Less Red Ink
By Isaac Cohen*
The difference between federal government expenditure and revenue, the fiscal deficit, has reached the lowest level since 2007, under President Barack Obama. Therefore, those who were concerned that the United States could go the way of Greece can relax for a while.
During the fiscal year ending September 30, the deficit decreased 9 percent from last year, to $439 billion. This represents 2.5 percent of the economy and is the lowest from the average of the past 40 years. True, the federal debt amounts to 73 percent of the economy, but due to low interest rates servicing the debt represents only 1.3 percent of the nation’s Gross Domestic Product.
Increased revenues generated by the improving economy, coupled to automatic spending cuts agreed by both major political parties in 2013, led to the fiscal deficit reduction. These circumstances contributed to the recent approval, also through bipartisan agreement, of lifting the spending limits and to grant the federal government authorization to borrow, until March 2017. Therefore, the agreement sets aside, during an election year, one of the most contentious issues, which led to threats of government shutdowns and to jeopardize the federal government credit rating.
Also, credit should be given to the departing Speaker of the House of Representatives John Boehner (R-Ohio), who was able to gain approval of the bipartisan agreement, despite strong opposition from the most conservative members of his own party.
*International analyst and consultant. Commentator on economic and financial issues for CNN en Español TV and radio. Former Director, UNECLAC.