July 14, 2014
Some folks might think that a newspapers job is to convey information to its readers: not the Washington Post. At least when it comes to budget reporting the Post firmly believes in the frat boy ritual of throwing out really big numbers that will be almost meaningless to virtually all of its readers.
It gave us one such ritualistic piece on Saturday that discussed new budget projections from the Office of Management and Budget (OMB). Among other things the piece told readers:
“The White House said Friday that the federal budget deficit will fall to $583 billion this year, the smallest deficit of President Obama’s tenure and the first to dip below $600 billion since the Great Recession took hold in 2008. …
“The White House predicts that the nation’s finances will deteriorate markedly over the next decade, with deficits rising nearly $600 billion above previous projections. …
“When Obama took office in 2009, the economy was in free fall and the budget deficit was soaring toward $1.4 trillion, the first of four consecutive trillion-dollar deficits that drove the national debt to the highest level as a percentage of the economy since the end of World War II. …
“Democrats hailed Friday’s White House deficit forecast, which came on the same day as a Treasury Department announcement that the government recorded a surplus of $71 billion for the month of June. ….
“Republicans, meanwhile, noted that the long-term outlook remains gloomy, with the national debt forecast to rise to more than $25 trillion by 2024 if Obama’s policies are enacted.
“On Friday, the debt stood at $17.6 trillion.”
Feel well informed? The amazing part of this story is that the reporter did not even herself have to wade through the long arduous process of dividing the numbers by GDP to make them somewhat meaningful to readers. This information was actually contained in the blogpost by OMB director Brian Deese to which the piece links.
She could have told readers that the new projections show a deficit of 3.4 percent of GDP for fiscal 2014, which is projected to fall to 3.0 percent of GDP in 2015. The size of the deficit is projected to continue to fall, hitting 2.1 percent of GDP in 2024.
While the Post piece implies that the debt situation is bad news (“remains gloomy) by just giving dollar numbers without any context, in fact it is projected to edge down slightly. The ratio of total debt (including money owed to the Social Security trust fund) to GDP is currently just over 100 percent. The latest OMB numbers project the debt to GDP ratio falls to 94.1 percent of GDP in 2024. In short, for deficit hawks the reality is the opposite of what the Post article asserts.
In addition to its frat boy use of numbers, it is also worth elaborating slightly on the pieces reference to “painful but historic spending cuts.” The budget cuts were painful to millions of people who were denied work since the government was reducing demand in a badly depressed economy, therefore leaving more people without jobs. They were also painful to tens of millions of workers who were unable to secure a share of the gains from economic growth in higher wages because the weak labor market left them with little bargaining power.
The cuts probably were not painful to most business owners or highly paid professionals. The former have seen profits hit a record share of GDP, likely in part due to the fact that wages are low. The latter have benefited from being able to hire cheap help, since workers have few choices in a labor market that has been kept weak by budget cuts.
Addendum:
It is worth noting that the burden of the debt is measured by the amount of debt service, not the size of the debt. The latest OMB reports a net interest burden in 2024 of 3.0 percent of GDP. This is slightly less than its early 1990s levels. Thanks to Robert Salzberg for reminding me about this point.
Note: Type corrected, thanks to Rodrigo.
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