Yesterday’s presentation by the U.S. Treasury was a comical spectacle—at least for those of us with sardonic senses of humor. The good news? The deficit for FY2014 (which ended September 30) was 29 percent lower than the deficit was in FY2013. Increased corporate tax receipts drove much of the deficit reduction.
The bad news? The actual deficit was $483 billion, or nearly half-a trillion dollars. Only in Washington, D.C. can such a massive gap between spending and revenues be celebrated.
Despite a government shutdown and sequestration, government outlays did not go down. In fact, the Treasury reported, spending went up by $50 billion, to $3.5 trillion from $3.45 trillion the previous year.
Rather than admit that the federal government still has a spending problem, Secretary Jacob Lew and OMB Director Shaun Donovan oozed spin. “The President's policies and a strengthening U.S. economy have resulted in a reduction of the U.S. budget deficit of approximately two-thirds–the fastest sustained deficit reduction since World War II.”
Of course, as BusinessWeek pointed out, Lew’s baseline was, yes, FY2009 when the federal deficit reached its highest level ever: $1.4 trillion. This is a bit like a baseball player batting .166 in FY2014 and bragging that he raised his average by two-thirds over the past 5 years. To put FY2014’s $483 billion deficit in perspective, the deficit in FY2008 (when the economy was still in the tank) was $455 billion.
Meanwhile, the accumulated deficits continue to climb. FY2014’s half-trillion dollar deficit boosts the federal debt to a frightful $12.8 trillion. And the nation remains on a fiscally unsustainable path. CBO predicts—absent any congressionally enacted changes to current law—“by 25 years from now, rising budget deficits would push federal debt held by the public to more than 100 percent of GDP, a level seen only once before in U.S. history, just after World War II. To put the budget on a sustainable path, lawmakers will need to cut benefits from some large programs relative to current law, raise tax revenue above its historical percentage of GDP to pay for the rising cost of those programs, or adopt a combination of those approaches. Moreover, the changes in federal spending or revenues that would be required to achieve certain possible objectives for federal debt are substantial.”
One can only hope that the new Congress, which arrives in late January, will take seriously the nation’s fiscal mess. And act.
Kevin R. Kosar is the director of the governance project and a senior fellow at the R Street Institute.