The Congressional Budget Office (CBO) presented its year-end estimate of the fiscal year 2009 deficit yesterday. NPR told listeners: "the Congressional Budget Office estimate, while expected, is bad news for the White House and its allies in Congress as they press ahead with health care overhaul legislation that could cost $900 billion over the next decade." Let's see, back in August, CBO projected that the deficit would be $1,587 billion, yesterday CBO estimates that the 2009 deficit will actually be $190 billion less that they had believed, and this is "bad news for the White House and its allies in Congress" and a setback for health care reform? Those of us who are not professional reporters for a major national news outlet may miss the logic here. It is clear that NPR is unhappy with the deficit, calling it "unprecedented flood of red ink," which it compares to: "the previous record deficit was $459 billion and was set just last year." Serious reporters would have told listeners that the 2009 deficit was approximately equal to 10 percent of GDP. The previous post-World War II record was 6.0 percent of GDP in 1982. The actual records were more than 20 percent of GDP set during the war years. The piece goes on to tell listeners: "the huge deficits have raised worries about the willingness of foreigners to keep purchasing Treasury debt." Yes, people worry about all sorts of things. Millions of people are worried that President Obama was not born in the United States. While some people no doubt have the worried that NPR notes, it might have been more informative to tell listeners that in spite of the large deficits, foreigners are willing to hold U.S. debt at historically low interest rates. This is very strong evidence that the foreigners are not worried. It might also have been worth noting that if foreigners (notably China) stopped purchasing Treasury debt, then their currency would rise against the dollar. This would increase our exports to these countries and reduce our imports from them. In the case of China, this has been exactly the policy shift that both the Bush and Obama administration have been publicly demanding. It might have been worth providing readers with this information.
--Dean Baker
