It hasn't been a good month for the austerity scare-mongers. First came word last week that one of their favorite pieces of "evidence" regarding the need to keep cutting and cutting and cutting spending was the product of an Excel error. This week brings two more reports indicating that no, the budget deficit isn't nearly as out of control as austerions (to borrow Jared Bernstein's coinage) and their congressional allies would have people believe.
The American Enterprise Institute's John Makin releases a report today which concludes that the United States has achieved the necessary deficit reduction to get our fiscal house in order in the short and medium term. According to an excerpt provided to David Frum:
The American fiscal austerity has been moderate and probably, at the current pace of deficit reduction of about $300 billion per year over the next half decade, has proceeded far enough for now. … [I] is important for the US Congress to take yes for an answer to the question of whether it has already achieved substantial deficit reduction. Perhaps by accident, Congress has in fact reduced the US budget deficit by enough to enable working at long-term fiscal reform…
Needless to say, I disagree with his next-step policy prescription – the answer is to focus on jobs, not fiscal reform – but the fact that even scholars at AEI are declaring medium term fiscal victory speaks volumes.
Makin isn't the only one. The New York Times reported yesterday that analysts at Goldman Sachs have
lowered their estimates of the deficit both this year and next, on the back of higher-than-expected revenues and lower-than-projected spending. Analysts started the year projecting that the deficit in the current fiscal year would be about $900 billion. Earlier this year, they lowered the estimate to $850 billion. Now they have lowered it again, to $775 billion, or about 4.8 percent of economic output.
In other words the deficit is falling and falling fast. So fast, the Times notes, that the International Monetary Fund last week criticized the U.S. government for cutting spending too quickly, noting that what economic growth there is "will be achieved in the face of very strong, indeed overly strong, fiscal consolidation." Overly strong is right – it's affirmatively killing job growth, as I've written before.
Remember all of this the next time you hear that "out of control spending" is the root of all our problems.
Of course the main purveyors of that particular pernicious canard are themselves changing their tune. Remember how the spending-is-the-problem caucus tut-tutted that Obama had oversold the effects of sequestration? All of a sudden they're up in arms over sequestration. Spending is the problem, it seems, until it comes time to actually cut spending.