By Isaac Cohen*
There must be satisfaction among those who were alarmed by the magnitude of the fiscal deficit, or the amount of red ink in US government accounts. After all, over the last five years, the government was spending every year over $1 trillion in excess of its revenue
However, to the surprise of many, figures released by the Treasury Department on the last fiscal year, revealed that the red ink has decreased drastically, by an amount not seen since the end of World War II.
In fiscal year 2013, the deficit fell almost by half, from $1.1 trillion to $680 billion, or from 6.8 percent as a proportion of the overall economy, to 4.1 percent. The explanation for this impressive performance is found in less spending, higher taxes and the economic recovery. All pushed up revenues by $324 billion, an increase of 12.8 percent between 2012 and 2013. Additionally, government expenditures did not increase, with federal outlays remaining at $3.5 trillion in both years. As a consequence, since 2007, government hiring at the local, state and federal levels decreased by 535,000, to the lowest level since 2005.
The fiscal deficit is projected to decrease to 3 percent of the overall economy throughout this decade. Without change, increased deficits are projected to return until the next decade, as a consequence of higher health and retirement costs.
*International analyst and consultant. Commentator on economic and financial issues for CNN en Español TV and radio. Former Director, UNECLAC.