“Believe it or not, the federal deficit has fallen faster over the past three years than it has in any such stretch since demobilization from World War II.”
~Investors Business Daily
I know that it runs counter to what people have been led to believe relative to the deficit. When we talk about President Obama and the huge federal deficit – the common narrative is that President Obama has built huge deficits based off of his increases in government spending. Only – the facts don’t bear that out. Not only has the deficit shrunk as a % of GDP – it has shrunk faster than at any time since WW2. In fact – if we saw anything faster in terms of cuts – it could have a very negative impact on our economy.
Investor’s Business Daily writes HERE:
In fact, outside of that post-WWII era, the only time the deficit has fallen faster was when the economy relapsed in 1937, turning the Great Depression into a decade-long affair.
If U.S. history offers any guide, we are already testing the speed limits of a fiscal consolidation that doesn’t risk backfiring. That’s why the best way to address the fiscal cliff likely is to postpone it.
From fiscal 2009 to fiscal 2012, the deficit shrank 3.1 percentage points, from 10.1% to 7.0% of GDP.
That’s just a bit faster than the 3.0 percentage point deficit improvement from 1995 to ’98, but at that point, the economy had everything going for it.
They show this chart here showing the impact of the deficit as measured by 3 years as a % of GDP. The deficit is now 3.1% better than it was when he took over.
As Politifact rated as “mostly true” – the increase in government spending under President Obama has increased at the slowest rate in nearly 60 years (source). And that’s actually hurting the economy; if government spending grew at the same rate that it did under Bush Jr. or Ronald Reagan – unemployment would have been below 7% by election day (source). So – President Obama is managing a real balancing act here between addressing the long term debt, negotiating with Republicans intent to sabotage the economic recovery and still growing the economy via Keynesian economics means. That’s a tough needle to thread.
Like us on Facebook?