There was a time when a $200+ billion reduction in the federal budget deficit would have been big news and hailed as a singular achievement worthy of either fiscal sainthood or a dance-on-the-table party...or both.
Yet yesterday's Congressional Budget Office report showing that the fiscal 2013 federal deficit will be $642 billion, $203 billion less than CBO's previous estimate of $845 billion, did not create any spontaneous cannonizations or celebrations. It also didn't change the still-stalemated and crisis-oriented federal budget debate by even a small amount.
The bottomline: It's in almost no one's interest to be happy about the budget news that should have made everyone happier.
1. The $642 billion estimate is indeed an overwhelming reduction from the 2009 $1.4 deficit and a substantial change from CBO's February projection. But it is also $642 billion more than no deficit at all. That means that all sides in the budget debate will still be able to use even this much lower number to "prove" whatever point they were making before the new estimate was released.
2. The White House couldn't take a victory lap because anything it said would have been mischaracterized by congressional Republicans as the president supporting a $600+ billion deficit.
3. Even though they could take some credit for keeping the sequester in place and, therefore, lowering spending, the congressional Republican leadership couldn't take a victory lap because that would have been taken by some tea partiers as an indication that the speaker and majority leader were not going to demand additional reductions.
4. There's anything but universal agreement among economists that reducing the deficit in the current economic environment is the right fiscal policy and, therefore, that the reduction in the deficit is good news. Given the still-slow corporate and consumer spending, the continuing cutbacks by state and local governments and the continuing economic problems around the word that are limiting trade with the U.S., Americas austerity-like fiscal policy that has been in place for several years may well be the exact wrong plan at this time.
5. The year-by-year deficit is quickly being replaced by the national debt as the number one fiscal issue. This isn't surprising: the deficit is falling while the debt is rising and the deficit is in billions while the debt is in trillions. The fact that CBO projects the debt will soon be in a range that most economists would call insignificant makes no difference when the multi-trillion dollar debt sounds so scary.
6. In the wake of the report, the deficit hawk groups are still saying that the deficit is as much of a problem as it was before and pushing for a grand bargain. This too isn't a surprise. After all, these groups would have less reason for being and far less ability to raise funds if the deficit didn't exist as an issue.
7. Although the CBO forecasts show the deficit falling from 2013 to 2015, it also shows it rising in nominal terms each year thereafter. Even though that is far less meaningful than the deficit as a percent of GDP, which stays in the low 3.5 percent range, it still allows everyone to cherry-pick the results that best "prove" what they want to say.
So...Do the new CBO numbers mean that there won't be a fight this fall over the debt ceiling and a continuing resolution? Absolutely not.