Obama economy: Deficit shrinks by $1 trillion in Obama era

[Independent voter]

I hope the next president can do as well.







In the not-too-distant past, talk in the political world of the U.S. budget deficit was all the rage. As the Tea Party “movement” took shape, conservatives quite literally took to the streets to express their fear that President Obama and Democrats were failing to address the “out of control” deficit.

Congressional Republicans agreed. As recently as 2013, Sen. Rand Paul (R-Ky.) was asked about the radicalism of his political agenda and he responded, “[W]hat I would say is extreme is a trillion-dollar deficit every year.” Around the same time, then-House Majority Leader Eric Cantor (R-Va.) argued that Congress should be “focused on trying to deal with the ultimate problem, which is this growing deficit.”

The Republican rhetoric was ridiculously wrong. We don’t have a trillion-dollar deficit; the deficit isn’t the ultimate problem; and it’s not growing.

Strong growth in individual tax collection drove the U.S. budget deficit to a fresh Obama-era low in fiscal 2015, the Treasury Department said Thursday.

For the fiscal year that ended Sept. 30 the shortfall was $439 billion, a decrease of 9%, or $44 billion, from last year. The deficit is the smallest of Barack Obama’s presidency and the lowest since 2007 in both dollar terms and as a percentage of gross domestic product.

Keep in mind, in the Obama era, the deficit has shrunk by $1 trillion. That’s “trillion,” with a “t.” As a percentage of the economy, the deficit is now down to just 2.5%, which is below the average of the past half-century, and down from 9.8% when the president took office.

Revisiting our coverage from several months ago, I looked for press releases from the “Obama is turning us into Greece!” crowd, eager to see them celebrate President Obama’s striking record on deficit reduction, but so far, nothing has turned up. Maybe they’re busy.

And in practical terms, that’s a shame. The vast majority of Americans are absolutely certain – thanks to deceptive Republican rhetoric and unfortunate news coverage – that the deficit has soared in the Obama era. Late last year, a Bloomberg Politics Poll found that 73% of the public believes the deficit has gotten bigger over the last six years.

The year before, the same pollster found that only 6% of Americans realized the deficit was shrinking. It helps explain why the president hasn’t gotten any credit for deficit reduction, which seems like the sort of development Tea Partiers and the Beltway’s Very Serious People should consider an extraordinary accomplishment.

As we talked about last year, it’s tempting to conclude that the public’s confusion doesn’t matter. In the Clinton era, the deficit disappeared entirely, and Americans had no idea.

But there’s another side to this. Whether or not Americans know and/or understand the basics of the fiscal argument may not have a practical impact on the debate itself, but the fact remains that voters are ultimately responsible for electing policymakers. If Americans believe, incorrectly, that the deficit is getting bigger, these same voters may be inclined to vote for candidates who’ll slash public investments and undermine social-insurance programs – which would have real-world consequences.

Postscript: To reiterate a point that bears repeating, I don’t necessarily consider this sharp reduction in the deficit to be good news. If it were up to me, federal officials would be borrowing more, not less, taking advantage of low interest rates, investing heavily in infrastructure and economic development, creating millions of jobs, and leaving deficit reduction for another day.

That said, if we’re going to have a fiscal debate, it should at least be rooted in reality, not silly misconceptions. And the reality is, we’re witnessing deficit reduction at a truly remarkable clip. Every conservative complaint about fiscal recklessness and irresponsibility in the Obama era is quantifiably ridiculous.

[Ahhdurr]

if we’re going to have a fiscal debate, it should at least be rooted in reality, not silly misconceptions.

Might as well exclude most Republicans then.

[Endus]

It's strange, to me. It feels like some Republicans haven't looked at any of the data since 2009/2010 on economic issues, in many cases. This is one of them. Unemployment is another; unemployment peaked in 2010 and has been falling ever since. Does this mean the current economic state is ideal in every way? No. There's plenty of room for improvement, and nobody is saying otherwise. But acting as if the economy crashed in 2008 and Obama's failed to manage the USA through its recovery is about as close to false a statement as you can make. The economy's largely recovered. There are still extant issues that predated that crash, like the growing wealth inequality, but Obama was focusing more on broad strokes to get the USA back to its "normal state".

[PC2]

We're in 2016, I want the very latest budget numbers!

[aceperson]

this is politics we're talking about. if the facts don't suit a side they just completely ignore it or even lie about it. the republicans just go further than the democrats.

[Mackeyser]

This looks like an article. If it is, bad form not linking the original source.

Also, I think you have misunderstood your own graph.

The deficit didn't shrink. What shrunk was the RATE at which the deficit grew. By your own graph, the deficit still INCREASED $439B in fiscal 2015.

That's not to say that the economy hasn't...somewhat...turned around. That being said, the structural issues with the economy aren't best discussed on a casual Off-Topic forum.

Is it a big deal that the rate of increase of the deficit has diminished as much as it has? Yes, yes it is. And there's still far more they could do to be an efficient government and respond to disasters, better fund a responsive military that actually deals with our existential threats and prepares us to meet today's and tomorrow's challenges (including actually F'ing PAY the soldiers and sailors IN the military...it's a damned disgrace that enlisted personnel with children have to head down to the MWR and have military personnel help them sign up for food stamps, TANF, Section 8 vouchers and other aid) WHILE also doing more with infrastructure and social programs...while bringing down both the yearly budget deficits AND the ACTUAL deficit.

It may seem pedantic, but it's not. The deficit is STILL growing...just by less each year than before. And because the economy isn't growing at 3+%, we can't just ignore deficit increases of the size we're sustaining, EVEN THOUGH, they're a Trillion less than when Obama took office.

[I Push Buttons]

This looks like an article. If it is, bad form not linking the original source.

Also, I think you have misunderstood your own graph.

The deficit didn't shrink. What shrunk was the RATE at which the deficit grew. By your own graph, the deficit still INCREASED $439B in fiscal 2015.

That's not to say that the economy hasn't...somewhat...turned around. That being said, the structural issues with the economy aren't best discussed on a casual Off-Topic forum.

Is it a big deal that the rate of increase of the deficit has diminished as much as it has? Yes, yes it is. And there's still far more they could do to be an efficient government and respond to disasters, better fund a responsive military that actually deals with our existential threats and prepares us to meet today's and tomorrow's challenges (including actually F'ing PAY the soldiers and sailors IN the military...it's a damned disgrace that enlisted personnel with children have to head down to the MWR and have military personnel help them sign up for food stamps, TANF, Section 8 vouchers and other aid) WHILE also doing more with infrastructure and social programs...while bringing down both the yearly budget deficits AND the ACTUAL deficit.

It may seem pedantic, but it's not. The deficit is STILL growing...just by less each year than before. And because the economy isn't growing at 3+%, we can't just ignore deficit increases of the size we're sustaining, EVEN THOUGH, they're a Trillion less than when Obama took office.

The debt increased.

The deficit is the negative balance each year, which has decreased.

[Glorious Leader]

This is actually incredible terrible news and will likely mean a recession or economic downturm here shortly. Theirs two ways the defecit can shrink. If the trade balance is corrected or if the private domestic sector is giving too much in taxes. The other side of the deficit coin is net private savings. The government defecit shrinkings means the domestic sector of the economy will have shrinking net financial assets as well. This is called SECTORAL BALANCES and is just accounting.

[Independent voter]

This looks like an article. If it is, bad form not linking the original source.

Cut and paste the first sentence into Google.

[Brubear]

I imagine the source was left out because there are some folks here that'll dismiss it out of hand because it's from MSNBC, specifically the Rachel Maddow blog.

http://www.msnbc.com/rachel-maddow-s...lion-obama-era

Since it's from last year I'd be interested to see if this trend continued through to now. Though I do agree that all the people complaining about our ballooning deficit lack a basic understanding of economics (or are being intentionally deceptive).

[Prokne]

I doubt the deficit can go down that much in the future. For one, there had to be a huge recession with increased government spending and less taxes coming in to get it to the level it was at when Obama became president. Secondly, if the deficit went down by another trillion dollars from about 450 billion, there would be a surplus of over 500 billion dollars which has never happened. The last time there was any surplus, the Republican president decided to give it all away to rich people and start a war. The next Republican president hopefully wont do the latter, but will definitely give that surplus away to the rich if given the chance.

[Macaquerie]

More reason why Democrats should never pay attention to Republicans' bleating about the deficit. They end up sacrificing pretty much all of the goals they had campaigned on just to keep spending under control and the minute they're out of office the Republicans come in and start cutting taxes with no regard whatsoever for fiscal responsibility, leaving a huge mess that they invariably blame entirely on Democrats.

[Deletedaccount1]

The debt (which is what matters) hasn't shrunk by that much, the size at which it grows has shrunk. Not to mention that it has gone up this year from $500 billion to $600 billion.

I will save my praise for a president who can actually fix a problem, not cause it to be less terrible.

- - - Updated - - -

It's strange, to me. It feels like some Republicans haven't looked at any of the data since 2009/2010 on economic issues, in many cases.

Republicans stopped being the party of fiscal responsibility almost 50 years ago when they created the framework for the modern American welfare state. I'm not saying that all Republicans aren't fiscally conservative or that most Republicans aren't well intentioned but the public never wants to cut spending in any area when specifically polled and politicians lose nothing and often times gain a lot from increasing spending.

Obama has actually done some good in decreasing spending in wasteful areas like NASA or the military but increasing the welfare state was a terrible decision that has set a bad precedent for future presidents who have no intention of shrinking it.

Even proponents of the welfare state can't argue against the simple mathematical fact that it is the primary cause of the deficit and constitutes a much larger chunk of government spending than anything else.

[Templar 331]

thanks to deceptive Republican rhetoric and unfortunate news coverage – that the deficit has soared in the Obama era. Late last year, a Bloomberg Politics Poll found that 73% of the public believes the deficit has gotten bigger over the last six years.

Yeap. I keep hearing how "this is the worst President ever and our economy is still in the shitter!!"

I respond with "no, our economy is doing better than it was and our unemployment is less than double digits now."

Then I hear "No it isn't!! Where did you hear that from?!?"


But on the whole good news.

[paralleluniverse]

Deficits are good.

With bond yields (i.e. government borrowing costs) at an all time historic low, there has never been a better time for government spending.

https://www.whitehouse.gov/sites/def...policy_cea.pdf

[Dr Assbandit]

Might as well exclude most Republicans then.

This kind of silly and blind partisanship is doing yourself and others a huge disservice. Not all Republicans are crazy alt-righters and neither are all Democrats die-hard ultra ssjw liberals.

There are people willing to listen on both sides, just because a vocal sub-set of them act a certain way does not mean they speak for the rest.

[NED funded]

This kind of silly and blind partisanship is doing yourself and others a huge disservice. Not all Republicans are crazy alt-righters and neither are all Democrats die-hard ultra ssjw liberals.

There are people willing to listen on both sides, just because a vocal sub-set of them act a certain way does not mean they speak for the rest.

I think the generalisations are justified. It's been almost 30 years since republicans continue to believe that we can cut taxes without cutting spending.

[zenkai]

I hope the next president can do as well.


-snip-

When you start out with it skyrocketed, it's not hard to shrink it.... Look at your own graph. Also you should also cite sources.


http://www.factcheck.org/2016/04/oba...l-2016-update/


- - - Updated - - -

It's strange, to me. It feels like some Republicans haven't looked at any of the data since 2009/2010 on economic issues, in many cases. This is one of them. Unemployment is another; unemployment peaked in 2010 and has been falling ever since. Does this mean the current economic state is ideal in every way? No. There's plenty of room for improvement, and nobody is saying otherwise. But acting as if the economy crashed in 2008 and Obama's failed to manage the USA through its recovery is about as close to false a statement as you can make. The economy's largely recovered. There are still extant issues that predated that crash, like the growing wealth inequality, but Obama was focusing more on broad strokes to get the USA back to its "normal state".

OH I am sure they look, they just understand it better than you.

http://www.politifact.com/truth-o-me...ased-two-thir/

Why the drop might not be so exciting

Experts told us that while Obama's math may be correct, it's missing some important caveats.

First, it's important to note that the deficit swelled in 2009 (hence the steady drop). In 2008, the deficit was $458 billion, or 3.1 percent of GDP. Those deficits are smaller than the ones the country is facing today. The 2009 fiscal year represented a huge jump in the deficit, partly because of the massive stimulus program to jumpstart the cratering economy.

"This is not to say that that large deficit was his fault, but if one used the 2008 deficit as a frame of reference, the comparison would be quite different," said Alan Auerbach, University of California Berkeley professor of economics and law.

Also, some economists we consulted pointed out that the 2009 fiscal year was Obama’s first year in office, and so not necessarily a good starting point since he had little control over the spending in that year.

And there's another issue. Princeton University economics professor Harvey Rosen said the more important question is if Obama has put the government on a path that will keep deficits stable. "And the answer is no," Rosen said, because entitlement programs, such as Medicare, Medicaid and Social Security, have not had substantial reform.

The long-term forecast for the deficit illustrates this point.

Absent substantial reform, the Congressional Budget Office expects a few more years of short-term deficit decreases followed by bigger shortfalls in 10 and 20 years. Federal spending is projected to increase through 2039, so much so that by then the federal debt held by the public will reach a point only seen after World War II.

The deficit would be equal to 3.7 percent of GDP in 2029 and 6.5 percent of GDP by 2039, a higher deficit than any year between 1947 and 2008.

This chart from the Congressional Budget Office shows how the deficit is not expected to continue its downward trend in recent years.

A final word on Obama’s point from the experts.

The deficit has come down in recent years because of the strengthening economy, which drives tax revenues up, and the draw-down of various economic stimulus programs that were implemented to weather the financial crisis. Additionally, the expiration of 2 percent payroll tax cuts and increases in tax rates for high-income earners played a role, albeit a smaller one.

"It’s not clear one would want to view the evolution as relating to fiscal responsibility rather than an improving economy," Auerbach said.

Our ruling

Obama said since taking office the country has seen "our deficits cut by two-thirds."

His claim is accurate if you use 2009, his first year in office with an historically high deficit, as a starting point.

The claim ignores a stark reality about the deficits, however. The country’s spending is not expected to continue its downward route, according to federal forecasters, for factors that include increased interest payments on the debt and the lack of substantial policy changes for the country’s biggest programs, like Social Security and Medicare.

The deficits have largely come down as a result of the improved economy for which Obama cannot assume full credit.

[Slant]

I hope the next president can do as well.

Did you write that or was it a quote? If the latter, please do mark it as a quote more clearly.

If the former, I commend you on a text well written.

[Endus]

OH I am sure they look, they just understand it better than you.

It's interesting that I made a point regarding 1> unemployment, and 2> economic recovery from the 2008 recession, and you responded with a dismissive statement that didn't refer to either, but was entirely about 3> the deficit.

Why not respond to what I actually said, rather than moving the goalposts to a more convenient target? I know the OP referred to the deficit, but that doesn't explain why you thought it was a response to my post.