StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between



deficit politics

Posted by Stan Collender

I'm willing to bet that most of you -- part of a readership that is far more interested in the federal budget than any group of typical Americans -- didn't know that the deficit was significantly lower in fiscal 2013 than it was in 2012.

For the record, the Treasury reported a little over a week ago that the 2013 deficit was $680 billion, a 38 percent drop from the approximately $1.1 trillion deficit in 2012 and 48 percent less than the $1.4 trillion deficit in 2009.

The 2013 deficit was 4.1 percent of GDP, the smallest since 2008. Fiscal 2013 was the fourth consecutive year the deficit has fallen as a percent of GDP. And the 4.1 percent-of-GDP deficit was almost a third less than the 6.0 percent that had been projected when the White House submitted its fiscal 2014 budget to Congress less than 6 months ago.

Posted by Stan Collender

I don't use the word "defense" much when talking about the federal budget because it always prejudices the conversation. U.S. military spending isn't always defensive; it often is appropriately offensive and changing the name in 1949 from the Department of War to the Department of Defense should go down as one of the top 10 greatest public relations achievements of all time.

So why did I violate my own rule and use the word "defense" in the headline to this post? To make a point: In spite of all the spin and all the warm feelings Americans supposedly have about the military, Congress was more than willing to throw defense spending under the budget bus in the sequester. When it was a question of tax increases and Medicare reductions vs the Pentagon, not only did the Pentagon lose, but it wasn't even on the field or the same game.

Posted by Stan Collender

 Quick note about tonight's State of the Union Address: I'm not expecting too much to be said about the budget, deficit or debt.

There are four reasons.

First, as much as a budget person likes me hates to admit it, all three of those topics are highly contentious, wonkish and almost certainly will darken the mood. In other words, they'll do exactly what most president's don't want to do with a SOTU.

Second, the president will want to use the speech to talk about his vision, that is, about the "promised land" voters will find if they follow his lead. He will want to make it clear that budget problems will be solved, or at least diminished, as the country moves in that direction rather than the country will move in the right direction if it solves the budget problem.

Third, there will be plenty of time in the coming weeks for the White House to talk about these topics. In fact, as soon as the SOTU and the follow-up events the administration has planned around the country are over, that's just about all it will be discussing through the end of March. The SOTU is almost the admnistration's last chance not to focus on these things.

Posted by Stan Collender

It now looks like the Senate on Wednesday will pass the "no budget no pay" version of the debt ceiling increase that has already been adopted by the House.

This will be the third GOP budget miscalculation, misstep and mistake in a row.

The first was the fiscal cliff, which turned out to be a political debacle for congressional Republicans in general and House Speaker John Boehner (OH) in particular. Boehner's Plan B disaster will go down in U.S. political history as one of the most ill-conceived efforts by any speaker on any issue. The ultimate result was that the House GOP was forced to do something it told its base it would never do -- allow an increase in taxes to be considered and enacted. It also had to kill the so-called Hastert rule (nothing comes to the House floor unless a majority of the majority are in favor of it) to do it.

The second was the empty GOP threat to use the federal debt ceiling to get the White House to agree to spending cuts. The dollar-for-dollar formula that for months Boehner had been saying was a nonnegotiable demand was completely dropped when the administration refused to negotiate.

Posted by Stan Collender

CG&G alum Bruce Bartlett has an important column about federal spending in The Fiscal Times that does what Bruce does best: Say it straight with no BS.

What Bruce shows -- convincingly -- is that, contrary to those that say federal "spending" is the long-term problem, the real problem is spending in just one area -- interest payments on the national debt. Spending on virtually every other area of the budget is flat over the long term while interest starts to rise precipitously in 2020 and keeps rising over the next 60 years.

This isn't to say that interest payments on the national debt don't constitute federal spending because that obviously isn't true. But, as Bruce points out, the deficit for the non-interest part of the budget -- the "primary deficit" -- is only 1.7 percent of GDP over the long run and that makes it far less scary than the deficit scolds want us to believe.



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