Some news about the federal budget deficit: the sky still isn’t falling.
It was only a few short years ago that the deficit was held up as evidence of the Bush administration’s fiscal recklessness. From nearly every corner, someone was arguing that the end was nigh. Fortune called the deficit “staggering.” Tim Russert, while interviewing the President, referred to his “deficit disaster.” Andrew Sullivan was convinced that “soaring deficits” necessitated a new gas tax. Even Alan Greenspan went to Europe and told reporters that the U.S. budget deficit was “out of control.”
Yesterday, with little fanfare, the Treasury Department reported that the federal deficit fell from October to February, down 25.5 percent from the same period last year. This is consistent with the dramatic fall in the budget gap over the past two years. The White House projects the deficit will be $244 billion by the end of the year. The Congressional Budget Office is even more optimistic, forecasting a deficit of $214 billion. If the White House’s more conservative estimate is right, the deficit will be around 1.7 percent of GDP. The average federal budget deficit over the past 40 years has been 2.4 percent.
I won’t pretend that a single quarterly announcement on deficit figures means that much. But surely it’s time for the legions of economic doomsayers to admit that they were wrong. Or maybe it’s simply an evergreen of American politics to talk about budget deficits as if they were a sign of the end of life as we know it. The country was full of such talk during the 1992 election, when the Concord Coalition was predicting all sorts of horrible fiscal scenarios. Four years later, the country was running a budget surplus. And here is an article from Time that does all the usual hand-wringing on the subject. It is a classic of the genre, peppered with generous citations of the Brookings Institution and containing the apparently essential line: “Some economists are frankly afraid that the nation’s budget is out of control.” The article appeared in 1972.
