The deficit trolls came out in force in response to my two recent posts (take a look at the comments here and here) about the precipitously dropping federal deficit. In traditional online troll-like behavior, they either flat out refused to believe me, said the government was lying, said I was drinking the Kool-Aid, showed an extreme lack of knowledge about federal borrowing or repeatedly demonstrated that they don’t understand the difference between the deficit and debt.
The final numbers for 2014 announced yesterday by the U.S. Treasury show the federal deficit for the fiscal year that just ended did indeed fall as precipitously as I previously reported. As the report shows, the actual 2014 deficit was $483 billion, $3 billion less than what the Congressional Budget Office estimated a week ago.
For the record, $483 billion is $197 billion below the almost $680 billion deficit recorded in 2013. It’s also $930 billion, that is, close to $1 trillion, less than the largely recession-caused $1.4 trillion deficit in 2009. (Attention trolls: the Congressional Budget Office projected in early 2009, that is, before the start of the Obama administration, that, because of the recession, the deficit that year would be $1.2 trillion.)
In dollar terms, 2014 was the lowest federal deficit since 2008. And in the category most important to economists – the deficit as a percent of Gross Domestic Product – the 2014 deficit was 2.8 percent of GDP, the smallest since 2007.
There are several ways to look at this.
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.
If you’re a deficit scold, you ignore the deep deficit reduction that has taken place since 2009 and instead focus on the budget challenges that are ahead. What’s happened in the meantime, which was a prerequisite for getting what the scolds say they want, is given little-to-no importance.
If you think a falling deficit was the wrong economic policy (take a look at this excellent piece by Jared Bernstein) the past few years when monetary policy was limited in what it could do and the economy needed a boost from fiscal policy, you say the deficit fell too far too fast and that the reduction was misguided.
But no matter where you’re coming from, you can’t and shouldn’t reject the fact that the federal deficit is projected to continue to fall. Under current policies the deficit could be below 2 percent of GDP for years to come before retiring baby boomers and higher interest rates are projected to reverse the trend.
And if you’re a “the-deficit-is-tool-of-the-devil-and-must-be-reduced-all-the-time” kind of person, you have to admit that significant progress has been made. You can’t truthfully continue to insist the deficit needs to be reduced and then not be even grudgingly grateful for the reduction that has already taken place.
In other words, take a victory lap, do an end zone dance and stop and smell the roses.
