On Thursday, the Treasury Department announced that the U.S. government’s fiscal year 2013 deficit has fallen below $1 trillion for the first time in five years, noting that the improving economy and increasing revenues has lowered the deficit from $1.089 trillion in fiscal year 2012 (or 6.8 percent of GDP) to $680.28 billion (or 4.1 percent of GDP) in fiscal year 2013. The deficit had peaked at 10.1 percent in 2009. The White House noted that the figures mean that as a percentage of GDP, the deficit has been more than cut in half since 2009, “the fastest decline in the deficit over a sustained period since the end of World War II.”
The release came as Congressional budget negotiators met for the first time to reconcile the divergent House and Senate budget bills and reach a modest deal.
Democrats hope to undo the automatic budget cuts that went into effect in March, while the GOP is seeking reductions in mandatory spending. The parties clashed on taxes, with some Republicans flatly rejecting increasing revenue and Democrats insisting that any deal must include ending some tax breaks. Senate Majority Leader Harry Reid (R-NV) had previously said that “any large-scale debt-reduction deal must include increased revenue in exchange for changes to mandatory spending programs.”
At least some Republicans remain open to that possibility, however. “I believe that it should be, but not in the way some of my friends on the other side of the aisle suggest,” Rep. Tom Cole (R-OK) said. “More revenue doesn’t and shouldn’t mean higher taxes.”
Since 2011, lawmakers have agreed to $2.4 trillion in deficit reduction — 72 percent of which has come through spending cuts. Indeed, this unbalanced approach to deficit reduction sank the super committee established under the Budget Control Act and it’s a likely to doom this new effort.
Yet the falling deficit is just part of the ample evidence that there is no need to focus on spending cuts. Fiscal projections have much improved over the past three years. Meanwhile, the deficit would actually look better if sequestration were completely done away with. Yet Republicans have decided to embrace the cuts as good way to reduce spending despite the economic pain they have inflicted.