The Federal Deficit Is Shrinking Already, But That’s Not Really a Good Thing

Let our journalists help you make sense of the noise: Subscribe to the Mother Jones Daily newsletter and get a recap of news that matters.

So how’s the federal deficit doing? Last month the Treasury Department figured that the FY2012 deficit would clock in at about $1.1 trillion, or 7 percent of GDP. That’s down considerably from three years ago, when the deficit peaked at a hair over 10 percent of GDP.

Jed Graham, using the three-year change as a benchmark, says this is the biggest peacetime drop in 75 years:

Believe it or not, the federal deficit has fallen faster over the past three years than it has in any such stretch since demobilization from World War II….If U.S. history offers any guide, we are already testing the speed limits of a fiscal consolidation that doesn’t risk backfiring. That’s why the best way to address the fiscal cliff likely is to postpone it.

….Other occasions when the federal deficit contracted by much more than 1 percentage point a year have coincided with recession. Some examples include 1937, 1960 and 1969.

This three-year window feels a little like cherry-picking to me. I’m not sure it has any special value aside from the fact that it happens to give us a comparison with the peak deficit year of 2009, therefore making this year’s decline look especially steep. Still, there’s no question that no matter what window you look at, the deficit is shrinking at a pretty rapid pace, as the chart on the right shows. And Graham is right: this means that the government “already has its foot on the brakes” at a time when our recovery from the Great Recession is still pretty fragile. Braking even harder isn’t a great idea right now.

There’s nothing wrong with negotiating over long-term deficit reduction, but that’s all we should be negotiating over: long-term reduction. Over the next year or two, there’s really no reason we should be shrinking the deficit at all.

SIX TRUTHS

Reclaiming power from those who abuse it often starts with telling the truth. And in "This Is How Authoritarians Get Defeated," MoJo's Monika Bauerlein unpacks six truths to remember during the homestretch of an election where democracy, truth, and decency are on the line.

Truth #1: The chaos is the point.

Truth #2: Team Reality is bigger than it seems.

Truth #3: Facebook owns this.

Truth #4: When we go to work, we're in the fight.

Truth #5: It's about minority rule.

Truth #6: The only thing that can save us is…us.

Please take a moment to see how all these truths add up, because what happens in the weeks and months ahead will reverberate for at least a generation and we better be prepared.

And if you think journalism like Mother Jones'—that calls it like it is, that will never acquiesce to power, that looks where others don't—can help guide us through this historic, high-stakes moment, and you're able to right now, please help us reach our $350,000 goal by October 31 with a donation today. It's all hands on deck for democracy.

payment methods

SIX TRUTHS

Reclaiming power from those who abuse it often starts with telling the truth. And in "This Is How Authoritarians Get Defeated," MoJo's Monika Bauerlein unpacks six truths to remember during the homestretch of an election where democracy, truth, and decency are on the line.

Truth #1: The chaos is the point.

Truth #2: Team Reality is bigger than it seems.

Truth #3: Facebook owns this.

Truth #4: When we go to work, we're in the fight.

Truth #5: It's about minority rule.

Truth #6: The only thing that can save us is…us.

Please take a moment to see how all these truths add up, because what happens in the weeks and months ahead will reverberate for at least a generation and we better be prepared.

And if you think journalism like Mother Jones'—that calls it like it is, that will never acquiesce to power, that looks where others don't—can help guide us through this historic, high-stakes moment, and you're able to right now, please help us reach our $350,000 goal by October 31 with a donation today. It's all hands on deck for democracy.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate