“The last of the 2008 doomsday scenarios is fading away” and is being replaced with a tentative sense of optimism that the economy is back on track, Mr. Harding said.
He noted that spiraling deficits were one of the biggest fears the public had coming out of the Great Recession.
“One at a time, we’ve seen the doom-and-gloom fears drop by the wayside,” he said. “The Great Recession ended and an economic recovery has been underway since mid-2009. The stock market has fully recovered and gone on to new highs. We’ve seen the loans to automakers and banks fully paid back (with interest). The fear of spiraling inflation did not materialize.
“Now it looks like the fear of the record government debt load may also be fading away. The trend reversal is clearly in the right direction,” he said, though “there’s still a massive problem in the record level of the overall federal debt” facing Congress, he said.
The CBO projections show that the accumulated public debt will start growing again after declining to 70.8 percent of economic output in 2018 and will reach 73.6 percent by 2020.
Deficit-hawk groups such as the Concord Coalition say the near-term improvement in the deficit should prompt Congress to focus all the more on the long-term problems with entitlements such as Social Security and Medicare, which are headed toward insolvency. Federal Reserve Chairman Ben S. Bernanke on Wednesday urged Congress to reverse some of the $85 billion in across-the-board spending cuts imposed this year and replace them with longer-term reforms in entitlements. He said that would be the best approach for the health of the economy.
To date, though, Republicans in Congress appear determined to extract further deficit-reduction measures as the price for increasing the government’s debt limit later this year.
“From the perspective of informed conservatives, the continually growing deficit is still a problem,” said Cullen Roche, founder of Orcam Financial Group. “Sure, the deficit might be shrinking, but that’s like the fat guy who is putting on 20 pounds a year, vows to lose weight and then celebrates next year when he only puts on 10 pounds. It’s the absolute size of government spending relative to the economy that worries conservatives.”