DAILY BEAST
This is the Golden Age of deficit reduction. Really
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You wouldn’t know it if you listen to the professional deficit hawks, who have plowed hundreds of millions of dollars and countless op-eds into a fruitless effort to drive a grand bargain on taxes and spending. But it is. Policy is nobody’s idea of optimal. But nonetheless the gridlock of the past few years has produced spending restraint and higher tax rates. President Obama has proposed more of both in the budget he released on Wednesday. The sequester has just kicked in. And sustained economic growth, the miracle deficit cure, continues to work its magic. The expansion is now in its 46th month.
While the national debt mounts, I’ve noted that the primary deficit—the annual mismatch between revenues and expenditures—is melting away. Check out the March Treasury Monthly Statement, which was released Wednesday. In March 2013, the government collected $186 billion in revenues and spent $292.5 billion, for a deficit of about $106 billion. Pretty bad. But in March 2012, revenues were substantially lower and spending was significantly higher. Then, revenues were $171.2 billion and spending was $369.37 billion, for a deficit of $198 billion. From last March to this March, revenues rose 8 percent while spending fell 21 percent, and the monthly deficit shrank 46 percent.
While the national debt mounts, I’ve noted that the primary deficit—the annual mismatch between revenues and expenditures—is melting away. Check out the March Treasury Monthly Statement, which was released Wednesday. In March 2013, the government collected $186 billion in revenues and spent $292.5 billion, for a deficit of about $106 billion. Pretty bad. But in March 2012, revenues were substantially lower and spending was significantly higher. Then, revenues were $171.2 billion and spending was $369.37 billion, for a deficit of $198 billion. From last March to this March, revenues rose 8 percent while spending fell 21 percent, and the monthly deficit shrank 46 percent.
Now, monthly numbers can move around—if a big tax payment comes in on March 31 one year and arrives on April 1 the next year, or if a benefits payment that went out on March 1, 2012, instead went out on Feb. 28, 2013. So it’s useful to look at the trend. The fiscal year is now six months old. And guess what? It shows more deficit melting. Through the first six months of this fiscal year, revenues are $1.196 trillion, up 12.5 percent from $1.063 trillion in the first six months of fiscal 2012. Meanwhile, the government has spent $1.797 trillion in the first six months of fiscal 2013, down 2.4 percent compared with the first six months of fiscal 2012. The deficit for the first half of the fiscal year is $600.5 billion, down 22.5 percent from $775 billion in the first half of fiscal 2012.
The last six months of the fiscal year are always good ones for the government, as tax payments tend to produce surpluses in April and again in September. Should the current trends continue for the rest of the year, we’ll be looking at an annual deficit of about $850 billion for fiscal year 2013, down from $1.089 trillion in fiscal 2012. (The Obama administration projects a $972 billion deficit for the current fiscal year, but it will surely be less than that.) Put another way, that’s $240 billion in deficit reduction in a single fiscal year—in the absence of a grand bargain. The reduction is even more impressive when you consider that in fiscal 2009, the deficit was more than $1.4 trillion....
The last six months of the fiscal year are always good ones for the government, as tax payments tend to produce surpluses in April and again in September. Should the current trends continue for the rest of the year, we’ll be looking at an annual deficit of about $850 billion for fiscal year 2013, down from $1.089 trillion in fiscal 2012. (The Obama administration projects a $972 billion deficit for the current fiscal year, but it will surely be less than that.) Put another way, that’s $240 billion in deficit reduction in a single fiscal year—in the absence of a grand bargain. The reduction is even more impressive when you consider that in fiscal 2009, the deficit was more than $1.4 trillion....
And in theory, there’s more to come. The budget Obama presented, which is naturally dead on arrival, continues the spending restraint. Next year it projects spending will rise 2.5 percent. It aims to increase revenues by doing things like getting rid of the absurd carried-interest tax break for private equity and hedge-fund managers. Should all the proposals become law, the administration projects revenues will rise nearly 12 percent in fiscal 2014, leaving a deficit of $744 billion.
That’s still big. But it would represent as a decline of 47 percent in four years. And what ultimately matters isn’t the sheer size of the annual deficit but its size in relation to the economy. That’s shrinking too. The ratio of the primary deficit to GDP has been falling rapidly, from 10.1 percent of GDP in 2009 to a projected 6 percent in fiscal 2013 (it’ll probably be less), and 4.4 percent of GDP in fiscal 2014.
[For more detail on that dead on arrival Obama budget, check out The WASHINGTON POST:
[For more detail on that dead on arrival Obama budget, check out The WASHINGTON POST:
In the first budget of his second term, President Obama set aside the grand ambitions that marked his early days in office and sent Congress a blueprint aimed at achieving a simple goal: ending the long partisan standoff over the national debt.
The $3.77 trillion spending plan looks largely the same as the deal Republicans rejected during the “fiscal cliff” negotiations at the end of last year, but with cuts to Social Security designed to get fiscal hawks back to the table.
The 10-year budget request Obama unveiled Wednesday calls for nearly $300 billion in new spending on jobs and public works. That includes a landmark $77 billion expansion of preschool education financed by smokers, who would have to pay an extra 94 cents a pack for cigarettes.
DAILY BEAST (Concl)
We may be no closer to a grand bargain than we were last year. Congressional Democrats are angry at Obama’s willingness to propose a reduction in the growth rate of Social Security, while Republicans can’t countenance any increase in revenues. And yet the deficit continues to decline.
[Below JACKIE CALMES NY TIMES discusses the debate among Democrats on Obama's willingness, yet again, (see Method To Obama's Madness for a Grand Bargain? ) to strike a deal.]
[Below JACKIE CALMES NY TIMES discusses the debate among Democrats on Obama's willingness, yet again, (see Method To Obama's Madness for a Grand Bargain? ) to strike a deal.]
President Obama’s new budget has opened a debate over what it means to be a progressive Democrat in an age of austerity and defines him as a president willing to take on the two pillars of his party — Medicare and Social Security — created by Democratic presidents. ...Mr. Obama has provoked angry supporters on his left to ask whether he is a progressive at all.
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But to Mr. Obama, cost-saving changes in the nation’s fastest-growing domestic programs are more progressive than simply allowing the entitlement programs for older Americans to overwhelm the rest of the budget in future years.
Even so, he emphasized that his support is contingent on Republicans agreeing to higher taxes from the wealthy and new spending, in areas like infrastructure, to create jobs.
Speaker John A. Boehner accused the president of holding "modest entitlement savings" hostage for more tax increases.
The president’s views put him at the head of a small but growing faction of liberals and moderate Democrats who began arguing several years ago that unless the party agrees to changes in the entitlement benefit programs — which are growing unsustainably as baby boomers age and medical prices rise — the programs’ costs will overwhelm all other domestic spending to help the poor, the working class and children.
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Representative Nancy Pelosi of California, the Democratic minority leader, has arranged for House Democrats on Thursday to hear a debate on Mr. Obama’s proposed change in the cost-of-living formula that determines Social Security benefits. The debate will pit the A.F.L.-C.I.O. counsel, Damon Silvers, who opposes the change in the formula, and Robert Greenstein, executive director of the liberal Center for Budget and Policy Priorities, which has long supported changes to entitlement programs as part of a bipartisan deal to protect other federal spending on, for example, antipoverty programs, the nation’s infrastructure and education.
It has been evident from his first months in office that the pragmatist in Mr. Obama has made him sympathetic to the thinking of Mr. Greenstein and others. In 2009, Mr. Obama considered proposing the change in the cost-of-living formula for Social Security until Democratic Congressional leaders objected.
But now in his fifth budget and the first of his second term, he has decided over some advisers’ objections to make that proposal — and his brand of pragmatic liberalism — official.
Under the president’s budget, the government would shift in 2015 from the standard Consumer Price Index — used to compute cost-of-living increases for Social Security and other benefits and to set income-tax brackets — to what is called a “chained C.P.I.” The new formulation would slow the increase in benefits and raise income tax revenues by putting some taxpayers into higher brackets sooner, for total savings of $230 billion over 10 years.
While many economists say the new formula is more accurate, opponents say it does not adequately reflect the out-of-pocket health care expenses that burden older Americans. All Social Security beneficiaries would be affected, but Mr. Obama proposes that at age 76 they would get gradual benefit increases to offset the depletion of their private assets or pensions.