President Obama is propping up any little victory he can massage a narrative out of in order to rally the troops ahead of the November midterms. Usually, there’s little substance underlying the braggadocio.
So it is with his self-congratulation over the much-touted reduction in the federal deficit. The president has repeatedly boasted that the deficit has fallen from a steep $1.4 trillion a few short years ago to $486 billion in 2014. “The tea party is going to have to find something else to complain about,” one Forbes contributor recently intoned.
Yes, that’s a much smaller number. But what’s the context? “Smaller” relative to what?
“[I]t’s it’s worth putting the declining deficit in context, and remembering that, as a Senator, Obama probably would have been appalled by his current deficits,” Reason’s Peter Suderman observes:
The  year’s deficit total, just shy of half a trillion dollars, represents a big drop from the $1.4 trillion peak it hit in Obama’s first term. (More than 40 percent of that reduction came as a result of tax hikes.) But the reduction only came following a massive 800 percent increase in annual deficits.
Notably, it’s still much higher than the typical deficits during the Bush years, which, you may recall, were worrisomely large — indeed, they were large enough that Obama, as a Senator in 2005, declared that “you don’t have to be a deficit hawk to be disturbed by the growing gap between revenues and expenses.” Between the 2006 and 2007 fiscal years, the deficit dropped from $248 billion to $160 billion.
So we started from a bad place, went to a far worse place, and then receded (for the moment) to a place that’s still worse than where we started. Great.
“Simply citing the 66 percent fall in deficits over the past five years without context is misleading, since it follows an almost 800 percent increase that brought deficits to their highest levels in post-war history,” remarked the Committee for a Responsible Federal Budget (CRFB).
And the federal deficit is probably at the lowest point it’s likely to reach under Obama and the 113th Congress — and probably long after that.
“[T]he deficit remains more than three times as high as in 2007 (1.7 percentage points higher as a percent of GDP) and is projected to grow over time,” commented CRFB. “Under CBO’s current law baseline, annual deficits will return to trillion-dollar levels by 2025. Under their more pessimistic Alternative Fiscal Scenario, the deficit will reach $1.5 trillion in 2025, exceeding the nominal-dollar record set in 2009.”
Finally, the ratio of debt-to-gross domestic product (GDP) is growing — an indicator that places any deficit number, however low it may appear, into a context that’s both quantitative and qualitative.
And it’s the qualitative context that looks especially bad.
“[O]ver the same period that deficits fell by 66 percent, nominal debt held by the public grew by 69 percent — from $7.5 trillion to $12.8 trillion,” wrote CRFB. “As a percent of GDP, debt has grown extremely rapidly, from 35 percent of GDP in 2007 to 52 percent of in 2009 and to over 74 percent in 2014.
“… While the deficit has indeed dropped significantly, this drop followed a massive increase, was largely expected, and does not suggest the country is on a sustainable fiscal path. Currently, debt levels are at historic highs and projected to grow unsustainably over the long run.”
For more information on CRFB’s number-crunching, as well as illustrative charts and graphs, check out the nonprofit organization’s Oct. 8 report.