"In its updated budget outlook released Tuesday, the CBO now estimates the annual deficit for this fiscal year will be $642 billion or 4% of GDP. That's $203 billion less than the agency estimated a few months ago. The CBO attributes the improved estimate to higher-than-expected tax revenues and an increase in payments to the Treasury by mortgage giants Fannie Mae and Freddie Mac.
By 2015, the deficit will fall to its lowest point of the next decade - 2.1% of GDP. And it will remain below 3% until 2019, at which point it will start to increase again. Deficits below 3% are considered sustainable because it means budget shortfalls are not growing faster than the economy.
Similarly, the CBO now estimates the country's total debt - the sum of annual deficits accrued over decades - will fall to roughly 71% of GDP in 2018 and 2019. That's four percentage points below where it is today."
What's this about Obama's debt-laden policies destroying the United States? The fear over Obama's deficits was always silly insofar as it implied these deficits were causally responsible for economic problems here and now: there is zero substantive research indicating that debt-to-GDP ratios in the range the USG currently maintains are harmful to the economy and countercyclical fiscal/monetary policy (government spending/tweaking interest rates/purchasing assets) is a widely accepted precept of macroeconomics with plenty of empirical support.
Yes, long-term structural problems remain unaddressed, yes the situation in the job market is very disconcerting and Obamacare may exacerbate it, and yes, no one is precisely sure what will happen when the Fed takes its foot off of the quantitative petal. But these issues are independent of my point about the short-term deficits of the Obama Administration.
