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Do they know something we don't

"The increase in the deficit in the first half of 2015 was mostly due to the end of payments from the bailed-out mortgage companies Fannie Mae and Freddie Mac to the Treasury. Government revenue was up, although spending on health care programs and Medicaid also rose."


http://m.washingtonexaminer.com/the-incredible-shrinking-deficit-is-no-more/article/2563096


The incredible shrinking deficit is no more
BY: Joseph Lawler April 20, 2015 | 5:00 am
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Although the accumulated debt has grown significantly during President Obama's tenure, the yearly gap between revenue and spending has narrowed.(AP Photo/Jacquelyn Martin)
TAXES SOCIAL SECURITY PENNAVE ECONOMY BUDGETS AND DEFICITS MAGAZINE JASON FURMAN MEDICARE
The days of the shrinking federal deficit appear to have come to an end.

The first sign that the government's shortfall is no longer declining came when the Congressional Budget Office reported earlier this month that the deficit for the first half of fiscal 2015, through March, was $17 billion higher than a year earlier.

The annual deficit had shrunk in each of the past three years and was down more than two-thirds as a share of economic output since the dark days of the financial crisis in 2009, when it topped $1.4 trillion.


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The significant improvement in the government's short-run financial situation has been one of the Obama administration's favorite talking points. Although the accumulated debt has grown significantly during President Obama's tenure, the yearly gap between revenue and spending has narrowed. The prospect of mounting annual shortfalls that are only expected to get bigger will complicate Obama's rhetoric.

Asked about the rise in the first-half deficit, Obama economic adviser Jason Furman answered that "we have been broadly expecting the fiscal stance to shift to a more neutral one, where you're keeping that deficit below the average of the last 40 years as a share of [gross domestic product] but it's roughly leveling off."

"The president has proposals that, over the medium and long run, would make sure that you're continuing to keep the deficit below 3 percent of GDP, continuing to keep the debt on a downward path as a share of GDP," Furman added.

The deficit as a share of GDP fell from 9.8 percent in 2009 to 2.8 percent in 2014 and was expected to tick down further to 2.7 percent this fiscal year.

The increase in the deficit in the first half of 2015 was mostly due to the end of payments from the bailed-out mortgage companies Fannie Mae and Freddie Mac to the Treasury. Government revenue was up, although spending on health care programs and Medicaid also rose.

That the deficit will be higher for the full year is not guaranteed, budget experts say.

The first-half deficit is usually larger than the second-half deficit, with April, June and September being surplus months, when the government collects more tax revenue than it spends. Last year, the deficit totaled $413 billion through March, but grew only another $69 billion in the second half of the year, for a $482 billion total.

Loren Adler, a budget analyst for the Committee for a Responsible Federal Budget, noted that spending also can be lumpy, with major payments sometimes going out just before or after the end of the month. Nevertheless, he added, the six-month shortfall "certainly lends evidence" that the deficit is on its way up.

Richard Kogan, a budget expert at the Center for Budget and Policy Priorities, a left-of-center think tank, said that if he were forced to guess, he would place the fiscal 2015 deficit at $500 billion to $525 billion based on the first six months of data.

The Congressional Budget Office, the nonpartisan in-house budget experts available to Congress, estimated in March that the deficit would clock in at $486 billion, just $3 billion larger than the official shortfall for fiscal 2014.

Kogan added, however, that historically there is about a $150 billion margin of error in estimating final-year deficits based on six months of data. "No sane person ought to be placing a bet based on this information to date," he said.

More importantly, though, the deficit is now driven less by the economic slowdown and unemployment associated with the recession and is increasingly about the retirement of the baby boomers, Kogan said.

The White House, in its fiscal 2016 budget, separated the anticipated deficits into "cyclical" and "structural" components, with the cyclical part reflecting additional spending or lost taxes that result from an economic slowdown, such as unemployment benefits. The structural part measures the underlying imbalance between planned spending and revenue.

In fiscal 2014, the cyclical deficit, at $308 billion, was much larger than the $176 billion structural deficit. That was projected to flip in fiscal 2015, $241 billion to $342 billion.

Over time, the government is expected to see its finances drained by the long-term mismatch between planned taxation and the growing number of retirees owed Social Security and Medicare benefits.

Although the Congressional Budget Office sees the deficit dropping to $455 billion in 2016 and 2017, eventually it projects deficits to grow to $1 trillion over the next 10 years. The federal debt held by the public, currently at 74 percent of GDP, is expect to grow to nearly 80 percent without changes in the law.