The Deficit Is Already Shrinking At Its Fastest Pace Since World War II Demobilization

A blog about business and economics.
Nov. 21 2012 1:01 PM

The Deficit Is Already Shrinking At Its Fastest Pace Since World War II Demobilization

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Jed Graham at Investors Business Daily gives us a fact you don't hear much about from Washington's chorus of deficit scolds, the deficit is already going down at a very fast pace—the fastest rate since World War II demobilization.

This is the flipside of the huge increases in the deficit that were associated with the recession. An economic downturn activates a lot of "automatic stabilizers"—falling tax revenue and higher payouts for safety net programs. We also had the American Recovery and Reinvestment Act. Those rising deficits were used to sow a lot of panic, but their natural flipside is that as the economy strengthens and ARRA fades out the deficit falls rapidly. Throw in the spending cuts House Republicans got the White House to agree to last year, and you've got pretty rapid federal deleveraging.

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I'd say that's a net minus for the economy. But it's something you'd think the budget hawk crowd would be cheering. But instead they're sowing further panic about the "fiscal cliff."

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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