President Obama called for Congress to end the “foolish” budget cuts required under sequestration, arguing that lawmakers should feel empowered because “deficits are falling at the fastest rate in decades.”

“I’ll keep fighting to end those foolish across-the-board budget cuts known as the sequester, which is threatening our readiness,” Obama told the Naval Academy Class of 2013 during commencement today. “With deficits falling at the fastest rate in decades, it’s time for Congress to budget in a smarter way that protects middle-class priorities, preserves investments in our future, and keeps our military strong — because we have the best-trained, best-led, best-equipped military in history, and I am determined to keep it that way, and Congress should be, too.”

The comment follows Treasury Secretary Jack Lew’s remark that “we are overachieving on deficit reduction right now,” as he put it during a congressional hearing this week. “So, the goal, you know, should not be to balance the budget right now,” Lew said on Wednesday. Obama’s fiscal exuberance probably springs from a Congressional Budget Office report that the deficit will be $200 billion less than previously projected. The CBO expects the U.S. to run a $642 billion deficit this year. The CBO made clear that there isn’t a lot to get excited about, though. “[F]ederal debt held by the public is projected to remain above 70 percent of GDP — far higher than the 39 percent average seen over the past four decades,” CBO said. “(As recently as the end of 2007, federal debt equaled 36 percent of GDP.) Under current law, the debt is projected to decline from about 76 percent of GDP in 2014 to slightly below 71 percent in 2018 but then to start rising again; by 2023, if current laws remain in place, debt will equal 74 percent of GDP and continue to be on an upward path (see figure below).” What does that mean for you? The CBO explained:
Such high and rising debt later in the coming decade would have serious negative consequences: When interest rates return to higher (more typical) levels, federal spending on interest payments would increase substantially. Moreover, because federal borrowing reduces national saving, over time the capital stock would be smaller and total wages would be lower than they would be if the debt was reduced. In addition, lawmakers would have less flexibility than they would have if debt levels were lower to use tax and spending policy to respond to unexpected challenges. Finally, a large debt increases the risk of a fiscal crisis, during which investors would lose so much confidence in the government’s ability to manage its budget that the government would be unable to borrow at affordable rates.