When Will a $400 Billion Deficit Be Considered Bad News?
One of the economic facts that President Obama touted in his 2015 State of the Union address to demonstrate that his “middle class economics” policies are working, is that “our deficits [have been] cut by two-thirds.” This has been a source of great pride for the Obama administration, and for the media for some time now, as this recent White House tweet, which essentially makes the same point, demonstrates:
Of course, the media, especially the especially progressive media, have picked up and amplified Obama’s message. Many of the most popular memes that left-wing sites circulate amongst themselves — variations of a picture of a cool-looking President Obama (maybe wearing sunglasses and smiling), a list of Obama’s accomplishments, and a message of “Thank You, Mr. President” — list prominently how the deficit was less than 3% of the GDP in 2014.
Even in Forbes one can find almost verbatim summations of the President’s talking points on this issue. Columnist Stan Collender writes “If you’re a troll, you refuse to celebrate the extraordinary reduction in the federal deficit that has happened in such a short time. The only comparable period in U.S. history was immediately after World War II when the budget went from a 29 percent of GDP deficit in 1943 to small surpluses in 1947-49.”
I do in fact celebrate this “extraordinary reduction,” and not merely to avoid Mr. Collender’s name-calling. The 2014 budget deficit of $469 billion does not even make the Top Ten of Budget Deficit lists (adjusted for inflation) since 1940, and is nearly a trillion dollars lower than the $1413 billion deficit of 2009.
In fact, again in inflation adjusted dollars, the deficit has been reduced an impressive average of 19.50% a year since Obama has been president. Gee, if we can just keep lowering the federal deficit every year by about 19.50% from 2014 on, then we can have a practically balanced budget by around 2040, and we would have only have added about … $700 billion to the deficit! Yay!
Unfortunately this recent deficit trend is not expected to continue. In fact, it is expected to reverse. According to the Congressional Budget Office, “annual budget shortfalls are projected to rise substantially—from a low of $469 billion in 2015 to about $1 trillion from 2022 through 2024.”
And that whole “deficit as a percentage of the GDP” stat Obama and the Progressives are crowing about turns out to be no big deal – deficits are expected to stay around 3% of the GDP. It’s just that we will owe about $7 trillion more then than we do now.
Of course, these are just projections, but given that President Obama has just presented a budget to Congress that will increase the deficit by 20%, it is easy to be pessimistic at the CBO’s optimism.
It is interesting how subjectively empirical data can be reported. Recently, for example, when the Bureau of Economic Analysis announced that 2014 GDP was 2.4%, it was lauded by Lawrence Summers (one of the media’s favorite economic minds, probably behind only Warren Buffett and Paul Krugman, now that Jonathan Gruber has been demoted) as “vindication of Obama’s policies,” despite it being about 25% lower than the average GDP between 1950 and 2014, and an astounding 54.1% lower than the GDP growth we saw at this point in the Reagan Recovery.
Similarly, one wonders when a deficit of over $400 billion will no longer be seen as good news. In 1983 the US saw a deficit of $207 billion ($493 billion in today’s dollars) and this was bad, but the debt was $1.3 trillion (about $3.3 trillion in today’s dollars). But in 2015, with a debt already at $18 trillion, six times as large as 1983’s debt, and that has probably increased by about $10 million in the time it took me to type ‘$18 trillion’. I’m not saying we are at the point of it being the straw that broke the camel’s back, but another $400 billion deficit, with a debt of $18 trillion, feels a little scary.
One would think the context of certain numbers would mean more than it does. If Mike, of TV’s Mike and Molly fame, went to one of his Overeater’s Anonymous meetings saying he only gained 5 pounds last week, I doubt if his group would be very impressed, even if he were to say, “but the week before I gained 8 pounds!” or “5 pounds is less than 2% of my body weight!”
Too bad our media and our academics aren’t as honest as Overeaters Anonymous.