U.S. Budget Deficit to Slip to $1.1 Trillion

by John M. Curtis
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Copyright February 3, 2012
All Rights Reserved.                                         

             Just as GOP candidates slam President Barack Obama for mismanaging the economy, the Congressional Budget Office forecasts that federal budget deficit that topped $1.4 trillion under former President George W. Bush will drop to $1.1 trillion in 2012, leveling off at around $1 trillion thereafter.  If the country continues to add around 100,000 government and private sector jobs a month for the next five years, the deficit could be eliminated entirely, when the employment rate dips below 7%.  When you consider how Barack’s national health care initiative, should it survive the Supreme Court this spring, could add millions of jobs, the nation’s economic prospects don’t look that bleak.  Today’s GOP primary in Florida is built around bashing Obama’s economic policies that have taken the Dow Jones Industrial Average from 8,000 on Inauguration Day to near 13,000.

           Beyond despising Obama, Republican candidates agree on one thing:  That the federal government should be downsized, shrunk to a smaller piece of the Gross Domestic Product.  Today’s good news on budget deficits is bad news for the GOP trying to sell Obama as economically incompetent. Yet facts are stubborn things.  Lowered budget deficits indicate that with over 3.2 million folks with new jobs since June 2010, the federal treasury has collected more taxes.  As the trend continues, the government, even with the lowest tax rates in U.S. history, could balance its books by 2017.  If the CBO’s estimates are correct, the budget deficit to GDP ratio could drop to 7.3% by Election Day, a far more manageable figure.  GOP presidential candidate Rep. Ron Paul’s (R-Texas) urgent $1 trillion slash in the federal budget would be irrelevant and economically destructive.

             Paul’s budget prescription would toss 25% of the federal workforce into unemployment, adding greatly to federal budget deficits.  Keeping folks employed, whether in government or privately, is government’s top priority for collecting more payroll taxes to fund Washington’s vast national projects.  Slashing the federal budget would hurt government contracting and social spending.  Whether Paul knows it or not, the framers never imagined a population that would grow from 2.5 million in 1776 to over 310 million in 2011.  With so many immigrants coming from Latin America, does the GOP really believe the government should provide less support?  Slashing federal funds to education, health care, social programs, etc., sounds good to an angry mob but pulls the rug out from underneath citizens and residents needing help.  More employment and tax receipts are good news.

            Rabid Obama-basher House Budget Committed Chairman Rep. Paul Ryan (R-Wis.) painted the CBO’s forecast in dire terms.  “Four straight years of trillion-dollar deficits, no credible plans to lift the crushing burden of debt,” said Ryan, cheerleading for the GOP.  Ryan knows that federal budget deficits, despite all the bailouts under Bush and Obama, have improved significantly, showing an unmistakable trend toward lower future deficits.  More partisan zealotry doesn’t accurately characterize the evolving U.S. economy.  “The president and his party’s leaders have fallen short in their duty to tackle our generation’s most pressing fiscal and economic challenges,” said Ryan, who raised no such objections when Bush drove the deficit to $1.4 trillion.  While Ryan preaches to the GOP choir, he disseminates misleading propaganda for those trying to get an accurate economic picture.

          News of shrinking budget deficits is bad news for Republicans.  Putting 3.2 million folks back to work since 2010 added to government coffers, shrinking today’s deficits down to $1.1 trillion.  When Ryan talks of “our generations most pressing and economic challenges,” he apparently not talking about creating jobs.  He’s referring to wiping out today’s budget deficits that he knows directly relate to high unemployment.  Ryans’ approach would throw thousands of federal, state and local government employees into unemployment.  He ignores the interrelated partnership between government and private employment.  Ryan and other savvy GOP officials know that the federal government is the nation’s largest employer.  Slashing the federal budget would be the worst possible action on an already shaky economy, requiring both government and private sector employment.

            Republicans like Ryan continue their zealous “no tax pledge,” expecting the government to fund needed social and defense programs with less revenue.  Today’s tax structure, especially for upper income tax payers, has them paying less in federal and state taxes than middle class taxpayers.  Billionaires like Warren Buffett have urged Congress to adopt the “Buffett Rule,” requiring millionaires and billionaires to pay 30%, not the current 15%.  “Republicans must be willing to put revenue on the table,” said Senate Budget Committed Chairman Kent Conrad (D-N.D.), hoping that expired Bush tax cuts will reinstate the government’s revenue stream.  Given today’s improving employment trend, even without higher taxes, the government should continue to reduce budget deficits.  Instead of slashing the federal budget, the GOP should accept reality and admit the improvement.

  John M. Curtis writes politically neutral commentary analyzing spin in national and global news.  He's editor of OnlineColumnist.com.and author of Dodging the Bullet and Operation Charisma.       

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