There’s a lot of political concern in Washington about public anxiety about budget deficits. Substantively, the public’s concerns don’t really make sense, as deficit-reduction amidst a severe recession will only make the recession more severe. But Stan Collender, whose deficit hawk credentials should not be in question, observes that the political problem is largely a mirage as well:
If you look beyond the very short-term, the deficit situation will begin to turnaround next year, that is, before the election. Under current forecasts, the deficit will fall by a record amount from 2009 to 2010. It will still be high by virtually anyone’s standards — probably around $1 trillion or so. But the big change in the right direction will give the White House the breathing room it needs and alter the politics substantially. Anyone want to bet that there will be a cover story somewhere next year calling Obama the deficit killer?
This will, of course, not be a substantive fix for anything. But the nominal deficit reduction will, indeed, be huge. As the economy recovers, tax revenues will rise, social safety net outlays will fall, and stimulus measures will begin to tamp down. If we can assume further growth in 2011, the complete expiry of Recovery Act provisions, and the winding down of the Iraq War, that’ll be further deficit reduction. On the merits, people would still do well to be concerned about the deficit further out when, in the absence of structural reform of the health care sector, Medicare costs will bury us all. But in the short term, things are going to look worse than they really are in 2009 and then look better than they really are in 2010. And of course people vote in the even-numbered years.