The issue: However, the good news will last only so long
In Washington there is a by-now hackneyed but still useful expression: “Kicking the can down the road.” It means putting off dealing with a difficult problem until some unspecified time in the future in the hopes that in the meantime some solution to the problem presents itself.
Sometimes, to general astonishment, it actually works.
THE FEDERAL DEFICIT is declining faster than expected as the economy rebounds more strongly than expected. It is a most pleasant surprise, if only a temporary one.
The deficit for fiscal 2013, which ends Sept. 30, will be “only” $642 billion, 4 percent of GDP, $200 billion less that the Congressional Budget Office forecast and the smallest shortfall since 2008.
Households, too, were reducing their debt, by $110 billion in the first quarter.
As a practical matter, Congress, which has already twice delayed an increase in the national debt ceiling, will not have to deal with that problem, and the ugly politics associated with it, until October or even November.
At the previous rate of borrowing, the government would have reached its credit limit in August when Congress would have been in the midst of a five-week vacation. The lawmakers can now leave town with a relatively clear conscience.
The declining deficit is due to increased tax revenues from individuals, households and businesses and the automatic, across-the-board federal spending cuts under sequestration.
The improved deficit outlook may start a movement to ease up on sequestration but House GOP deficit hawks seem content with the existing spending clamp on federal agencies.
THE GOOD NEWS will continue, at least for a while. The CBO projects that the deficit, 7 percent of GDP in fiscal 2012, will fall steadily until it bottoms out at 2.1 percent of GDP in 2015.
But then the can will have been kicked as far as it will go. Starting in 2015, Social Security and Medicare costs will start to soar, and the deficit is expected to stabilize at 70 percent of GDP later in the decade. The CBO says that for the past 40 years the federal deficit has averaged 39 percent of GDP.
And then, barring congressional action on the deficit or an improbable economic boom, it will be time to find another can to kick.