Is our deficit actually shrinking?

[WethePeopleUS]

Bloomberg businessweek reported that our deficit is shrinking faster than projected. Thanks to increased tax revenues, the budget deficit will shrink to $642 billion this year, or 4 percent of GDP. That’s the lowest aggregate deficit since 2008 and less than half the size of 2009′s deficit, which was 10.1 percent of GDP. Do people realize that our economy almost collapsed in 2008-2009, and that we couldn't fix these problems overnight? Slowly but surely, we are getting back on our feet.

Moreover things should keep improving over the next couple years: By 2015 the deficit will fall to 2.1 percent of GDP. Even more impressive is that these adjustments aren’t a function of the sequester’s $85 billion in cuts, nor the tax increases Congress passed in January. Those were both baked into the CBO’s February estimates. This is just plain old organic growth of private sector tax receipts, which means that neither Congress nor the White House can take credit for this.

The Incredible Shrinking Budget Deficit - Businessweek

 

[S.J.]

In other words, Obama is only overspending by $642 billion, after 4 consecutive years of over a trillion dollars. It's still higher than any president in history. You call that progress?

 

[Decus]

Funny that you would use this article to imply that those elected officials are making good decisions - they are NOT.

"Congress has gotten away with its awful handling of the economy for one big reason: The Fed has done a lot more to aid the economy than Congress has done to harm it. Unprecedented "quantitative easing" by the Fed has pushed interest rates far lower than they'd otherwise be, boosted stock values, accelerated a housing rebound and generally persuaded investors and consumers that there's some adult leadership in Washington."

"Here's how powerful the Fed's policies have been. The spending cuts known as the sequester, which went into effect March 1, will cut about $85 billion in spending in 2013. That's a lot, which is why the battle over the cuts has been headline news. But the Fed is injecting $85 billion per month into the economy, through a bond-purchase program that's been in place since late 2008. "The Fed is putting liquidity equal to about 6 percent of GDP into the system each year," says Rick Rieder, chief investment officer of fixed income at investing firm BlackRock. "That's what's important to the markets.""

How Ben Bernanke Is Enabling Congress - Rick Newman (usnews.com)

"Keep in mind, the Fed currently is buying $85 billion of securities per month, or $1.02 trillion per year."

Does this "unprecedented" trillion dollar 2013 (projected) QE appear in the Federal budget and is it counted towards the deficit? Probably not, Budget accountancy is a game of smoke and mirrors in this case and nobody knows where the money goes. The fact remains that should the ponzi scheme known as the stock market collapse, US taxpayers will be paying for the Federal Reserve's "printing" of new money.

 

[USNavyVet]

Federal revenues increased this year due to the changes in the tax laws that went into effect and caused many investors to take the dividends at the end of last year and pay the taxes on them. We won't see revenues as high this year because the sell off already occurred. Therefore our deficit will grow larger next year. This happened once before during the reign years if I remember correctly. The WSJ article isn't the one I was looking for but it points out the reason.

"Higher payroll taxes, higher tax rates for households making more than $450,000 and improved wages have boosted receipts. Also, many bonus and dividend payments were moved up to December to avoid higher taxes, possibly distorting figures through the first part of the fiscal year."


U.S. Posts Biggest Monthly Surplus in 5 Years - Real Time Economics - WSJ

 

[Toro]

Bloomberg businessweek reported that our deficit is shrinking faster than projected. Thanks to increased tax revenues, the budget deficit will shrink to $642 billion this year, or 4 percent of GDP. That’s the lowest aggregate deficit since 2008 and less than half the size of 2009′s deficit, which was 10.1 percent of GDP. Do people realize that our economy almost collapsed in 2008-2009, and that we couldn't fix these problems overnight? Slowly but surely, we are getting back on our feet.

Moreover things should keep improving over the next couple years: By 2015 the deficit will fall to 2.1 percent of GDP. Even more impressive is that these adjustments aren’t a function of the sequester’s $85 billion in cuts, nor the tax increases Congress passed in January. Those were both baked into the CBO’s February estimates. This is just plain old organic growth of private sector tax receipts, which means that neither Congress nor the White House can take credit for this.

The Incredible Shrinking Budget Deficit - Businessweek

So the answer to the title of the thread is "yes," then.

 

[Decus]

A stay of execution is enough to make you rejoice. Sadly the stay is temporary so enjoy it while you can.

 

[WethePeopleUS]

Funny that you would use this article to imply that those elected officials are making good decisions - they are NOT.

"Congress has gotten away with its awful handling of the economy for one big reason: The Fed has done a lot more to aid the economy than Congress has done to harm it. Unprecedented "quantitative easing" by the Fed has pushed interest rates far lower than they'd otherwise be, boosted stock values, accelerated a housing rebound and generally persuaded investors and consumers that there's some adult leadership in Washington."

"Here's how powerful the Fed's policies have been. The spending cuts known as the sequester, which went into effect March 1, will cut about $85 billion in spending in 2013. That's a lot, which is why the battle over the cuts has been headline news. But the Fed is injecting $85 billion per month into the economy, through a bond-purchase program that's been in place since late 2008. "The Fed is putting liquidity equal to about 6 percent of GDP into the system each year," says Rick Rieder, chief investment officer of fixed income at investing firm BlackRock. "That's what's important to the markets.""

How Ben Bernanke Is Enabling Congress - Rick Newman (usnews.com)

"Keep in mind, the Fed currently is buying $85 billion of securities per month, or $1.02 trillion per year."

Does this "unprecedented" trillion dollar 2013 (projected) QE appear in the Federal budget and is it counted towards the deficit? Probably not, Budget accountancy is a game of smoke and mirrors in this case and nobody knows where the money goes. The fact remains that should the ponzi scheme known as the stock market collapse, US taxpayers will be paying for the Federal Reserve's "printing" of new money.

I do not believe that in my OP that I was advocating that our elected officials had anything to do with it. True enough I did mention that tax increases had something to do with the situation, but it was not the sole reason. In the article that I used as a reference, the second paragraph explicitly states that: "This is just plain old organic growth of private sector tax receipts, which means that neither Congress nor the White House can take credit for this. (Which, of course, means that they will.)"

 

[WethePeopleUS]

In other words, Obama is only overspending by $642 billion, after 4 consecutive years of over a trillion dollars. It's still higher than any president in history. You call that progress?

Most presidents recently have had deficits. How big or how small depends on the state of the economy upon taking office. Since Bush sent our economy down the toilet, would we assume that when Obama took office, he was going to wave a magic wand and fix everything overnight? That is surely what it seems people like you think. Anything this country does to get back on their feet just isn't good enough for you, unless it goes back to being 100%. Sorry, but that is not going to happen.

 

[Sallow]

Bloomberg businessweek reported that our deficit is shrinking faster than projected. Thanks to increased tax revenues, the budget deficit will shrink to $642 billion this year, or 4 percent of GDP. That’s the lowest aggregate deficit since 2008 and less than half the size of 2009′s deficit, which was 10.1 percent of GDP. Do people realize that our economy almost collapsed in 2008-2009, and that we couldn't fix these problems overnight? Slowly but surely, we are getting back on our feet.

Moreover things should keep improving over the next couple years: By 2015 the deficit will fall to 2.1 percent of GDP. Even more impressive is that these adjustments aren’t a function of the sequester’s $85 billion in cuts, nor the tax increases Congress passed in January. Those were both baked into the CBO’s February estimates. This is just plain old organic growth of private sector tax receipts, which means that neither Congress nor the White House can take credit for this.

The Incredible Shrinking Budget Deficit - Businessweek

So the answer to the title of the thread is "yes," then.

Well yeah.

But conservative are loath to credit Obama for anything.

It also shows they do not care about spending.

 

[Rozman]

Bloomberg businessweek reported that our deficit is shrinking faster than projected. Thanks to increased tax revenues, the budget deficit will shrink to $642 billion this year, or 4 percent of GDP. That’s the lowest aggregate deficit since 2008 and less than half the size of 2009′s deficit, which was 10.1 percent of GDP. Do people realize that our economy almost collapsed in 2008-2009, and that we couldn't fix these problems overnight? Slowly but surely, we are getting back on our feet.

Moreover things should keep improving over the next couple years: By 2015 the deficit will fall to 2.1 percent of GDP. Even more impressive is that these adjustments aren’t a function of the sequester’s $85 billion in cuts, nor the tax increases Congress passed in January. Those were both baked into the CBO’s February estimates. This is just plain old organic growth of private sector tax receipts, which means that neither Congress nor the White House can take credit for this.

The Incredible Shrinking Budget Deficit - Businessweek

Just think where we will be in the year 3000.

We should be in fantastic shape then...

 

[Rozman]

Something for all of us to look forward to...

I guess.

 

[WethePeopleUS]

Bloomberg businessweek reported that our deficit is shrinking faster than projected. Thanks to increased tax revenues, the budget deficit will shrink to $642 billion this year, or 4 percent of GDP. That’s the lowest aggregate deficit since 2008 and less than half the size of 2009′s deficit, which was 10.1 percent of GDP. Do people realize that our economy almost collapsed in 2008-2009, and that we couldn't fix these problems overnight? Slowly but surely, we are getting back on our feet.

Moreover things should keep improving over the next couple years: By 2015 the deficit will fall to 2.1 percent of GDP. Even more impressive is that these adjustments aren’t a function of the sequester’s $85 billion in cuts, nor the tax increases Congress passed in January. Those were both baked into the CBO’s February estimates. This is just plain old organic growth of private sector tax receipts, which means that neither Congress nor the White House can take credit for this.

The Incredible Shrinking Budget Deficit - Businessweek

Just think where we will be in the year 3000.

We should be in fantastic shape then...

Sarcasm duly noted

 

[itfitzme]

The only problem with the debt and deficit is that, at some point, we cannot borrownany more.

I still have the unresolved issue that the process by which the money supply is maintained requires that there be a continuous increase in debt in the economy. Fundamentally, the debt will reside in the public, business or consumer sector. Paying down the public debt simply shifts it over to one of the other two. The question where that debt is more "efficiently" maintained and under what economic conditions.

What bothers me most is the conclusion that the debt maintained money supply process requires an exponentially increasing interest burden as new debt is incurred to cover principle and interest on previous debt. I don't see it as sustainable and repeated business cycles, lacking exogenous shocks, are not tremendously surprising. Nor is the debt and deficit.

So far, I have yet to find an answer to this. It seems to be a pretty obvious conclusion that should be highlighted and addressed in "macro econ" or "money and banking".

Unless this issue is resolved, the rest is a mute point. Seems to me, alot of questions end up being "barking up the wrong tree". Flat tax or progrogressive tax, austerity or stimulus, it's like asking if the gas tank should be filled with regular or supreme when the engine has a blown head gasket. It's like asking a gunshot victim if he is alergic to asprin. It's like asking passengers on the Titanic if they would prefer waiting for rescue in the main dining room or the sundeck.

 

[itfitzme]

In other words, Obama is only overspending by $642 billion, after 4 consecutive years of over a trillion dollars. It's still higher than any president in history. You call that progress?

real dollars per capita terms? How does it then compare? Obviously, the rate and population growth causes nominal aggregate dollars to increase even when per capita real dollars is flat.

What is the maximum rate at which the deficit can be reduced without creating a recession, economic collapse or unreasonable hardship?

Most reporting is based on an oversimplified static, feed forward, model of the economy. It makes for conclusions that don't mean anything.

 

[itfitzme]

"Here's how powerful the Fed's policies have been. The spending cuts known as the sequester, which went into effect March 1, will cut about $85 billion in spending in 2013. ... the Fed is injecting $85 billion per month into the economy, through a bond-purchase program ...

Nice. *

Do you happen to know how the QE rate compares to the rate that money is going into M1?

Monetery policy is not suppose to substitute for fiscal policy. *Unfortunately the Congress is not able to function effectively as a fiscal policy manager. *

 

[EdwardBaiamonte]

"This is just plain old organic growth of private sector tax receipts,

organic????? Actually it is anti anti anti organic given that it is backed by BO's $787 billion inorganic stimulus and $85 billion inorganic 5 year easing a month from the Fed!

The real question is, how on earth will the addict survive when the drugs are no longer administered or, more importantly, how will the addict survive when the Fed takes back all the money it has injected without causing a great depression.