappear after Obama won the election..
Other than the fact that I was resoundingly ridiculed when I called it dead on ballz accurate *within 12 hours* while the Obama administration was STILL sticking with the utterly BS story about a phantom protest...
Other than that... Nothing at all. :D
Seriously, you postulated a scenario where the lack of discussion over the deficit was due to the fact that the economy has made a definitive uptick, despite all the gloom and doom predictions from the Romney campaign..
I simply point out that there might be OTHER reasons why the talk of the deficit has taken a back seat...
Michty,
Nope. Like I said before just because the numbers are ok doesn't mean the deficit reduction measures enacted by Congress haven't affected them.
I knew you would say that.. :D
When the news is good, it's all due to the Great And Powerful Obama...
When the news is bad, it's all because of the terrorist evil Republicans..
Gotcha.. {{wink}} {{wink}}
And by the way the fear-mongering was on both sides - apparently the tax raises in January on 'job creators' (lolololol I still laugh at this ridiculous term) were going to wreck the economy... Oh wait February 2013 (pre-sequester) was the best month of job growth in 3 years.
You prove my point for me.
YES, there was fear-mongering on both sides..
And BOTH fear mongering was wrong..
Yet, according to YOU, *only* the Right's fear-mongering was REALLY wrong..
The fear-mongering from Obama was JUST AS WRONG, yet YOU spin it that it was really right..
Once again proving that you have your nose so far up Obama's arse, it's impossible to tell where he ends and you begin..
Case closed.. :D
Michale
OK, I admit that even I cringed a little when typing that last line. Heh. Profuse apologies to Bobby Zimmerman...
you mean the guy who shot trayvon martin? :p
you mean the guy who shot trayvon martin? :p
Oh crap, don't EVEN get me started!!! :D
Or we could talk about how Obama's IRS targeted conservative groups during the last election and then, today, Obama blamed BUSH for it!!! :D
Either subject would be just all right with me.. :D
Michale
nypoet22 -
"You may call me Bobby, you may call me Zimmy"
-Bob Dylan
Heh.
-CW
Michale [11] -
Um, when you call out the Republicans' fear-mongering for what it is, then I'll consider it, okay?
:-)
-CW
Michale [13] -
Oh, Lordy, be still my beating heart. You actually DID call out GOP fear-mongering!
My apologies. Heh.
-CW
Um, when you call out the Republicans' fear-mongering for what it is, then I'll consider it, okay?
Uh... I always do...
YES, there was fear-mongering on both sides..
And BOTH fear mongering was wrong..
The issue isn't really the fear-mongering itself.. Both Partys do it, both are wrong for doing it.
*MY* beef is that many here decry the Right's fear-mongering but do not concede the Left's fear-mongering.
Can we all agree that the Right *AND* the Left are guilty of fear-mongering for political purposes??
Oh, Lordy, be still my beating heart. You actually DID call out GOP fear-mongering!
My apologies. Heh.
I guess BOTH of us should always finish the comments before commenting, eh? :D
To be fair to you, I do not go out of my way to post about and comment on Right Wing fear-mongering. I feel it's redundant given the climate here.. :D
However, I'll be more than happy to do so, iffn ya'all want.. :D
Michale
"You may call me Bobby, you may call me Zimmy"
as long as you don't call him george.