Boasting about a 4.2% deficit?

Here’s President Obama in his weekly address on Saturday:

In a little over three years, our businesses have created more than 6.5 million new jobs.

… Corporate profits have skyrocketed to all-time highs.

… Our housing market is healing.

… And our deficits are shrinking at the fastest rate in decades.

If you studied my post last Wednesday on the CBO baseline update, this should strike you as an odd boast.

CBO projects that under current law we would have a deficit of 4% of GDP for 2013, meaning that our debt/GDP will continue to rise. CBO further projects that under the President’s budget we would have a deficit of 4.2% of GDP for 2013, slightly higher than their projected deficit under current law.

President Obama’s words:  Our deficits are shrinking at the fastest rate in decades.

Translation 1:  The rate at which we’re rolling backwards is slowing dramatically.

or Translation 2:  Our debt problem is getting worse much more slowly than in recent years.

That is not something you should boast about.  You’re supposed to boast when things are getting better, not when they’re getting worse more slowly.

I escaped Washington, DC and now teach at Stanford's Graduate School of Business.

Posted in budget
3 comments on “Boasting about a 4.2% deficit?
  1. rjsigmund says:

    Bill McBride has graphed the actual budget deficits as a percentage of GDP since 1980 in purple, and then added the CBO projections for the next ten years in blue:–keZwKo/UZKvpaKDIDI/AAAAAAAAaSc/3Mj3FBoeDQw/s1600/CBOUpdate.jpg

    it’s fairly clear that if the CBO projections play out, the deficits of the next ten years will be no greater than those of the last 22, and certainly less than the last 10 years of Reagan-Bush…

    • Vivian Darkbloom says:

      This chart is highly misleading for two reasons:

      1. The CBO figures from which the chart was developed uses “current law” as a baseline. That is to say, the CBO assumes, among several other major things, that Medicare reimbursement rates will not increase, none of the sequester cuts will take place, etc. Often, the CBO publishes what it admits is a more realistic view of budgetary reality–“the alternative fiscal scenario”. This alternative was not presented in the document that McBride got his data from.

      2. As noted by Hennessey, the CBO data based on “current law” also does not include changes that Obama proposes to current law—his budgets call for higher deficits (even when not accounting for Medicare adjustments etc under “current law”).

      Does comparing historical data (based on what *actually* happened) with a projection of what will almost certainly not happen based on admittedly unrealistic assumptions (and a scenario Obama does not want to happen under his budget) make any sense here?

      • Vivian Darkbloom says:

        The phrase above “none of the sequester cuts will tale place..” should have read “all of the sequester cuts will take place “. (that is, not be reversed).

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