The good news is that the budget deficit of the federal government for fiscal 2013 fell by $309 billion, about 30 percent, to its lowest level in five years. It’s the first Obama deficit to be under a trillion dollars. But the bad news is that the deficit, $680.3 billion, is still 4.1 percent of GDP, well above what is considered a safe borrowing level by national governments for long-term fiscal health.
$680.3 billion is a lot of money. It is more than $2,100 for every man, woman, and child in the United States. It is greater than the total GDP of all but 20 countries. Taking inflation into account, it is about equal to the biggest budget deficit experienced in World War II (1943, when we were in the red to the tune of $54.7 billion). It is larger than the entire national debt as recently as 1976.
Absent serious entitlement reform, the deficits are bound to increase in future years as more and more baby boomers retire and begin to receive Medicare and Social Security. The Congressional Budget Office estimates that entitlements will drive the deficits above 6.5 percent of GDP within 25 years, regardless of how well the American economy is performing.
The heart of the problem is that the national debt is a long-term problem and politicians are incentivized to think short-term. It is tomorrow’s headline and next year’s election that politicians care about. A crisis that is ten or twenty years down the road, even though it is clearly discernible now, is going to be someone else’s problem.
But every year that serious fiscal reform is put off, means the crisis, when it hits, will be that much more severe. The people who constitute the federal government today, Republicans and Democrats alike, are committing slow-motion treason by doing nothing now.