To some Washington lawmakers the deficit is the lodestone for their fiscal decisions, guiding them like a compass in their opposition to tax cuts. These lawmakers dismiss the economic benefits of tax cuts, and they ignore the moral argument that people should be allowed to keep more of their hard-earned money.
This year, the deficit will be the highest it’s ever been: some $400 billion. But in February, the deficit was projected to top $520 billion.
What’s happened is that the economy has grown so strongly since February—averaging better than 4 percent real growth—that revenues are pouring in from all the increased activity.
Those who hold the deficit lodestone, though, argue that it’s still too high. They think Congress should postpone or make temporary or even repeal the very tax cuts that led to that economic growth.
Viewed another way, the $400 billion expected deficit is about 4.5 percent of GDP. That’s nowhere near a record. In 1943, the deficit topped 30 percent of GDP, and was in double digits during the other war years. It’s even smaller than it was for four years of President Reagan’s defense build-up and the Cold War. It reached 6 percent in 1983, but subsided to just over 3 percent by the time Reagan left office.
We’re fighting a war now, but the federal deficit is a fraction of what it was during World War II, and less than it was during the non-shooting Cold War.
The fact is that the deficit is not the problem, just as tax cuts aren’t a big reason for the deficit. Spending, especially on non-defense items in the last few years, is to blame.
So why aren’t most of those politicians who are caught in the thrall of the deficit lodestone talking about postponing or even repealing some spending?
You may want to be sure you have an acceptable answer to that question by November.