budget deficit
This morning, the Congressional Budget Office released its August Update estimating the FY11 deficit would rise $71 billion to $1.066 trillion as compared to its March estimate. The increase comprised $92 billion of legislated deficit increases, $45 billion of deficit reduction from better than expected economic performance, and $23 billion of increased deficit from worse technical estimating assumptions. The FY10 deficit estimate improved $27 billion. See Appendix Table A-1 for the details.
My column from today's Roll Call says something seldom said in mixed company about reducing the deficit: whether it's tax breaks or spending programs, the federal government is going to have to stop doing something...or things.
The Not-So-Secret Truth About Deficit Cutting
June 1, 2010
Forget everything you’ve heard about how hard it is to cut the federal deficit. Once you disregard the partisan rhetoric and put aside the election-year demagoguery, you rapidly come to a conclusion that is seldom stated as directly as this: The federal government is going to have to stop doing some of the things it’s currently doing.
I used my first column for The Fiscal Times to take on all those who insist that the only way to deal with the federal deficit is by cutting spending. Contrary to those who repeat the "it's a spending problem" mantra, spending definitely is not the only issue and spending cuts are not the only possible response.
I agree that Eugene Steuerle's "Fiscal Democracy Index offers a chilling new perspective on the declining state of federal finances. Like Andrew Samwick, I too hadn't realized that 2009 was the first year in which all Federal revenues were consumed by promises made in the past -- entitlement programs and interest on the debt. All discretionary programs, the ones that Congress has to vote to fund each year, were paid with borrowed money.
Here are some other factoids that I only recently learned, courtesy of Fitch Ratings (see attachment at bottom of this post), which warned earlier this month that the United States' AAA rating could be at risk if don't make some sort of fiscal headway in the next three to five years.
Point One: We often hear that the US government debt load is lower as a share of GDP than those of many other large, wealthy nations, including Japan, Germany, the UK and France. But a more apples-to-apples comparison, which combines federal, state and local government borrowing, suggests that the US is in worse shape than most other AAA-rated countries.
(Note: I'm tempted to simply say "same old, same old." In fact, the results shown below don't seem have changed much in the more than three decades since I started working on the federal budget. Andrew is too young to be able to say that, but I suspect that if they admitted to their real age Pete and Bruce would agree.)
Just in case you have any doubts about why there are deficits, this paper from the American Enterprise Institute with a compilation of polling results about attitudes toward government involvement in the economy and federal spending says it all. Here are excerpts from the money quotes:
Questions that ask Americans whether they would like a smaller government with fewer services or a larger government with more services usually produce a preference for smaller government.
The Treasury announced and the media dutifully reported yesterday that the fiscal 2009 federal budget deficit reached $1 trillion in June. Here's what Bloomberg said in the first two paragraphs of its story:
July 13 (Bloomberg) -- The U.S. budget deficit topped $1
trillion for the first nine months of the fiscal year and broke
a monthly record for June as the recession subtracted from
revenue and the government spent to rejuvenate the economy.
The shortfall for the fiscal year that began Oct. 1 totaled
$1.1 trillion, the first time that the gap for the period
surpassed $1 trillion, Treasury figures showed today in
Washington. The excess of spending over revenue for June was
$94.3 billion, the first deficit for that month since 1991,
according to data compiled by Bloomberg.
At least, that what Diane Rogers over at EconomistMom.com said.
It's always nice to think that someone, anyone, is reading and listening. As Andrew and Pete will tell you...you never really know.
Here's my column from today's Roll Call.
It’s Time to Start Talking About the Budget Deficit
Note that the headline says “talking” rather than “doing” something about the federal budget deficit.
This is a critical difference. It’s still not time to take any actions that will reduce this year’s deficit. In the current economic environment, doing that when private-sector economic activity has not fully recovered would be a Herbert Hoover-like move that would be as incorrect a fiscal policy now as it was back then.
That’s not to say that there haven’t been some positive economic signs in recent weeks. Some things, like consumer sentiment and the Dow Jones Industrial Average, have been moving upward. Other statistics, like unemployment and mortgage defaults, continue to lag behind. And, while it looks good, it’s not at all clear whether the recent uptick in the Dow is real or a bear market rally.
At 2 PM tomorrow, the Treasury Department will report a deficit of approximately $171 b. for the month of November according to a preliminary estimate by the Congressional Budget Office. October's deficit was $237 b., so the federal deficit will reach $408 b. for the first two months of FY09. That's well on the way to the first trillion dollar deficit ever recorded. The first official estimate of a trillion dollar FY09 deficit is expected when CBO releases its annual report in February. The President's Office of Management and Budget is expected to release an abbreviated budget with a similar estimate in February or March.
I'm not sure how many people these days remember the movie "Dr. Strangelove," the 1964 Stanley Kubrick directed/Peter Sellers tour de force that was a take off on another movie of that year, "Fail-Safe."
Dr. Strangelove's full title was "Dr. Stangelove or: How I Learned To Stop Worrying and Love the Bomb" and the basic joke was how the dropping of an atomic bomb (they didn't call them nuclear weapons back then) might not be such a bad thing after all. It was as funny as "Fail-Safe" was frightening.
Matt Miller, a deficit hawk long before the phrase was commonly used, has now adopted the Dr. Strangelove mentality when thinking about the atomic bomb-like deficits that are about to occur. As I wrote in my "Fiscal Fitness" column this week, and as Matt has now put out there for all to see. previously unimaginably high federal deficits are now not just a fait accompli, but something we all need tio learn to love.
