Everything You Heard About the Deficit Falling Is Wrong

By Nomi Prins

May 23, 2013  |  If it’s too good to be true, it probably isn’t. Especially if it involves math, the Treasury Department, and two disparate political camps championing two different economic doctrines that came of age decades ago. 

 

So went the telling of the deficit story last week. Most of the media bought the notion that somehow the deficit had magically halved to $682 billion from around $1.1 trillion last year, based on not even examining the Treasury Department's own reports before promoting that gleeful and surreal conclusion.

When the Congressional Budget Office (CBO) announced that the deficit underwent some kind of Fastest Loser diet, Keynesian types were thrilled that their philosophy was validated. The magic number proved that government fiscal stimulus will ultimately boost the economy. (Leave aside that John Maynard Keynes was actually an asset manager and successful speculator.) Thus, budgetary cuts are not necessary.