News Column

If the Deficit's So Bad, Where's the Red Ink?

September 2, 2014

Isaac Cohen -- HispanicBusiness.com

File image
File image

Last week, the bipartisan Congressional Budget Office released its semiannual report, with downward revisions of its predictions about government funding and concluding that "at this point underlying financial conditions have improved."

In other words, there is good news on the issue of government financing.

The federal government is still spending more of what it is receiving, but the size of the difference -- the deficit, as it is called, or the amount of red ink in government accounts -- is smaller. For the current fiscal year ending on Sept. 30, the Budget Office now projects a deficit of $506 billion, equivalent to 2.9 percent of the economy, less than the average of the last 40 years.

Moreover, the expectation is that this declining trend will continue until 2018.

You wonder where are those who were saying that the U.S. was spending so much that there was a risk of a government default, as in Greece or Argentina.

Also, some were saying that excessive government debt was generating an imminent risk of inflation.

True, at the peak of the Great Recession, in 2009, the red ink in government accounts amounted to 10 percent of the economy. Now, it is less than 3 percent.

Also, inflation is almost nonexistent. According to the Commerce Department, in July, consumer prices increased 1.6 percent, less than the central bank objective of 2 percent.

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Isaac Cohen is an international analyst and consultant, a commentator on economic and financial issues for CNN en Espaņol TV and radio, and a former director, UNECLAC Washington Office.


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