There were times in Barack Obama’s presidency where he would brag about having had lowered the deficit — which were hilarious examples of how to lie with statistics. “We’ve done all this while cutting our deficits by almost three-quarters,” Obama told us in his 2016 State of the Union address, after citing a whole bunch of other economic statistics.How could Obama, who nearly doubled the national debt to just south of $20 trillion claim to have reduced the deficit? Simple — run an explosive deficit in the trillions your first year in office, spend less in later years, then claim that as a decline.
The largest deficit that George W. Bush ran was a $454.8 billion deficit during his last year in office. Obama ran his largest deficit his first year in office, of $1.415 trillion. Obama reducing the deficit to $552 billion by 2016 was what he meant by “cutting our deficits by almost three-quarters.”
Put another way, Obama’s smallest deficit during his presidency was still larger than Bush’s largest.
Fortunately under President Donald Trump, we’ll actually see deficit reduction, not just “reduction” from the largest single-year deficit in American history.According to Zero Hedge:
CBO has just released its ‘score’ of President Trump’s proposed budget, noting that the plan would shrink the deficit by a half from their baseline by 2017 (good news). However, even accepting Trump’s dynamic scoring and 5% growth expectations, CBO is unable to balance the budget and Yellen’s recent “US debt is unsustainable” warning seems ever more prescient.
Trump’s budget would shrink notably from the CBO baseline…
According to CBO’s estimates, the deficit would fall from the $693 billion projected for 2017 to $593 billion in 2018 under the President’s proposals. After that, the deficit would generally rise, totaling $720 billion in 2027. The cumulative deficit over the 2018–2027 period would total $6.8 trillion. Measured as a percentage of output, the deficit would decline from 3.6 percent of GDP in 2017 to 2.6 percent at the end of the period. The deficit would average 2.9 percent through 2027. (The average deficit over the past 50?years has equaled 2.8 percent of GDP.) Those estimates exclude any macroeconomic feedback effects.This is still a big deficit, and coming a day after Janet Yellen warned that the US debt situation was unsustainable, it seems more prescient than ever to focus on spending cuts.
There is some other good news (if you buy it). By the end of the coming decade, debt held by the public would total 80 percent of GDP: 11 percentage points below the debt-to-GDP ratio projected in CBO’s baseline. But as CBO notes, this is due to the adminstration’s hopeful growth estimates.
As always seems to be the case, there is good news, and there is bad news.
The good news is that Trump’s budget does shrink the deficit relative to its current trajectory. The bad news is that we’ll still be running deficits for years to come.