More goodies out of the latest Congressional Budget Office report released this morning. The Federal Deficit has shrunk to $514 billion, a 37% decline year over year.
This dovetails nicely with a discussion of how the deficit grows or shrinks, in the first place. When President Obama took office in January, 2009, the country was reeling, and hundreds of thousands of people were losing their job every month, through no fault of their own. As bad as the economic situation was, we had not even begun to pick up the pieces yet when Obama was inaugurated.
From there, hundreds of thousands of people continued losing their job, and the government lost that subsequent tax revenue. At the same time, as more and more people became poor during the recession, use of the social safety net swelled near an all time high, as it should during the greatest economic hardship in 80 years. The result, obviously, was massive deficits.
Now, with economic growth returning, and more and more people finding jobs, those government revenues are going up, while expenditures on safety net programs are down. This is how the Federal Deficit can drop 37% in one year that did not include any major tax increases.
That’s why, from the very beginning, when Republicans were calling for belt tightening and fiscal austerity as the answer to our budgetary problems, liberals correctly maintained that what the economy needed was stimulative spending now, to get the economy moving again, increase tax revenue and decrease safety net program outlays, along with LONG TERM deficit reduction targets.
One can only wonder what type of situation the country and the world might be in now if more people had listened to them.