For all the sound and fury, Washington’s actually making real progress on debt

[babylonsister]

http://www.washingtonpost.com/blogs/wonkblog/wp/2013/01/20/the-case-for-deficit-optimism/


The case for deficit optimism

Posted by Ezra Klein on January 20, 2013 at 1:08 am

Here’s a secret: For all the sound and fury, Washington’s actually making real progress on debt.


Let’s do some quick math. Start the clock — and the deficit projections — on Jan. 1, 2011. Congress cut expected spending by $585 billion during the 2011 appropriations process. It cut another $860 billion as part of the resolution to the 2011 debt-ceiling standoff. And it added another $1 trillion in spending cuts as part of the sequester. Then it raised $600 billion in taxes in the fiscal cliff deal.

Together, that’s slightly more than $3 trillion in deficit reduction. After accounting for reduced interest payments — as there’s now less debt to pay interest on — it’s more like $3.6 trillion. That’s real money!

In fact, that’s about enough to stabilize the nation’s debt-to-GDP ratio over the next decade. If over the next few years, say, there’s another $800 billion in deficit reduction — imagine a new deal that cuts $400 billion from Medicare and other mandatory spending while raising $400 billion in taxes — then the country is put on a declining debt path.

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But the truth is that deficit reduction is going better than you’d think from listening to the sniping in Washington. So why the continuous freaking out over the deficit? In part, it’s because deficits offer a convenient excuse for politicians to push policies that the American people wouldn’t support on their own terms. Republicans have long wanted to devolve Medicare to private insurers, for instance, but they didn’t get any traction with the idea until they cloaked it in the guise of deficit reduction.

In general, if someone says he thinks the deficit is the most important issue facing the country, but he doesn’t think it’s important enough to merit raising another dollar in taxes, he probably doesn’t really think the deficit is all that important an issue.

If you want to worry over the economy, don’t worry over future deficits, which we can and will get under control. Worry over the labor market, which is in worse shape than predicted a few years ago, and which exhibits fewer bright spots than the budget. The recession was deeper than expected, the recovery has been slower than predicted, and Washington has been feckless in its response than we would’ve hoped. Whereas in late-2011, the Obama administration was at least pushing a big jobs bill, now they and the Republicans have both fallen silent on the issue. At least the deficit has the two sides arguing and trying to act.