- The Washington Times - Wednesday, October 30, 2013

Powered by tax increases and deep budget cuts that held spending in check, the federal deficit dropped to $680 billion in fiscal year 2013, according to a Treasury Department report Wednesday that marks the first subtrillion-dollar deficit since President Obama took office.

The deficit is less than half the record $1.413 trillion figure Mr. Obama and President George W. Bush shared in fiscal year 2009, and it comes out to a little more than 4 percent of the economy as measured by gross domestic product.

That is still higher than economists say is healthy, but it’s far more manageable than at the height of the recession.

The Treasury numbers show the government achieved a major landmark by cutting overall spending $83 billion, down to $3.454 trillion.

It’s the second consecutive year that overall spending dropped — a feat the government hasn’t managed since 1953 to 1955.

Meanwhile, taxes grew to $2.774 trillion, marking an all-time high and signaling that personal and business incomes are beginning to recover from the recession.

White House budget director Sylvia Mathews Burwell said the figures mean Mr. Obama has made good on his pledge to cut the deficit in half.

“As a percent of Gross Domestic Product (GDP), the deficit fell to 4.1 percent, representing a reduction of more than half from the deficit that the administration inherited when the president took office in 2009,” Ms. Burwell said in a blog post. “The deficit reduction since that point represents the fastest decline in the deficit over a sustained period since the end of World War II.”

She said the credit belongs to Mr. Obama for fighting to raise taxes in the January “fiscal cliff” deal, and for drawing down troops in Afghanistan.

But Republicans said credit goes to the spending cuts, which were the result of the 2011 deal that imposed discretionary spending caps and budget sequesters.

“Since Congress passed the Budget Control Act with overwhelming bipartisan majorities in 2011, Washington has actually reduced the level of government spending for two years running. That’s the first time this has happened since the Korean War,” said Senate Minority Leader Mitch McConnell, Kentucky Republican.

The federal deficit is the measure of how much spending outstrips revenue in one year. The federal debt is the accumulation of those deficits over time. As of Tuesday, the most recent figures available, total public debt stood at $17.1 trillion.

The 2013 deficit figure would have been worse if the government hadn’t borrowed nearly $40 billion from the Social Security trust funds.

The deficit also benefited from a $83.5 billion credit from federally backed housing programs Fannie Mae and Freddie Mac.

The fiscal year ended Sept. 30 and the deficit numbers were supposed to be released earlier this month, but were delayed by the government shutdown.

Instead, the figures were released on the first day of official meetings by House and Senate negotiators who have been tasked with writing the first overall budget blueprint since 2009.

Mr. Obama has called for lawmakers to strike a grand bargain that would raise taxes and cut entitlements, using some of the money to replace the budget sequesters and the rest to reduce the deficit in future years.

But liberal advocacy groups have said they will lobby against any effort to constrain the growth of Social Security or other entitlement benefits, and Republicans have ruled out tax increases, leaving narrow room for a deal.

“If we look at this conference as an argument about taxes, we’re not going to get anywhere,” said Rep. Paul Ryan of Wisconsin, the House Republicans’ chief budget negotiator. “The way to raise revenue from our perspective is to grow the economy, to get people back to work.”

Sen. Patty Murray, Washington Democrat and chairwoman of the Senate Budget Committee, said the modest goal of the negotiations should be to set a spending number for fiscal 2014, which began a month ago, and to come up with ways to alter the budget sequesters.

“This won’t be easy,” she said. “The House and Senate budgets are very different even for just this year, but if both sides are willing to move out of their partisan corners and offer up some compromises, I’m confident it can be done.”

The next round of budget sequesters, due to bite Jan. 15, will hit defense spending particularly hard.

That comes on top of the cuts for fiscal year 2013, in which defense spending dropped to $635.2 billion, down from a high of $708.3 billion in 2011.

Indeed, discretionary spending — the annual spending Congress has to approve each year — dropped, while entitlements such as Social Security, Medicare and veterans’ benefits grew.

• Stephen Dinan can be reached at sdinan@washingtontimes.com.

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