WASHINGTON – Just four years ago, U.S. deficits and debt were an explosive political combination, propelling Republicans to control of the House of Representatives and fueling the budget fights that would ensue over the next three years.
Today, they are an afterthought in Washington’s political and policy landscape.
The nation’s annual deficit, the amount the government spends beyond what it receives in revenue, has been cut by nearly two-thirds from its 2009 high, thanks to a combination of tax increases, an improving economy and mandatory across-the-board cuts in programs from defence to transportation to education.
And lawmakers, fatigued by their budget battles, have called a truce and abandoned the brinkmanship that led to unnerving default threats and a partial government shutdown last year.
President Barack Obama submits his latest budget plan to Congress early next month.
“It’s hard to deny that there is less political momentum at this moment, in the year 2014, for the type of extensive budget negotiations we saw in 2011 and 2012,” said Gene Sperling, the director of the White House’s National Economic Council and a close Obama adviser.
That doesn’t mean the problem has been solved. The nonpartisan Congressional Budget Office projects deficits will rise again in a couple of years, pushed up by an aging population, rising health care costs and anticipated increases in interest on the nation’s debt, the amount accumulated over the years by deficit spending.
But the public has shifted its anger. The 2008-2009 bank bailouts and the stimulus spending that Obama set in motion in 2009 sparked the revolt in 2010 as some voters demanded more fiscal accountability. With another midterm election this year, voters appear more concerned about their own personal economic circumstances, and Republicans are focused on making the election a referendum on Obama’s health care law.
A Gallup poll last week showed public preoccupation with debt and deficits falling as concerns over jobs took over as the top worry for Americans. Health care continued to rank among the top problems cited by those surveyed.
The shift in attention may well be both a blessing and a curse.
If the cease-fire over budgets holds, the economy no longer will be convulsed by last-minute negotiations, missed deadlines, threatened shutdowns and fears of jeopardizing the nation’s credit. The new 2014 projection from the Congressional Budget Office — $514 billion this year from a $1.4 trillion high 2009 — means this year’s deficit would be about 3 per cent of the nation’s economic output, good news in that it would virtually match the average percentage of the past four decades.
But the nation’s debt continues to grow, the CBO says, ever rising as a share of the nation’s gross domestic product. The CBO estimates that the federal debt will equal 74 per cent of GDP at the end of the year, the highest since 1946, and it projects that based on existing laws, it will rise to 79 per cent in 2024.
The main drivers of the debt are the government’s biggest benefit programs — Social Security, Medicare and Medicaid. The government revenue stream is simply not keeping up with the aging population and with the increases in the cost of care.
White House officials say the revenue projections in the president’s budget won’t be as pessimistic as CBO’s, in part because they will factor in deficit reduction from their immigration overhaul plan. Under White House projections, deficits as a share of the economy will be below 2 per cent after the 2023-2024 fiscal year. The CBO says they will rise to about 4 per cent.
Associated Press writers Jim Kuhnhenn and Donna Cassata in Washington contributed to this report.