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.

[dirk digler]

Originally Posted by Brainiac

I'll concede the point that HALF of the $700 billion dollar TARP could legitimately be charged to Bush, because the TARP bill passed while he was President and he spent $350 billion of it. However, Obama was not only fully on board with the TARP program, he actually asked Bush to release the remaining $350 billion before Obama even took office.

I'll agree that it can be a little tricky figuring out exactly who is responsible for the respective portions of that $1.4 trillion deficit for 2009. But to just arbitrarily charge all of it to Bush is extremely misleading and inaccurate.

Fair enough. Obama is certainly responsible for what he spent once he took office like his stimulus bill and defense appropriation bills.

I was just checking on the cost of the appropriations they passed in December and it was around $500 billion and they were requesting almost $200 billion more.

The Administration has requested a total of $196.5 billion in emergency supplemental appropriations for FY2008, of which $189.3 billion is for military operations in Iraq, Afghanistan, and elsewhere, $6.9 billion is for international affairs, and $325 million is for other programs. To date, Congress has appropriated $16.8 billion requested for Mine Resistant Ambush Protected (MRAP) vehicles, but much of the remainder has been caught up in debate over Iraq policy.

On December 17, the House approved an omnibus FY2008 appropriations bill, H.R. 2764, that provides $485 billion in regular and emergency appropriations for non-defense programs, including international affairs, plus $31 billion in emergency supplemental defense appropriations for Operation Enduring Freedom (OEF). On December 18, the Senate took up the bill and, by a vote of 70-25, adopted an amendment by Senator McConnell to provide $70 billion in emergency supplemental defense appropriations without limits on where the money can be used. The House is expected to consider to amended bill on December 19.

Of course Joe Biden relayed this story a couple of months ago that should shed light on what they were walking into.

Biden told the group of Floridians that he and President Obama had been on the job less than a week when a top economic adviser told them the country was facing a trillion-dollar budget deficit. Biden says that Obama replied, “But I haven’t done anything yet.”

[Direckshun]

Originally Posted by DementedLogic

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.

Nope. Our recovery was actually stronger than Germany's. We're poised to grow at a much more productive rate than them over the next four years.

Virtually every country in Europe embraced austerity. You're blind, or you don't keep up with that kind of information. One of the two.

There were austerity riots all over Europe, for Christ's sakes.

[Direckshun]

Originally Posted by Brainiac

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

Or is that too "right wing" for you?

That doesn't confirm your argument. If it does, I need you to quote the part that does.

Is there a single serious author on the Internet that agrees with you that Obama had anything less than a 1.2 trillion dollar deficit the day he took office?

Because you're flat wrong.

The deficit was 1.3 trillion dollars the day Obama stepped into office.

[Direckshun]

Originally Posted by 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?

Check the OP.

[Direckshun]

Originally Posted by dirk digler

Not really. The fact is the government's fiscal year starts in October every year.

Which is why you will not find a single serious soul on the internet claim Obama inherited anything less than a 1.2 trillion dollar deficit.

Not a single one.

[Direckshun]

FactCheck.org:

It’s true that Obama “inherited the biggest deficit in our history,” as he said on CBS. By the time Obama took office in January 2009, the nonpartisan Congressional Budget Office had already estimated that increased spending and decreased revenues would result in a $1.2 trillion deficit for fiscal year 2009, which began Oct. 1, 2008. In a detailed analysis of fiscal year 2009, we found that Obama was responsible for adding at most $203 billion to the deficit, which in the end topped $1.4 trillion that year.

PolitiFact:

On Jan. 7, 2009, two weeks before Obama took office, the Congressional Budget Office reported that the deficit for fiscal year 2009 was projected to be $1.2 trillion.

NYT's Economix blog...

Because of the large deficits Mr. Bush bequeathed Mr. Obama – on Jan. 8, 2009, the C.B.O. projected a deficit for the year of $1.3 trillion that didn’t include any Obama policies – Congress was deeply reluctant to enact a stimulus larger than $787 billion...

[Direckshun]

Reuters:

The result: a $1.3 trillion deficit when he first took over the Oval Office.

New York Times:

Nonpartisan analysts agree that Mr. Obama inherited a bad hand: the 2009 deficit was a projected $1.2 trillion when he took office because of Bush-era policies and an economic crisis that slashed tax collections and increased spending for jobless aid and other safety-net programs. He has added $1.4 trillion in stimulus spending and tax cuts, and he has continued the Bush policies that Democrats blame for the swing from surpluses to deficits: income tax cuts, a Medicare drug benefit and war operations.

Fox News:

Obama inherited an economy in recession and a deficit in excess of $1 trillion.

Associated Press:

Obama: His pledge to cut the deficit "we inherited" in half by end of first term is a mark likely to be missed by a wide margin. The deficit when he took office was $1.2 trillion, and the $800 billion stimulus bill Obama signed soon afterward increased the shortfall to more than $1.4 trillion.

[BigRedChief]

Originally Posted by Brainiac

I'll agree that it can be a little tricky figuring out exactly who is responsible for the respective portions of that $1.4 trillion deficit for 2009. But to just arbitrarily charge all of it to Bush is extremely misleading and inaccurate.

Your bias is showing. No one and I mean no one outside the bubble thinks Obama didn't inherit at least a $1.3 trillion deficit from Bush.

[donkhater]

So you're saying Obama's as bad as Bush? I agree.

[nstygma]

Originally Posted by Direckshun

FactCheck.org:



PolitiFact:



NYT's Economix blog...

estimated, projected. isn't there a resource that tracks the actual number on a monthly basis at least?

[BigRedChief]

Originally Posted by donkhater

So you're saying Obama's as bad as Bush? I agree.

Foreign policy, Debt, Deficit, budget.......... yeah they are eerily similar. Gives ammunition and evidence to those who say it doesn't matter who wins.

[nstygma]

yep

[DementedLogic]

Originally Posted by Direckshun

Nope. Our recovery was actually stronger than Germany's. We're poised to grow at a much more productive rate than them over the next four years.

Virtually every country in Europe embraced austerity. You're blind, or you don't keep up with that kind of information. One of the two.

There were austerity riots all over Europe, for Christ's sakes.

Austerity is all in perspective. A socialist country practicing austerity is not the same as a capitalist country practicing Austerity.

Germany's unemployment rate is below 6% from above 9% while running a much lower deficit. I don't know how you can rationally defend that our recovery was stronger than Germany's.

[Dave]

[Mr. Flopnuts]

Originally Posted by DementedLogic

Austerity is all in perspective. A socialist country practicing austerity is not the same as a capitalist country practicing Austerity.

Germany's unemployment rate is below 6% from above 9% while running a much lower deficit. I don't know how you can rationally defend that our recovery was stronger than Germany's.

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.