The problem isn’t the deficit, which has fallen faster over the past three years than it has since the end of World War II, but employment, says economic analyst Jed Graham. So let’s not go down the path of Europe and apply unneeded austerity measures that plunge us back into recession.
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.
In fact, outside of that post-WWII era, the only time the deficit has fallen faster was when the economy relapsed in 1937, turning the Great Depression into a decade-long affair.
…From fiscal 2009 to fiscal 2012, the deficit shrank 3.1 percentage points, from 10.1% to 7.0% of GDP.
…military spending is now on the decline due to fewer troops in Iraq and Afghanistan; Medicare costs rose 3% last year vs. the average 7% growth in recent years; and after the last year’s Budget Control Act, excluding the automatic cuts set to take effect in January, nondefense discretionary spending is already on a path to shrink to 2.7% of GDP, well below the 3.9% average, notes the Center on Budget and Policy Priorities.
Graham argues that the biggest concern for the economy now is not the deficit but employment, so the best solution is to postpone dealing with the “fiscal cliff” through a compromise involving the expiration of the Bush tax cuts on the highest levels of income and the payroll tax, along with modest spending cuts.
