Is the United States close to running a budget surplus? So suggests the American Enterprise Institute’s James Pethokoukis, who highlights an analysis from Potomac Research, which notes two things.
First, the United States government ran a surplus of $112 billion in April, partly because of income tax payments, and partly because revenue is up from the previous fiscal year. Potomac then predicts that the deficit will fall below 5 percent of GDP for this fiscal year (to around $700 billion), further in 2014 (to $500 billion, close to 3 percent of GDP), and even further in 2015, to below 2 percent of GDP (around $300 billion). As the group notes at the end of its analysis, if the sequester holds and economic growth continues, it’s “not totally out of the question” for the United States to reach a balanced budget, or even a surplus, by the end of fiscal year 2015.
Not only would this fulfill President Obama’s election year promise to reduce the deficit — itself a carryover from his 2008 campaign — but it would hit the targets established by the Simpson-Bowles debt reduction blueprint, and potentially rob Republicans of one of their most important talking points against Obama and Democrats.
Conservatives who want to see drastic reductions in spending have every reason to welcome this analysis. Liberals, not so much. Mass long-term unemployment is still a problem — millions have been out of work for at least six months, and millions more have dropped out of the labor force completely. Under those conditions, we’re wasting resources by running a program of steady deficit reduction. What’s needed, as liberals have noted for the last four years, is further fiscal stimulus and action from the Federal Reserve.
Of course, there’s little appetite in Congress for anything close to stimulus, and ongoing enthusiasm for measures — like the sequester — that would slash spending from the budget, at the cost of jobs and growth.
But at bottom, this new analysis is a reminder that the United States has plenty of room for new stimulus, without harming its medium-term budget outlook. The simple fact is that there are no economic constraints to solving mass unemployment. For Washington, however, it’s just not a priority.