Economics U.S. Deficit Shrinking At Fastest Pace Since WWII - Page 7

**BigRedChief** · 11-21-2012, 09:45 PM

http://news.investors.com/blogs-capi...rld-war-ii.htm

Believe it or not, the federal deficit has fallen faster over the past three years than it has in any such stretch since demobilization from World War II.

In fact, outside of that post-WWII era, the only time the deficit has fallen faster was when the economy relapsed in 1937, turning the Great Depression into a decade-long affair.

If U.S. history offers any guide, we are already testing the speed limits of a fiscal consolidation that doesn't risk backfiring. That's why the best way to address the fiscal cliff likely is to postpone it.

While long-term deficit reduction is important and deficits remain very large by historical standards, the reality is that the government already has its foot on the brakes.

In this sense, the "fiscal cliff" metaphor is especially poor. The government doesn't need to apply the brakes with more force to avoid disaster. Rather the "cliff" is an artificial one that has sprung up because the two parties are able to agree on so little.

Hopefully, they will agree, as they did at the end of 2010, to embrace their disagreement for a bit longer. That seems a reasonably likely outcome of negotiations because the most likely alternative to a punt is a compromise (expiration of the Bush tax cuts for the top and the payroll tax cut, along with modest spending cuts) that could still push the economy into recession.

Rather than applying additional fiscal restraint now, the government needs to make sure it sets the course for steady restraint once the economy emerges further from the deep employment hole that remains. In fact, a number of so-called deficit hawks are calling for short-term tax cuts to spur growth, rather than immediate austerity.

From fiscal 2009 to fiscal 2012, the deficit shrank 3.1 percentage points, from 10.1% to 7.0% of GDP.

That's just a bit faster than the 3.0 percentage point deficit improvement from 1995 to '98, but at that point, the economy had everything going for it.

Other occasions when the federal deficit contracted by much more than 1 percentage point a year have coincided with recession. Some examples include 1937, 1960 and 1969.

President Obama hasn't gotten much credit for reining in the deficit, probably because a big part of the deficit progress has come from the unwinding of extraordinary government supports that he helped put in place. Stimulus programs have come and mostly gone; the end of stimulus to states led them to enact Medicaid curbs; jobless benefits in recent months have fallen by 50% since early 2010 (due to both job gains and extended benefits being exhausted).

TARP and the bailouts of Fannie Mae and Freddie Mac also make the deficit improvement look better, boosting the fiscal '09 deficit by about $200 billion more than in fiscal '12 (though the initial cost of TARP was overstated).

Still, military spending is now on the decline due to fewer troops in Iraq and Afghanistan; Medicare costs rose 3% last year vs. the average 7% growth in recent years; and after the last year's Budget Control Act, excluding the automatic cuts set to take effect in January, nondefense discretionary spending is already on a path to shrink to 2.7% of GDP, well below the 3.9% average, notes the Center on Budget and Policy Priorities.

HonestChieffan · 11-25-2012, 10:21 AM

Quote:

Originally Posted by Pawnmower

He probably doesn't understand the difference between the total deficit, and the deficit as a % of GDP.

It gets pretty hard to wade through the flock of total idiots in this place sometimes.

It takes the focus off of the data

**patteeu** · 11-25-2012, 10:35 AM

Quote:

Originally Posted by Direckshun

Link?

That's fundamentally wrong.

Fundamentally wrong.

You mean because Obama hasn't ever proposed a serious budget?

DementedLogic · 11-25-2012, 12:34 PM

Quote:

Originally Posted by Mr. Flopnuts

I've been saying for a while now that Germany did a better job than we did initially, however you can't ignore the Greece, and Spain fiasco that drug them below us. And D is right, the ICF has already come out with a report showing we're going to surpass them over the next 4-5 years.

There were reports that unemployment would not surpass 8% with the stimulus bill. Reports don't mean shit, results do. So far, Germany's results have been better than ours, which is a result of austerity.

BucEyedPea · 11-25-2012, 12:36 PM

Quote:

Originally Posted by HonestChieffan

It takes the focus off of the data

Using % of GDP ( which includes govt spending) is trickery. It makes it look like less.
Very typical of govt numbers. Kinda like a "cut" meaning slows the growth of spending. Lol!

Direckshun · 11-25-2012, 12:46 PM

Quote:

Originally Posted by DementedLogic

There were reports that unemployment would not surpass 8% with the stimulus bill. Reports don't mean shit, results do. So far, Germany's results have been better than ours, which is a result of austerity.

Depends how you measure it. It really does.

We are positioned better for the next half-decade than all of our allies.

**patteeu** · 11-25-2012, 12:59 PM

Quote:

Originally Posted by Direckshun

Depends how you measure it. It really does.

We are positioned better for the next half-decade than all of our allies.

In a world of hobbits, we tower above them as a petite dwarf.

Pawnmower · 11-25-2012, 03:10 PM

Quote:

Originally Posted by BucEyedPea

Using % of GDP ( which includes govt spending) is trickery. It makes it look like less.
Very typical of govt numbers. Kinda like a "cut" meaning slows the growth of spending. Lol!

Yes that gosh darn math stuff is devil tricks....

You do realize that we HAVE to look at historical deficits with some sort of adjustment (% of GDP, adjusted for inflation etc...) and not just total dollars...right?

Otherwise it is meaningless...

My god...

Direckshun · 11-25-2012, 03:32 PM

Quote:

Originally Posted by patteeu

In a world of hobbits, we tower above them as a petite dwarf.

Not that bad of an analogy.

HonestChieffan · 11-25-2012, 06:03 PM

Quote:

Originally Posted by BucEyedPea

Using % of GDP ( which includes govt spending) is trickery. It makes it look like less.
Very typical of govt numbers. Kinda like a "cut" meaning slows the growth of spending. Lol!

The devil is in the details

HonestChieffan · 11-25-2012, 06:05 PM

Quote:

Originally Posted by patteeu

In a world of hobbits, we tower above them as a petite dwarf.

Gotta love hobbits. Never trust someone not schooled in the world of hobbits, elves, dwarves, and ents.

mnchiefsguy · 11-25-2012, 06:31 PM

Quote:

Originally Posted by Direckshun

Link?

That's fundamentally wrong.

Fundamentally wrong.

Fundamentally wrong only because Obama is incapable of actually submitting a budget to Congress.

Pawnmower · 11-25-2012, 07:13 PM

Quote:

Originally Posted by mnchiefsguy

Fundamentally wrong only because Obama is incapable of actually submitting a budget to Congress.

I'm not an Obama fan but a 30 second google shows that he has submitted budgets every year at least as far as I can tell:

http://www.gpo.gov/fdsys/browse/coll...ionCode=BUDGET

Am I missing something?

Brainiac · 11-25-2012, 07:22 PM

Quote:

Originally Posted by Pawnmower

I'm not an Obama fan but a 30 second google shows that he has submitted budgets every year at least as far as I can tell:

http://www.gpo.gov/fdsys/browse/coll...ionCode=BUDGET

Am I missing something?

The Senate, which is controlled by Obama's party, hasn't passed a budget since 2009. The budget that Obama submitted for 2012 was rejected 97-0 by the Senate. Obama's budget proposals aren't even supported by ANYONE in his own party.

Pawnmower · 11-25-2012, 07:48 PM

Quote:

Originally Posted by Brainiac

The Senate, which is controlled by Obama's party, hasn't passed a budget since 2009. The budget that Obama submitted for 2012 was rejected 97-0 by the Senate. Obama's budget proposals aren't even supported by ANYONE in his own party.

It should be against the law to not have a budget, like the states.

If they refuse to pass a budget they should make changes and send it back....

FishingRod · 11-26-2012, 11:25 AM

Quote:

Originally Posted by Brainiac

The Senate, which is controlled by Obama's party, hasn't passed a budget since 2009. The budget that Obama submitted for 2012 was rejected 97-0 by the Senate. Obama's budget proposals aren't even supported by ANYONE in his own party.

I assume you know that was Republican shenanigans but, by the standards set by both parties what you are saying is technically true.

11-21-2012, 09:45 PM
BigRedChief Brainwashed Join Date: Dec 2003 Location: Swims with fishes Casino cash: $2264722	U.S. Deficit Shrinking At Fastest Pace Since WWII http://news.investors.com/blogs-capi...rld-war-ii.htm Believe it or not, the federal deficit has fallen faster over the past three years than it has in any such stretch since demobilization from World War II. In fact, outside of that post-WWII era, the only time the deficit has fallen faster was when the economy relapsed in 1937, turning the Great Depression into a decade-long affair. If U.S. history offers any guide, we are already testing the speed limits of a fiscal consolidation that doesn't risk backfiring. That's why the best way to address the fiscal cliff likely is to postpone it. While long-term deficit reduction is important and deficits remain very large by historical standards, the reality is that the government already has its foot on the brakes. In this sense, the "fiscal cliff" metaphor is especially poor. The government doesn't need to apply the brakes with more force to avoid disaster. Rather the "cliff" is an artificial one that has sprung up because the two parties are able to agree on so little. Hopefully, they will agree, as they did at the end of 2010, to embrace their disagreement for a bit longer. That seems a reasonably likely outcome of negotiations because the most likely alternative to a punt is a compromise (expiration of the Bush tax cuts for the top and the payroll tax cut, along with modest spending cuts) that could still push the economy into recession. Rather than applying additional fiscal restraint now, the government needs to make sure it sets the course for steady restraint once the economy emerges further from the deep employment hole that remains. In fact, a number of so-called deficit hawks are calling for short-term tax cuts to spur growth, rather than immediate austerity. From fiscal 2009 to fiscal 2012, the deficit shrank 3.1 percentage points, from 10.1% to 7.0% of GDP. That's just a bit faster than the 3.0 percentage point deficit improvement from 1995 to '98, but at that point, the economy had everything going for it. Other occasions when the federal deficit contracted by much more than 1 percentage point a year have coincided with recession. Some examples include 1937, 1960 and 1969. President Obama hasn't gotten much credit for reining in the deficit, probably because a big part of the deficit progress has come from the unwinding of extraordinary government supports that he helped put in place. Stimulus programs have come and mostly gone; the end of stimulus to states led them to enact Medicaid curbs; jobless benefits in recent months have fallen by 50% since early 2010 (due to both job gains and extended benefits being exhausted). TARP and the bailouts of Fannie Mae and Freddie Mac also make the deficit improvement look better, boosting the fiscal '09 deficit by about $200 billion more than in fiscal '12 (though the initial cost of TARP was overstated). Still, military spending is now on the decline due to fewer troops in Iraq and Afghanistan; Medicare costs rose 3% last year vs. the average 7% growth in recent years; and after the last year's Budget Control Act, excluding the automatic cuts set to take effect in January, nondefense discretionary spending is already on a path to shrink to 2.7% of GDP, well below the 3.9% average, notes the Center on Budget and Policy Priorities.
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