U.S. Deficit Shrinking At Fastest Pace Since WWII

[BigRedChief]

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.

[go bowe]

dreamy?

gosh, i didn't think anybody'd notice...

[Dave]

[Brainiac]

Originally Posted by Direckshun

The deficit was $1.3 trillion when Obama walked into the Oval Office on Day 1.

True or false.



The deficit has fallen $300 billion since Obama first walked into the Oval Office on Day 1.

True or false.

This response is so stupid and so factually incorrect that I just can't resist replying to it again.

What day do you think Obama walked into the Oval Office? Was it 14 months after he was elected? Was it a year after he was inaugurated as President?

I know Obama is dreamy to you, but you are really embarrassing yourself here. You'd be a helluva lot better off if you'd just admit you got it wrong and move on.

[KILLER_CLOWN]

Now that everything is fixed, we should move to get Hopebama a 3rd term.

[Fat Elvis]

Originally Posted by Direckshun

The truth is, austerity in a bad economy has been proven again, and again, and again, to be reckless.

Europe, four years ago, as in a similar situation to us. Europe embraced the conservative solution -- austerity.

The United States embraced the liberal solution -- deficit-fueled demand injected into the economy by the government.

Now, one entity is headed in the right direction. The other is at 12% unemployment and rising.

The fact that the Obama administration was able to do this while cutting the deficit he inherited by 300 billion dollars is unheardof.

But it's not terribly surprising. In modern American history, Democrats fix the deficit, Republicans explode it.

Liberals and their stupid facts....

[Direckshun]

Originally Posted by Brainiac

And you can say all you want about "pulling the economy out of a recession", and you would be technically correct since we are no longer in a situation where GDP has declined for two consecutive quarters. However, the real unemployment rate tells the story of an economy that is in terrible shape.

The "real" unemployment rate fluctuates just as the unemployment rate does.

Like the unemployment rate, it's been going in the right direction.

[Direckshun]

Originally Posted by Brainiac

Completely false. The deficit was $459 billion the day Obama walked into office.

I want a link to this. I want one remotely serious person who isn't on a rightwing organization's payroll to confirm this argument.

[Direckshun]

Originally Posted by Fat Elvis

Liberals and their stupid facts....

Not entirely sure what you're responding to?

[CoMoChief]

Who in the hell actually believes this clown show?

The US deficit isn't shrinking folks.

We're spending more than we're taking in. It's really that simple.

[mlyonsd]

I might have to rethink this crazy idea I have in my head that budgets matter.

[Brainiac]

Originally Posted by Fat Elvis

Liberals and their stupid facts....

The problem with the "facts" presented in this chart is the same problem I've already pointed out. It blames Bush for the $1.4 trillion that Obama spent in 2009.

This chart is both wrong and outdated. Obama has added over $5 trillion to the debt in 4 years. Bush added $4.7 trillion in 8 years. Bush's record was horrible. However, Obama is adding insane amounts to the deficit, and he's doing it at more than twice the rate of George W. Bush.

Ponder those FACTS.

[Brainiac]

Originally Posted by Direckshun

I want a link to this. I want one remotely serious person who isn't on a rightwing organization's payroll to confirm this argument.

http://www.whitehouse.gov/omb/budget/Historicals

Or is that too "right wing" for you?

[stonedstooge]

Originally Posted by Brainiac

The problem with the "facts" presented in this chart is the same problem I've already pointed out. It blames Bush for the $1.4 trillion that Obama spent in 2009.

This chart is both wrong and outdated. Obama has added over $5 trillion to the debt in 4 years. Bush added $4.7 trillion in 8 years. Bush's record was horrible. However, Obama is adding insane amounts to the deficit, and he's doing it at more than twice the rate of George W. Bush.

Ponder those FACTS.

RACIST!!!!!!!

[DementedLogic]

Originally Posted by Direckshun

The truth is, austerity in a bad economy has been proven again, and again, and again, to be reckless.

Europe, four years ago, as in a similar situation to us. Europe embraced the conservative solution -- austerity.

The United States embraced the liberal solution -- deficit-fueled demand injected into the economy by the government.

Now, one entity is headed in the right direction. The other is at 12% unemployment and rising.

The only country in Europe that really practicied Austerity, was Germany. Their recovery was much stronger than ours and their unemployment rate is down to less than 6%. Germany took Obama's advice and threw it out the window.

The only time the US really practiced Austerity in response to an economic recession was during the Depression of 1920-21, which resulted in one of the strongest economic recoveries this country has ever seen.

[donkhater]

So Bush is to blame for the deficit in year one of Obama's presidency. Fine.

(Nevermind that Obama agreed with the policies that caused the explosion but I digress)

What the hell has the savior done since?

No budgets, no implementation of the recommendation of the bipartisan commission that HE asked for, and nothing but class warfare and blame?

Impressive budget hawk, that one.