The Deficit Is Plunging! And Nobody Cares!

America's debt burden is falling faster than CBO projected, and, of course, this has changed nobody's minds

The annual long-term budget outlook from the Congressional Budget Office is an incredible document and, at least ostensibly, a moment to reflect on U.S. government spending and taxing. Instead, every year, it acts more like a magic mirror, somehow perfectly reflecting the previous biases of each reader. 

Consider the CBO's opening chart this year, which appears at the top of this article. Stare deeply into its green and darker green hues. Squint and meticulously trace the federal spending and revenues lines. What do you see?

Fiscal conservative Jim Pethokoukis sees the case for fiscal conservatism. Don't-worry-about-the-debt economist Brad DeLong finds cause to not worry about the debt. I think Brad is right for now and Jim less right, but who cares what I think? After writing about this stuff for a few years, it occurs to me that I will never change readers' mind about the debt. Ever. If you locked a hundred budget wonks in a room with one simple debt graph and told them they couldn't leave until they agreed on what it meant, cannibalism would come before consensus.

But you know who has changed its mind? The CBO. Director Doug Elmendorf admitted as much in a presentation last week.

In 2007, the CBO thought our debt burden was going to fall to hysterically low levels (see: YELLOW line). Then the Great Recession happened, and the CBO revised its projections (see: GREY). But even a year ago, it was still wrong by billions of dollars of annual deficits ...

... Without warning, health care costs slowed down and Congress repeatedly flayed the discretionary budget for dubious reasons, and CBO's debt projections fell, by many trillions of dollars, once again (see: BLUE). 

Of particular note, projected spending on Medicare -- perhaps the most important driver of our long-long term debt -- fell sharply since the recession, but not because of the recession. "Evidence does not support a finding that demand for health care by Medicare beneficiaries was measurably diminished by the financial turmoil," Michael Levine and Melinda Buntin wrote in a CBO working paper this spring, and "much of the slowdown in spending growth appears to have been caused by other factors." 

Debt hawks are still asking Washington to direct its valuable focus to long-term debt rather than short-term crises like long-term unemployment and wage stagnation. House Republicans are still threatening a showdown over the debt ceiling and a continuing resolution to fund government operations.

The hawkish arguments are unyielding, even as the underlying evidence is changing rapidly.

Since you made it this far, here's my unyielding argument: In the middle of a crisis we knew we were having, we've sacrificed growth and jobs to insure ourselves against a crisis we thought we'd have in the future -- whose imminent threat is fading by the year. The tired cliche says, Washington is miserable at thinking about the future. One sequestration, a thousand cuts, and many trillions of dollars of deficit reduction later, perhaps that cliche could lose its last three words.

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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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