If the current laws that govern federal taxes and spending do not change, the budget deficit will shrink this year to $845 billion, or 5.3 percent of gross domestic product (GDP), its smallest size since 2008. In CBO’s baseline projections, deficits continue to shrink over the next few years, falling to 2.4 percent of GDP by 2015.Wait, what? No more trillion dollar deficits under Obama? Uh oh. What happens to that talking point now? But it gets worse for the Republicans. It's not just that Obama has cut the deficit to under a trillion dollars. He's cut it in half, with respect to the size of the economy, since the last budget from a Republican White House.
The federal budget deficit, which shrank as a percentage of GDP for the third year in a row in 2012, will fall again in 2013, if current laws remain the same. At an estimated $845 billion, the 2013 imbalance would be the first deficit in five years below $1 trillion; and at 5.3 percent of GDP, it would be only about half as large, relative to the size of the economy, as the deficit was in 2009.Put another way...
The CBO report also shows a long term imbalance between revenues and spending over the next decade. Even with the Affordable Care Act, spending is expected to stabilize at 21.5% of GDP (only a half point above historic levels), while revenues are expected to stabilize around 19% of GDP (above historic levels, but clearly not enough to balance the budget).
The president, of course, is cognizant of that fact, and is not quite done raising revenues yet. He has already gotten the Republicans to acquiesce to the most progressive tax code since 1979. It turns out, the sky is still intact, and taxing the "job creators" did not actually stop job creation. In the three months since President Obama was resoundingly re-elected to the White House - according to the Republican mantra the death nail in job creation - the US economy added 600,000 jobs, counting the upward revisions in the numbers from November and December.
President Obama is not done. The president meant what he said after the fiscal cliff deal - that was the beginning, not the end, of making multinational corporations and wealthy individuals pay their fair share. In today's address from the White House, the president told Republicans in Congress that they needed to eat their vegetables if they want to save their dear defense industry from a cleaver.
“If Congress can’t act immediately on a bigger package, if they can’t get a bigger package done by the time the sequester is scheduled to go into effect,” Obama said in the White House briefing room, “then I believe that they should at least pass a smaller package of spending cuts and tax reforms that would delay the economically damaging effects of the sequester for a few more months.”The Speaker of the House, John Boehner, even prior to the fiscal cliff deal, already offered $800 billion in loophole closures for the top earners that the president can now force the Republicans to vote on. And the cuts he would be willing to accept could of course not affect the most critical investment and safety net programs.
By surrendering on the fiscal cliff, the deficit peacocks have lost the big argument: that big austerity cuts are the way to both balance the budget and grow jobs. In fact, making the rich pay their fair share, combined with a responsible approach to reducing spending seems to have worked better than just fine. President Obama's policies have halved the deficit and pulled us back from the abyss of losing 800,000 jobs a month and created 6.1 million jobs in the last 35 months, despite Republican obstruction.
One by one, Obama has strategically neutered the GOP's economic argument. Democrats won a debate on raising taxes for the first time in 20 years, and this president created millions of jobs and cut the deficit in half while doing it. The Republicans have nothing to show for their obstructionism; the president has a lot to show for his perseverance.
It is with this in the background that we start negotiations on the budget. In other words, it starts with a lot more credibility for the president and progressives who stuck with him, and a lot less of it for the wingbats on the Right. If the Republicans try to use the budget to handicap the president again, they will lose again. Something tells me they already know that they're losing that war.