The final tally for the federal budget shortfall was released yesterday, and whether one considers it good news or bad is a matter of perspective.
The U.S budget deficit for fiscal year 2011 is $1.299 trillion, the second largest shortfall in history.
The nation only ran a larger deficit for the 2009 fiscal year, which included the dramatic collapse of financial markets and a huge bailout effort by the government. The nation’s deficit that year was $1.412 trillion.
This year’s deficit is slightly higher than fiscal year 2010, when the nation ran a $1.293 trillion deficit. Fiscal years run through Sept. 30.
So, the deficit went from $1.293 trillion to $1.299 trillion, which doesn’t represent much of a change. For those of us who think the deficit should be high during a weak economy, this is hardly bad news. For that matter, in January, the deficit was projected to reach $1.5 trillion, but the final figure turned out to be significantly lower due to, believe it or not, an improving economy.
Nevertheless, a $1.299 trillion deficit is obviously quite big, and this is ordinarily the point at which the right starts complaining about the importance of fiscal responsibility. Indeed, I suspect many will blame President Obama for the shortfall.
It’s worth taking a moment, then, to remind folks about what happened in December.
Ten months ago, Bush-era tax rates were set to expire, and the Obama administration made their intentions clear: allow rates for the wealthiest Americans to return to Clinton-era levels, but leave the lower rates intact for everyone else. The increased revenue would help bring the deficit down.
Republicans refused, and a deal was reached during the lame-duck session that left all of tax cuts in place for another two years. What did Republicans propose to help pay for the extension of the tax cuts? They didn’t — GOP officials said to simply add the cost to the deficit.
And that’s exactly what happened. In fairness, the tax deal in December wasn’t solely about Bush-era rates, but the agreement was largely about tax cuts, which meant less government revenue, and which in turn meant a higher deficit.
If Republicans didn’t want a higher deficit, they shouldn’t have fought to make it worse. They had a choice — expensive tax breaks or deficit reduction. They chose the former.
No one should be surprised by the results of the GOP’s demands.