Thomas Donlan, Barron’s editorial page editor, explains in his latest column why no D.C. politicians deserve praise for the nation’s shrinking federal deficit.
President Obama was able to brag recently that “our deficits are getting smaller—not bigger. On my watch, they’re falling at the fastest pace in 60 years.”
Understandably, he didn’t mention the actual deficit number. Last year’s deficit was $680 billion, the largest in history except for all the others tallied on his watch. As a percentage of GDP, it was the largest deficit since 1945, except for all the other years of the Obama administration.
It’s like the old joke about making a small fortune producing plays on Broadway: Start with a big fortune. Cutting the deficit at a fast pace isn’t so hard if you start with record deficits. It’s even easier with automatic revenue increases and automatic spending cuts. A stalemate in Congress that blocks new spending and new tax cuts also helps—even as it makes real reform impossible.
Neither Congress nor the president deserve credit for reducing the size of the hole in American fiscal affairs. All they really did was dig more slowly.
The period of slower digging will not last without real spending cuts or real tax increases, or both, of the kind that Congress has shown itself unwilling to achieve.
Debt held by the public—the smallest way to measure the nation’s liabilities—is currently 73% of our gross domestic product. Current policies will increase those liabilities to about 100% of GDP in 25 years—onward and upward from there. The Congressional Budget Office fingers automatic increases in spending on Social Security, Medicare, Medicaid, the Affordable Care Act, the prescription-drug program, pensions, and health benefits as the major reasons for the increases.
