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Good News on the Budget Deficit?

June 28, 2013 in Economics

By Doug Bandow

Doug Bandow

If you’re a big spender, there’s good news in Washington. The deficit is down. The budget crisis is over. So Uncle Sam can go back to his wastrel ways!

Indeed, the usual suspects insist, it’s time to spend more. The federal government should provide more stimulus spending to put people back to work. Food Stamps should not be cut despite nearly doubling in cost over the last five years. Every state should expand Medicaid. Social Security benefits should be increased, not reduced. After years of horrible, painful austerity, it’s time to party!

Only in Washington.

A normal person could be forgiven for believing the U.S. faces a budget crisis of extraordinary proportions. Uncle Sam has run up $5 trillion in red ink over the last four years. The national debt now approaches $17 trillion. Economist Laurence Kotlikoff figured total federal debts, unfunded liabilities, and other obligations exceed $220 trillion.

But no. The Congressional Budget Office has delivered us from a life of pessimism and tears, of penury and privation. It recently issued new budget projections, which put Uncle Sam’s red ink this year at $642 billion.

That’s one-sixth of total federal outlays. It is 50 percent higher than that pre-Obama record deficit in 2008. It is adding huge obligations for tomorrow’s taxpayers to pay.

But no matter. It is less than previously predicted. So no more need for “austerity.” No more necessity for “draconian” budget cuts. No more cause to balance the budget “on the backs of the poor.” Now Washington can get back to what Washington does best — spending taxpayers’ money on clamorous interest groups.

In fact, the CBO’s latest report, “Updated Budget Projections: Fiscal Years 2013 to 2023,” actually demonstrates that we face a continuing, enduring, and potentially catastrophic budget crisis. The near term is slightly less disastrous than originally thought. But without a genuine change of direction, the federal Leviathan remains headed over an economic cliff.

There is one bit of good news. The deficit is falling. Earlier this year CBO figured the likely 2013 deficit at $845 billion. Now the organization estimates $642 billion.

However, this reduction does not reflect spending restraint. Rather, tax collections are up and the housing revival has at least temporarily stopped the fiscal bleeding of Washington’s boondoggle housing agencies. Explained the agency: the deficit estimate dropped significantly from February “mostly as a result of higher-than-expected revenues and an increase in payments to the Treasury by Fannie …read more

Source: OP-EDS

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