To add a little historical context to this, over the last four decades, only two presidents have reduced the deficit this much, this quickly: Bill Clinton and Barack Obama.
Benen seeks political advantage from this, but even he would recognize, if you pinned him down, that this is actually a pretty terrible time to focus on deficit reduction. Sadly, he did acknowledge this last week, in a post highlighting the fact that the US budget deficit dropped by $200 billion last fiscal year, only to hand-wave it away:
There’s a competing school of thought — which I’m sympathetic to — that suggests the deficit is currently too small, and that given economic conditions, interest rates, and the current yield of Treasuries, we should be borrowing far more and investing that money in job creation.
But for the purposes of political conversation, such an argument is probably a non-starter; the public has come to believe a deficit that’s getting smaller is good news.
The public has come to believe the wrong thing, and if Democratic partisans refuse to straighten them out on it, there’s no way to change that mentality. Partisans who use the deficit data to bolster the case for their party consign the country to continuing austerity and will make it impossible for government to carry out the functions of progressive policy, or to stimulate the economy when the need arises. It’s an extremely dangerous game.
Digby also correctly makes a distinction between the timing of the deficit reduction in the two separate Democratic Administrations of the modern age:
But in the case of Obama vs Clinton on this, I do have to point out one tiny difference. Clinton’s deficit reduction came about during an historic boom while Obama’s deficit reduction came about during an epic slump. I don’t think I have to explain why this matters, but I’ll just let Krugman do it just in case:
“Let’s look at estimates of the cyclically adjusted budget deficit from the IMF’s Fiscal Monitor, measured as a percentage of potential GDP. I don’t think you want to take these numbers as gospel — for Britain, at least, there’s a very good case that the IMF is greatly understating potential output and hence overstating the structural deficit, and I suspect that this is true to a lesser extent for the US. But in any case the point is that even cheap-money countries facing no pressure either from the market or from external forces to engage in immediate austerity are nonetheless engaged in sharp fiscal contraction…
This is taking place in an environment in which the private sector is still deleveraging ferociously from the debt binge of the previous decade; so we’re creating a situation in which both the private sector and the public sector are trying to slash spending relative to income. And whaddya know, the world economy is sputtering.”
The boom not the slump, is the right time for austerity, as John Maynard Keynes said 75 years ago. Certainly that has played out among these two Democratic Administrations. Clinton closed the deficit (in large part by raising taxes on the rich, incidentally) and the economy moved forward. In fact, the economic boom did most of the closing on its own. Obama closed the deficit in a time where the economy could not take up that slack, and the result has been meager.
There’s a good argument to make that the Clinton surpluses were very damaging. But in general, this point holds. I remember seeing Bill Clinton speak right before the 2008 election, and he said very plainly that Obama will not be able to engage in the same kind of deficit-reducing policies that he did during his Presidency. Initially, that held with the stimulus and some follow-on moves. Our large deficit is the only thing keeping the economy afloat amid weak demand. But for the last couple years, there’s been a noticeable pull back, and we have weak growth to show for it.
The idea that you can generate “credibility” from the serious Beltway people by slashing the deficit is a chimera. They still caricature Democrats as tax and spend liberals, and in this case, the economy suffers as a result of the deficit reduction. What would help politically is a better economy, but the story of the economy is so confused, and Democratic partisans so unwilling to set the story right, that such a prospect seems very far away.