The fiscal 2014 deficit was low by historical standards, yet Republicans — whose spending cuts are largely to credit — are not celebrating the news.
The Congressional Budget Office estimated Wednesday that the deficit for 2014 was $486 billion, a shortfall that was below the 40-year average for deficits as a share of economic output.
Although the deficit was low, especially for a government still recovering from a major financial crisis, Republicans are not impressed.
“A nearly $500 billion deficit is nothing to celebrate. And CBO still projects that, in the coming years, the deficit will rise even higher to unsustainable heights,” said a spokesman for Republican Rep. Paul Ryan’s House Budget Committee.
The CBO’s latest projections showed the deficit falling further in 2015, before rising indefinitely and ultimately pushing the federal debt from about 74 percent of gross domestic product currently to 77 percent in 2024, and then continuing to rise indefinitely after that.
Most of that increase would be driven by rising spending on retirement and entitlement programs. House Speaker John Boehner’s office criticized President Obama after the release of the CBO’s estimate Wednesday, writing that “Medicare and Social Security are still scheduled to go bankrupt and the national debt stands at $17.8 trillion, an increase of $7.2 trillion under President Obama — who has still not proposed a credible plan to balance the budget.”
But the short-term improvement in the deficit is real and partly caused by Republicans’ efforts to cut spending after the Tea Party swept the GOP into control of the House in 2010.
A number of factors have caused the budget gap to shrink, especially the improvement in the economy that has led to higher individual and corporate tax receipts, as well as slowing growth in the price of health care. But since the 2011 debt ceiling standoff, about 25 percent of the decline in the deficit came thanks to policy changes, according to Loren Adler of the Committee for a Responsible Federal Budget. That includes the tax increases on payrolls and high-income earners favored by the Obama administration and the across-the-board spending cuts favored by conservatives.
“At the end of the day it was the debt ceiling fight that was the proximate cause of all of that, which presumably the House ‘Rs’ could take credit for,” apart from the increased tax revenues, Adler said.
But doing so would be tricky for Republicans, partly because the cuts included $30 billion from Pentagon spending through the sequester, which many Republicans have warned is hurting the U.S.’s military strength.
Also, Republicans are concerned about the nation’s long-term debt and are accustomed to using President Obama’s poor approval rating on fiscal issues against him.
“It’s tough to make the nuanced argument that the debt is still really high but we’ve done a lot to control it,” Adler said.
“We shouldn’t get too excited about the latest numbers, especially on the spending side,” said Dan Holler, a representative for the conservative group Heritage Action. “Despite some sporadic policy victories, Congress has essentially locked in stimulus-era spending levels. As a result, the deficit still remains higher than it was in 2008.”
Relative to the size of the economy, however, the deficit was the smallest since fiscal 2007. “The Tea Party is going to have to find something else to complain about,” wrote Qorvis budget expert Stan Collender in a post on the deficit estimate. “One of its basic reasons for living — the federal budget deficit — is really, truly and absolutely falling … rapidly.”
Meanwhile, Democrats have cautiously praised the shrinking of the budget shortfall. “Projections of future deficits remain far too high, but we have made progress — the deficit this year looks to be the smallest recorded since 2008 and $195 billion less than fiscal year 2013,” said Rep. Chris Van Hollen of Maryland, the ranking Democrat on the House Budget Committee.
Van Hollen added that “the fastest and most effective way to continue to reduce the deficit is to put Americans back to work” and called for a “balanced approach” of spending cuts and closing special interest tax breaks to reduce long-term deficits.
