It has become conventional wisdom that the United States has a deficit crisis. But according to Paul Krugman, most politicians and journalists don't realize that the deficit has been "mostly solved."
"Reasonable projections do not, repeat do not, show anything resembling the runaway deficit crisis that is a staple of almost everything you hear, including supposedly objective news reporting," the Nobel Prize-winning economist wrote in a blog post on Thursday. He cited a new graph from the Center on Budget and Policy Priorities showing that since early 2011, the government has largely stabilized the U.S. debt outlook.
The New York Times columnist returned to the subject on Friday in a blog post on California's disappearing budget deficit. Krugman wrote that now that the economy is recovering, "deficits are receding as an issue before our eyes," which he predicted will anger "deficit scolds" that are "set on exploiting the alleged fiscal crisis to dismantle social insurance programs."
The deficit has loomed large in political debates over the past few years. Major newspapers published far more articles about the deficit than about unemployment starting in late 2010, according to a 2011 analysis by National Journal. The debt ceiling fight amplified coverage of the national debt on major TV networks, according to a 2011 analysis by ThinkProgress. And CNBC recently launched a campaign called "Rise Above" to call for deficit reduction.
Politicians have shaped government policies in kind. The government has shed 651,000 employees since President Barack Obama took office, according to Bureau of Labor Statistics data. This austerity has made the unemployment rate higher than it would have been otherwise, according to some economists.
Obama seems to be gearing up for future budget battles. On Thursday, he nominated his Chief of Staff Jacob Lew, a budget expert, for Treasury secretary. Congressional Republicans have threatened to force the U.S. government to default by March if Obama does not agree to spending cuts.