StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between



Pop The Cork? The Biggest Deficit Reduction In U.S. History Occurred From 2009 to 2010

08 Oct 2010
Posted by Stan Collender

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.

There were two primary reasons there was no cheering yesterday.

First, it's not at all clear that reducing the deficit was the correct fiscal policy given the slow growth in the U.S. economy.

Second, in the current political atmosphere even a 50 percent reduction would have still left lots of room for those who want to do so to use the deficit as an issue.  To those folks, the $125 billion reduction simply isn't as important as the $1.29 trillion deficit that's available for campaign fodder.

In other words, the $125 billion reduction in the deficit was both too much and not enough.

A quick word of caution.  The CBO numbers are estimates; the official final number, which will be released later this month by the Treasury, is likely to be a little different.  My back-of-the-envelope guess is that it will be a bit lower.

 

 

Nominal drop in deficit is a meaningless statistic.

Sure, you got $125B in deficit reduction. But that's an inflated figure because the 2009 deficit was more than *twice* as big as the 2008 deficit. Average over two years and you're still going the wrong way.

That's nothing to "celebrate" about.

Other years have achieved much more than a 10% drop in the deficit, so this isn't an achievement by any measure.


Well done

Thanks Wonk for proving his point.


I suppose I should point out

I suppose I should point out that this isn't for calendar 2009 and 2010 but for fiscal year 2009 and 2010. The fiscal year begins in October and ends in September.

Further, FY 2009 was Bush's 8th and final budget. FY 2010 was Obama's 1st and initial budget. Yes, that's right - it's the wild spending socialist President who has achieved the largest budget deficit reduction in U.S. history. Hmmm....bet you didn't hear that on Fox News.




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