The nonpartisan Congressional Budget Office (CBO) on Wednesday raised its projection for this year's federal deficit to $506 billion. The budget office's last report in April had projected the deficit for fiscal 2014 would top out at $492 billion on Sept. 30.
The same week, then-House Majority Leader Eric Cantor (R-Va.) told Fox News that Congress should be "focused on trying to deal with the ultimate problem, which is this growing deficit."
Neither lawmaker was making sense, even at the time. The United States isn't running "trillion-dollar deficits every year"; the deficit isn't "the ultimate problem"; and the budget shortfall, as we were reminded today, isn't "growing."
The minor difference between the latest figures -- which are not final until the fall -- and the previous projection are a gap in corporate income taxes, which will affect the final tally at the end of the fiscal year. (The entirety of the latest CBO report is online here.)
Regardless, at this point, the deficit is on track to reach a six-year low, and is expected to fall further next year. In fact, looking ahead, the CBO projects modest deficits for another decade.
How we got to this point matters.
As we discussed in May, the federal government recently raised taxes and cut spending, which invariably means a smaller deficit.
This remains a basic budgetary truism that Republicans continue to resist. Indeed, last year, when top marginal rates increased on households making more than $400,000 a year, a variety of GOP lawmakers argued that this would likely cause the deficit to go up -- as they saw it, higher taxes on the wealthy would slow growth, which would mean fewer jobs, which would mean fewer people paying income taxes, which would mean a larger deficit.
And we now know they were wrong -- again -- though this will probably do nothing to shake the Beltway perception of the GOP as the “fiscally responsible” party.
Let’s also note that the shrinking deficit -- we’re seeing the fastest reduction since the end of World War II -- is also one of the nation’s best-kept secrets. It was just last year when an independent national poll asked Americans whether they thought the deficit was increasing, decreasing, or staying about the same. Only 6 percent of the country recognized reality. That’s not a typo; it was just 6 percent.
The fact remains, however, that the annual budget deficit is on track this year to have shrunk by about $900 billion since President Obama took the oath of office.
Responding to the news today, a Republican spokesperson for the House Budget Committee told The Hill, "Too many families are living paycheck to paycheck, and if this report is any indication, things aren't getting much better. We need to get spending under control, so we can build a healthy economy and expand opportunity for everyone in this country."
It's the sort of quote that helps capture everything that's wrong with the debate over the deficit. If the economy is struggling, the GOP argument goes, it's imperative that Congress take capital out of the system and reduce demand. By most sane measures, that's bonkers, but Republicans won't let their uninterrupted streak of being completely wrong get in the way of ridiculous rhetoric.
Indeed, to reiterate a point from last fall, I don’t consider this sharp reduction in the deficit to be good news at all. On the contrary, I strongly believe the nation should be borrowing more, not less, taking advantage of low interest rates, investing heavily in infrastructure and economic development, creating millions of jobs, and leaving deficit reduction for another day.
That said, if we’re going to have a fiscal debate, it should at least be rooted in reality, not silly misconceptions. And the reality is, we’re witnessing deficit reduction at a truly remarkable clip. Every conservative complaint about fiscal recklessness and irresponsibility in the Obama era is completely divorced from reality.