Perhaps nobody in Congress has noticed, but the nonpartisan Congressional Budget Office reported this week that Washington is on track to post its smallest budget deficit in five years – since the onset of the Great Recession.
This should qualify for at least a little hooting and hollering on Capitol Hill, but there has been none. Instead, there is continued talk of shutting down the government, of more loony brinksmanship over the federal debt limit and, generally, of overarching government dysfunction.
But this is significant news. The deficit, which has topped $1 trillion since the final budget presented by former President George W. Bush, was $97.6 billion for the month of July, for a 2013 running total of $607.4 billion. That is more than one-third smaller than the $973.8 billion deficit recorded at the same point last year, and it puts the country on track to produce a deficit of $670 billion for the fiscal year ending Sept. 30, down from last year’s $1.09 trillion. That’s big news.
No one likes running a deficit, of course, and $670 billion worth of red ink is nothing with which anyone should be satisfied – especially given that Washington was running a surplus at the end of the Clinton administration. But some context is required.
As unwanted as deficits are, they are typical and even necessary in a time of economic recession. Deficits grow because Americans are out of work, buying fewer things, taking fewer vacations, paying less taxes. With revenues down, government’s choices are to raise taxes, run deficits or watch as critical government functions shut down or are threatened, and even more people are put out of work – teachers, police officers, air traffic controllers and more. Then, life becomes more dangerous and the recession grows deeper.
The good news is that pressures are easing. Revenues are up because of economic growth and higher tax rates, approved shortly after President Obama won re-election. Government sequestration – mindless across-the-board budget cuts – doesn’t appear to have contributed significantly.
This calls not just for a cheer from Congress, but for a commitment to seeing that the deficit continues to decline. As a political matter, that means everything needs to be on the table: revenues and spending, including entitlements.
Both sides will howl, but there can be no other way. Neither Republicans nor Democrats will absorb a blow unless the other party does, too. But they will be rewarded by voters in the center of the country if those Americans see continued significant progress not only on the deficit, but on the steps needed to ensure the long-term health of Medicare and Social Security.
This is a critical moment for the nation’s financial outlook. Washington can do nothing, and hope things continue in the right direction; it can sabotage the whole effort through the political stunts that have become so familiar to voters; or it can act responsibly, taking advantage of an improving economy and encouraging it along.
The right choice is obvious.