Remember the deficit? It was all the rage — or should we say, RAGE! — in 2009, when it propelled the tea party to the front ranks of American politics and became a driving force in elections around the country.
These days, not so much. The tea party’s popularity and the fury it inspired are ebbing. And so, precipitously, is the deficit. Funny how nobody talks about that.
The numbers are impressive:
• The Treasury Department reported that the deficit for 2013 dropped to $680 billion, from about $1.1 trillion the previous year, the sharpest drop in any one year since World War II.
• Last week, the nonpartisan Congressional Budget Office reported that the shortfall for 2014 would be smaller still, at $492 billion. That estimate is $28 billion less than the figure it reported only two months earlier, representing a total reduction in the deficit of 56 percent in just two years.
• The forecast, if accurate, would place the deficit at 2.8 percent of the country’s total economic output (GNP), well within what most economists consider a safe range. In 2009, reeling from the Great Recession and the steep decline in revenues, the deficit was climbing to near 10 percent.
In all, the deficit has plunged by nearly $1 trillion since 2009, a remarkable figure by any measure and one that contains both lessons about how to deal with economic crises and the nation’s priorities going forward.
The smaller deficit projections are a combination of several factors. Among the most important is the winding down of the wars in Iraq and Afghanistan. The failure to ask for increased revenues to pay for the wars was a colossal mistake that added hugely to the deficit and the national debt. We’ll be paying for it for decades.
Other factors include the economic recovery (such as it is), and tax increases that have yielded more revenue. Cuts in discretionary spending — domestic programs — also helped, but the Obama administration was wise to avoid the severe austerity recommendations embraced by the European Union, which delayed the recovery overseas.
It also undercuts the argument for the budget plan put forward by Rep. Paul Ryan, R-Wis., which would cut budget spending by $5 trillion over the next decade. What is needed now is not more across-the-board cuts in spending, but new programs to increase job growth and spur a robust recovery. A stronger economy, as the numbers above suggest, will spur more revenues and cut the deficits even further.
But just because the budget crisis is over, for now, does not mean that America does not face a long-term problem over balancing the budget.
Mr. Ryan and his Republican colleagues are not wrong to continue to push for reforms in entitlement programs such as Medicare. The same budget office that verified the plunging deficit numbers also forecast that deficits would begin to rise again by the next decade as an aging population requires more healthcare and Social Security outlays, as well as more interest payments on the mounting national debt.
But they are as unlikely to enact entitlement cutbacks without an increase in tax revenues — preferably, by reforming the tax code, rather than simply increasing the tax rate — as Democrats are to get increased taxes without yielding on entitlement reform.
Less spending and more revenue got us out of the immediate deficit crisis. There’s a lesson for Washington in that, if the politicians will heed it.