Deficit hawks should be thrilled

DEFICIT HAWKS SHOULD BE THRILLED…. The Washington Post ran an item that was easy to overlook today, back on page A12, on the budget deficit. Given all the talk from Republicans and far-right activists lately about the deficit, it’s tempting to think it would garner a little more attention.

According to a new estimate from the Congressional Budget Office, the federal budget deficit for the fiscal year was $1.29 trillion, which is, you know, a lot. But the deficit shrank from the year before; it’s slightly lower than the deficit President Obama inherited from his predecessor; and the total was also “lower than either the CBO or the White House had predicted earlier this year, suggesting that the wave of red ink propelled by the recession that began in 2007 has finally peaked.”

Stan Collender notes the larger context.

In previous years we would have been breaking out the champagne on this news: The monthly budget review released yesterday by the Congressional Budget Office estimated that the federal budget deficit fell by $125 billion from 2009 to 2010. This by far is the biggest one-year nominal drop in the deficit that has ever occurred.

Even if the CBO estimate turns out to be accurate — the official tally will come from the Treasury later this month — I don’t imagine we’ll see a lot of headlines blaring, “U.S. achieves biggest one-year deficit reduction in American history.”

Why not? Because it’s the kind of news that doesn’t really satisfy anyone. For those of us who want to see the government borrow more in order to invest in economic growth and job creation, news of the deficit going down isn’t good news at all. Borrowing more money is exceedingly cheap right now, and the economy desperately needs a boost. The fact that the deficit is shrinking may seem like good news in the abstract, but it’s arguably the opposite of what we need.

And for those who consider the deficit a civilization-threatening scourge, we may be witnessing “the biggest one-year nominal drop in the deficit that has ever occurred,” but it’s not enough because it’s still $1.29 trillion.

Or as Collender put it, “In other words, the $125 billion reduction in the deficit was both too much and not enough.”

Jonathan Cohn added that there were plenty of center-right Dems who balked at deficit spending, even to improve the economy, because they were afraid of a backlash: “Running higher deficits, they thought, would incur the wrath of voters and make re-election difficult. Well, now they’ve gotten their way. The deficit is coming down. Let’s see how much the voters care come November.”