Is the US Bouncing Back?

In the light of recent scandals, few people have noticed the enormous success achieved by President Barack Obama. The U.S. budget gap has been disappearing at a very rapid rate. Before last year’s elections, Republican candidate Mitt Romney took pleasure in posing for photographs in front of a huge electronic clock, which displayed a gigantic number that was expeditiously increasing, never ceasing. He took the clock to every election rally, even though the cost of its transportation and unpacking worked out to over $1,000 each time. It was supposed to constitute conclusive evidence that the evil Barack Obama was leading the U.S. into an abyss.

We do not know what fate befell the clock after the elections, however, if it is still on, it should have displayed 16,843,499,893,810 yesterday morning, at 9:17 a.m. EST. At the time, that was the U.S. public debt, a little shy of $17 trillion.

The U.S. debt has been the main subject of American politics, not only during the election campaign, but also for the last five years. On Jan. 20, 2009 when Obama moved into the White House, the national debt worked out at $10.6 trillion. George W. Bush left his successor an economy in turmoil, with a $1.4 trillion budget deficit.

In his first term, Obama assured that he would reduce the deficit by half. It might be the most important promise that he failed to fulfill. In 2010 and 2011, the deficit worked out at $1.2 trillion and in 2012, when he was re-elected, to slightly above $1 trillion.

A seemingly interminable debate about those figures has been going on in Washington. The Republicans accused Obama of an insidious extravagance, for which the generations to come would have to pay. During rallies, T-shirts with a frightened infant shouting, “How much do I owe you?” — statistically speaking, U.S. citizens incur $53 in debt the moment they are born — sold insanely well.

Democrats hit back by blaming Obama’s budget deficit on the Republican Bush. When he took over from Clinton, the budget was perfectly balanced — not only without a deficit but with a slight surplus! Admittedly, the national debt already exceeded $5 trillion, but this was a residue from previous generations of American citizens. Bush, who waged two expensive wars and cut taxes substantially, added another $5 trillion during the eight years of his administration. Furthermore, after the collapse in the real estate market, which resulted in a financial crash, Bush left the government in the direst crisis since the 1930s. In the first quarter of 2009, the economy dwindled by 6 percent on a yearly average.

Faced with that calamitous situation, Obama had to — as Democrats have explained — allocate over $1 trillion to the economic sector, so that it would get back on the right track. Moreover, the government's revenue was very much in the toilet as a consequence of the record low taxes set by Bush. This is why the budget gap could not be reduced, at least not by half as Obama had promised.

Certain economists, such as New York Times columnist Paul Krugman, were trying to convince the public that deficits were not such a bad thing. Conversely, in times of stagnation, the state has to spend as much as possible to revive the economy.

Both sides repeated their arguments so frequently that even casual observers of affairs in Washington knew them by heart. It appeared that after Obama’s re-election, nothing was going to change. Surprisingly, the spring saw the first signals of a rapid reduction of the budget gap.

Two weeks ago, the nonpartisan Congressional Budget Office announced an amendment to this year’s budget. The deficit is said to work out to only $642 billion, which is $200 billion lower than expected. It might have come as a surprise to many, but Obama kept to his word and reduced the deficit by half indeed. Granted, it took him six months longer than he said it would, but he more than made up for it by decreasing the deficit by more than he had planned.

“The results have highly exceeded our expectations, so I think it is time for us to focus on the improvement of other economic factors,” said new Secretary of the Treasury Jacob Lew.*

Surprisingly, this groundbreaking revelation went hardly noticed. Obviously, it was mainly because Republicans and the pro-Republican media preferred to ignore it — no wonder, as it undermined the main arguments against Obama that they had been able to come up with. In the U.S. the public is mostly engrossed with three events: the death of a U.S. ambassador in Benghazi, which was partly because the U.S. Department of State disregarded his appeals to tighten security; the IRS' malicious inspection of anti-Obama conservative institutions and foundations last year; and the Department of Justice's subjection of journalists to surveillance to expose the sources of a leak of state secrets to the media.

All those scandals are disconcerting; however, they are not going to affect the fate of the U.S. in any significant way. On the other hand, the reduction of the budget deficit — which amounted to 10 percent four years ago — to 4 percent is absolutely essential.

Why the sudden improvement? Tax revenues are much higher because of the revival of the economy, thanks to which Obama finally managed to force through the tax increase in January. That was the reason why many wealthy Americans decided to post their income statements last year, availing themselves of lower taxes. Last but not least, government expenditures decreased as a result of a new austerity program — implemented despite objections from Obama — according to which $1.2 trillion is to be cut over the next decade.

If accountants in Congress are right, it is not only a transient phenomenon. Next year or in two years at the latest, the deficit might plummet to merely 2 percent of national revenue. The majority of economists, both left- and right-wing, agree that 2 percent is not a budget gap anymore but rather a small hole, totally negligible as far as the economy is concerned.

Certainly, the government still has to deal with the $17 trillion national debt, which accumulated in the previous years. However, in spite of looking really serious, the debt does not pose any threat and is surprisingly easy to handle as well. Bond interest rates or the cost of borrowing money are so low at the moment that the U.S. spends only 1.5 percent of national revenue a year to cover the interests of the gargantuan national debt. On the other hand, this same operation under the administration of Ronald Reagan, Bill Clinton or both Bush presidents took up about 3 percent of national revenue. And please, bear in mind that the debt was much lower at that time!

Add to this a 2.5 percent economic growth — maybe not mind-boggling, but still pretty impressive when compared to Europe — the unemployment rate, which has just decreased to 7.5 percent — again, maybe not a great result by American standards, but Europe can only dream of achieving it — the biggest consumer confidence index in five years, and record levels of stock market indexes, and it appears that the U.S. is actually not doing so badly. The country is faring surprisingly well, especially to viewers of the right-wing, propagandistic TV station Fox News, who cannot rule out the possibility that the man whom they have held in such contempt is gradually getting the country out of stagnation.

*Editor's note: Although correctly translated, this quote could not be verified.