We learned about a month ago that the U.S. budget deficit for the most recent fiscal year fell to $1.089 trillion, $200 billion smaller than it was last year, and nearly $300 billion smaller than when President Obama took office.
For many on the left, the news was discouraging -- the deficit should be going up, not down, as we invest in job creation and economic growth. For the right, the complaints stayed the same -- the deficit that exploded under Bush/Cheney was still too high. But regardless of ideology, the fact remains that there's been an enormous drop in the size of the deficit in the first half of the Obama era.
How enormous? Matt Yglesias flagged this item from Investors Business Daily noting a tidbit that's generally ignored in the larger political debate over the nation's finances: "Believe it or not, the federal deficit has fallen faster over the past three years than it has in any such stretch since demobilization from World War II."
As the political world obsesses over the ongoing debt-reduction talks, I hope it's not too much to ask that policymakers remember that the deficit is already shrinking at an aggressive pace.
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So now will the GOP yell that it's going down too fast?
This democratic triumphal message is nonsense.
Here's a number for you: 600 trillion.
That is the minimum nominal value of derivatives in the financial markets (other estimates go as high as 1.5 quadrillion- to give you an idea of the magnitude the entire global gdp is only about 65 trillion, so there is nothing to backstop these uncollatoralized securities). So there really is an important fiscal cliff, it is really a lot lot bigger than the national debt and it is one we already fell off.
It has nothing to do with government financial malfeasance and everything to do with Wall Street's fiscal cliff. The important legislation has nothing to do with gaining tax concessions from the GOP, and everything to do with Fixing Dodd Frank and requiring these securities to be de-leveraged, and the too big to fail institutions broken up.
And yet we are talking about the US government's debt and not the fact that the global financial markets are still dancing at the edge of a 600 Trillion dollar fiscal cliff and that with all the too big to fail banks even bigger and more consolidated than they were in 2007, it is only time before we will repeat 2008 all over again.
That is what is so remarkably blind about MSNBC's coverage of the real financial health of the country. Congratulations to the Cycle for having Professor Scott Reynolds Nelson (author of Nation of Deadbeats) to explain this. A quick run down on the data may be found in finance articles such as this one.
You nailed it John.
There are a lot of harbingers out there that are telling us that the chance of another serious recession isn't that far away:
http://seekingalpha.com/article/1024141-to-disburse-or-not-to-disburse-or-here-comes-the-drachma
The ECB "may" be able to save Greece for a while, but not forever. Meanwhile, who's going to save the ECB??
Then there is this:
http://www.cnbc.com/id/49916909
"American Banks are Actually Lending Again - to Europe" with the basis of the story being that Europeans are more "credit-worthy" (translation: We can make BIG BETS on European debt and get bigger payouts if we win than we can in America).
There is a "perfect storm" heading towards us right now: We have a "do-nothing" Congress, we have banks out of control and gambling in Europe, and there just isn't enough money in the world to save the banks if Greece starts the dominos falling. And the media, even those who should know better like CNBC and Bloomberg, are pretending that everything is rosy.
Me, I'm going with the short-sellers!! And they are starting to show up.......
http://business.financialpost.com/2012/11/12/short-selling-opportunities-in-periphery-europe/
...even with the short-selling ban on the euro:
http://www.mondaq.com/unitedstates/x/207276/Commodities+Derivatives+Stock+Exchanges/EU+Regulation+on+Short+Selling+Impact+on+US+Issuers+of+Structured+Notes
Yes, JohnMesserly, "nominal value". Which means absolutely nothing. "Nominal value" is the value of something that remains fixed although the actual value is volatile. You can't price something at 600 Trillion or 1.5 Quadrillion if there isn't that much money to back it up. There is not that much money in all of the world to back that price of derivatives.
What you said is absurd. Now, let's all look at something that is a little more reasonable. Somebody who knows a little bit about the economy.
http://www.nytimes.com/2012/01/02/opinion/krugman-nobody-understands-debt.html?_r=0
I see.
The Krugman article you pointed to says nothing about derivatives, so it is unclear why you feel it disproves anything that I or the two authors I cited stated.
Perhaps you also disagree with the NYTimes background article on derivatives that cites the Bank for International Settlements in Switzerland who estimated the value of derivatives at $680 trillion? Are they misinformed as well?
One thing you do have right. The situation is absurd:
It doesn't matter that you cannot fathom the danger. Elizabeth Warren does and the good doctor is on her way.
Batosh,
You are completely missing John's point. He isn't talking about GOVERNMENT debt, he is talking about what Wall Street is doing (COMMERCIAL debt) and the precarious position they are again putting our economy in.
Remember what brought down our economy in 2007-08? It wasn't Government debt - it was Wall Street "gambling" using derivatives - you know those credit instruments that were supposed to be based on assets (but nobody understood that they WAY overvalued the "assets") that turned out to be worthless?
Nobody had the heart to go after Wall Street and stop this shady "gambling" so guess what? Wall Street hasn't stopped doing it - why should they? It is a GREAT moneymaker until it all falls apart like it did with the mortgage markets. So now, not only are they back in the mortgage business, but now they are gambling on Europe! How do you think THAT will end??
And WHO do you think will be stuck with the bill??? Cause we just can't let those "too big to fail" banks go down. Oh, and BTW, if they were too big to fail in 2008, well, they are MUCH larger now!!
We NEED banking regulations to STOP the banks from gambling with OUR money!!
If people are investing in derivatives worth more than all the money in the whole world, who is being stupid? At what point are they investing in something which has no hope of paying off.
This is not a hard trick.
When the deficit is higher than it's ever been (as % of GDP) then reducing the deficit (as % GDP) will tend to happen more quickly.
Let's say debt is the miles to Grandma's house. Then the deficit is the speed in miles per hour that you are driving AWAY from grandma's house. And reducing the deficit is simply letting your foot off the gas, as you continue to drive AWAY from grandma's house.
Since we were driving in the wrong direction faster than ever in history, it makes sense that if we let off the gas, we slow down more quickly.
That does NOT mean we are on our way to Grandma's house. At this rate the turkey and pumpkin pie will all be gone before we get there.
So if I owe a million dollars (100% of my imaginary income) it's quicker to reduce than if I owe one thousand dollars (1% of my imaginary income)?
Yeah, your analogy is all wrong. Reducing the deficit isn't the same as reducing the increase to the deficit. What is actually happening (according to your analogy of driving to Grandma's house) is we've turned the car around and are driving faster than the top speed our car has ever recorded. You are correct in saying, though, we've driven the car so far away from Grandma's house we'll likely never get there for desert.
When are Dems going to beat the Republicans over the head with their votes that pushed the deficit and debt up under Bush? They weren't concerned about the deficit and debt then. And the Dems should rub their faces in it.
"...I hope it's not too much to ask that policymakers remember that the deficit is already shrinking at an aggressive pace."
Now, now, why do you believe that your reality and facts will intrude into GOTP-world? That's not what they believe and they're gonna hold their breath until you understand that fact.....
"Reality has a well-known liberal bias." - Stephen Colbert
Rachel notes: For many on the left, the news was discouraging -- the deficit should be going up, not down, as we invest in job creation and economic growth.
Who are these "many on the left"? I am a proud liberal and I am overjoyed that the deficit has gone down. So I am definitely not among those "?many?" who are discouraged about the deficit going down.
Who are these "many on the left"? Whoever they are, they should take a course in economics. They should learn that if the government has to pay less to borrow money, the deficit will go down. Thank you, Ben Bernanke, Timothy Geitner, Democrats and 3 Republicans in Congress, and President Obama for mapping the course that pulled our country out of the worst recession since the Great Depression. These "?many on the left?" would learn that extending the Bush tax cuts in 2010 including for the 2% rich kept vital money in the pockets of the 98%. There are many other things that the "many on the left?" would learn if they took a course in economics.
I wonder if these "many on the left" are like the Libertarian Koch Brothers who are so removed from reality and convinced of the absolutely correctness of their positions they can achieve anything. Remember the Kochs arrogantly forced the Republican party to commit to the Kochs' Americans for Prosperity agenda. They lost.
I wonder if these "many on the left" include those progressives on one website who crow about all the victories their "endorsed" candidates had, but make NO mention of the President and his victory.
In any case, I believe there are not "many" on the left who agree with the undefined and self-proclaimed "many on the left" who are discouraged that the deficit has gone down.
Sarcasm, it's part of humor, that's all she meant.
Press: "The Deficit is going down!"
Republicans: "rabble, rabble, rabble!"
It's going down despite Republican obstruction.
It's going down without hitting those (who need government services) hard in the pocketbook.
This is contradictory to everything the Republicans have been saying about massive government spending.
Imagine that.
But but but the deficit isn't going down at all! Sir Romney the Truthful told us that Obama has doubled the deficit! That nice man wouldn't have lied repeatedly on national television where his claims could be easily falsified. Also, Romney won Ohio.
We are living in the era of cage fighting,kickboxing,wrestlemania entertainment and you want them to smoke a peacepipe? This ain't about the deficit this is war! Hoo-rah Wimper sigh!
Whimper sigh should read temper fly I reckon.
Holy Mackerel, and here's one for you. Nobody down here at this level really cares about Wall Street. We saw your action during the meltdown caused by the capitalists as poor 'ol George exited. We got you to worry about that, so if you don't mind I'll take my wife out for dinner. Keep up the good work.
Dodd Frank was gutted by the republicans in the "NO" gang, a few of the safeguards were watered down, so if they're running rampant then it's up to our Congress to get off their asses and pass a bill for the G.I.s and fix what's wrong instead of outlawing abortion. Get off their holy church "thing" and do their job. Tax the churches.
And to think, since Clinton we've only had to sacrifice part of the middle class and all of the post-middle class to reduce debts run up by Republican administrations without burdening the rich. The next president will be a Republican who will run up massive debts, and we can then repeat all of this, finishing off what's left of the middle class while continuing to reduce our population (since 1996, infant mortality among US poor has been growing while the life expectancy of our poor has actually fallen below that of some 3rd world nations, thereby reducing the number of Americans in poverty).
"If the poor would rather die (than work in 19th century workhouses), then they had best do it quickly, and decrease the surplus population!" - Ebenezer Scrooge, a Republican hero (Shame those ghosts showed up and ruined him...)
Something about that chart looked a little off to me... How did GW Bush reduce the deficit in three years of his borrow-and-spend economy? Then, I remembered... He kept the Wars in Iraq and Afghanistan, the huge tax cuts and Medicare Part D off the budget and out of the books... The budget deficit was much higher during his term, but the chart doesn't address that...
What an absolute bunch of BULL....S***! Deficit reduction? Really? Really? By absolute numbers you can pull off the lie.....gee, we went from $1 Trillion to $800 Billion.....a $200 Billion reduction!...yippee! Let's get real....let's stop listening to the MSNBC chatter about a 20% reduction.....yes, 20% sounds nice.....who is actually thinking here?? Obviously, ZERO people at MSNBC actually think....this is nonsense, people!!
LOOK AT THE FRIGGING SIZE OF THE 2009 or 2009 deficit!! Then try to come back to me as to how we are SHRINKING the deficit in %%%%%% terms since then. The DEMOCRATS are,........Once again.....playing with the MATH.....don't let them LIE to you any longer!!! We are going down the tube.....thank the DEMOCRATS for this!
Yeah I agree- Democrats are certainly using math.
Why is that the only President to eliminate deficits, reduce the debt, and leave a surplus was a Conservative Republican by the name of Ronald Reagan? I mean from 1992 to 2000 President Reagan got 102 months of consecutive growth and eliminated deficits, reduced the debt, and left a surplus for Liberal Democrat George W. Bush. Boy, you Libs sure need to stop spending.
@Jeff Korenak - are you being funny or do you really think that Reagan left a surplus? Hate to break it to you, but Reagan served as President from 1980 to 1988 not 1992 to 2000 when Democrat Bill Clinton served as President. And by the way, George W. Bush is, was, and always will be a conservative Republican. Either get your facts straight or be more clear with your sarcasm.
@DMinMN, it seems pretty obvious to me that Jeff is making a Colbert-style joke. What he says about 1993-2000 (we can overlook the "1992" as a typo) is essentially correct -- booming economy, deficits replaced by surpluses, national debt reduced -- except that (a) as we all know, Clinton rather than Reagan was president and (b) GWB was obviously not a "liberal Democrat."
Can any of you numbskulls talk about percentages? What an insane blistering of the facts this is...."The fastest deficit reduction in generations".....yeah, maybe because the OBAMA administration took it down from a TRILLION to 800 BILLION....Wow a $200 Million reduction!!!....how did it get to a TRILLION, though, in the first place? We can talk about absolute numbers.....then we can talk %'s. There's a difference here that the main blogger does not want you to think about. Statisticians can distort reality....and they do...when given a reason to do so.
How did it get to a trillion in the first place? Three decades of concerted budget-busting by Republican administrations capped off by 2 unfunded wars. Thanks for playing.
I'm sorry, I don't get, at all, the chart for this thread. Just what does that bar going up at the far right mean? And all the other bars mean?
Is there no longer integrity in journalism? Blogging on a quote from another journalist, Jed Graham, who cannot read the statistical chart reference he posted is dishonest. What are our colleges teaching journalism students these days? When every media outlet needs to go to some “Fact Checker” to verify a story they have already reported is insane. I thought journalists were taught to check and verify their story’s facts before the story was reported. Are journalists just PR representatives for whatever causes they believe in? “Spinning” the story seems more important than reporting the facts now a days. I would caution anyone to use a critical eye or ear when reading or listening to a story coming from any media outlet.
Steve Benen, you quoted Jed Graham, “Believe it or not, the federal deficit has fallen faster over the past three years than it has in any such stretch since demobilization from World War II." I have to ask if you even looked at the chart (read the bottom right note on chart)? Here are the facts directly from your story’s chart. The last reported year was approximately a 3% decrease in the deficit as % of GDP. The year before that the deficit increased by approximately 5% (low estimate from chart only). Then if you look at 3 years back the deficit increased by approximately 7.5%. Steve and Jed, I do not know what you were taught in your elementary new math classes but real math is the following. 7.5% + 5% = 12.5% which is an increase in deficit. Then when you take away (that means subtract) the 3% decrease in deficit for the last reported year, you get 12.5% – 3% = 9.5% which is still an increase in the deficit the last 3 years. I cannot even chalk this story up to “statistics don’t lie, statisticians do” because the statistics show this story is untruthful. Steve Benen and Jed Graham, I don’t care if your political views are left or right. Just publish the truth and not propaganda. Please bring back some “integrity” to the journalism profession.
@State: You're misreading the chart. Each bar represents not a single year but a trailing three-year period. It implies as much in the title of the chart. You can also verify this by going to the original story (link in article), where you'll read, "From fiscal 2009 to fiscal 2012, the deficit shrank 3.1 percentage points, from 10.1% to 7.0% of GDP." Or even better, look up the actual data on line.
Year-by-year, the deficit was 10.1% of GDP in fiscal 2009, 8.9% in fiscal 2010, 8.6% in fiscal 2011, and 7.0% of GDP in fiscal 2012. U.S. federal fiscal years end September 30 of the corresponding calendar year.
I agree with you that propaganda should not parrot propaganda and that readers should read skeptically. But you don't help your case when you hastily misread a chart and leap to a conclusion that's plainly just wrong.
Whee! I meant to write "journalists should not parrot propaganda" but come to think of it, propaganda shouldn't parrot it either, if only in the interest of originality. This is what I get for posting at 3:50 in the a.m. OK, I'm going to bed!