Thursday, May 16, 2013

Inept Obama Administration Buries the Good Economic News on the Deficit

An Important Number That Will Be Ignored Because of Republican/Media Hysteria

Even when the Obama Administration does good things they tend to get lost in the battle with Republicans and the Media over what is important.  Like the Clinton Administration before it, the Obama Administration inherited a huge deficit and like the Clinton Administration before it the Obama Administration is bringing down the deficit.

The US budget deficit is declining faster than expected as the rebound of the world’s largest economy helps the government collect more revenue from businesses, households and the two mortgage companies it rescued in the financial crisis.

How big a deal is this and how much deficit reduction is taking place?

New figures released by the non-partisan Congressional Budget Office showed the US budget deficit falling to $642bn, or 4 per cent of gross domestic product.

The CBO figures mark a $203bn improvement over its earlier projection only three months ago and a sharp reduction compared with the $1.1tn deficit of 2012, or 7 per cent of GDP. The CBO predicted the deficit would decrease further to 3.4 per cent of GDP in fiscal 2014 and 2.1 per cent the year after, before it starts rising again.

Now economically this may not be all that beneficial.  Lack of government spending at both the federal and state level may well slow down the recovery.  Cuts in government employment has been a major reason why the recovery has been weak and why employment has not gained as much as it should have. But the political news is very good, or would be if anyone is paying attention.

Instead the Republicans are trumpeting a phony Libya story which the press is going along with, and everyone is mad about the IRS targeting conservative groups.  And that story will wipe out any benefits the Democrats get from meeting Republican and public demands to cut the deficit. 

Mr. Obama dealt the country and the Democrats a massive blow in 2010 by his amateurish political blunders, and if he keeps it up he can do the same to the country in 2104.  All leads to a story that repeats itself again, Democrats govern effectively, Republicans win elections.

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