From Briefing.com:

On Friday, it was reported that the December US federal budget showed a surplus of $44.5 billion. This was well above the expected $24 billion.

The twelve month trailing deficit is now down to $208 billion.

This is amazing. The US federal deficit is now down to just 1.5% of GDP (through fourth quarter estimates).

At the end of 2003 the deficit was running at over 3.8% of GDP and was in excess of $420 billion. The forecasts were for “$400 to $500 billion yearly deficits as far as the eye can see.”

That conventional wisdom has been proved COMPLETELY WRONG. Yet, the belief seems to linger on. There are continued constant references to the “huge budget deficits” in the press on nearly a non-stop basis.

The fact is, the accumulated deficit as a percentage of GDP has fallen from 75% in 1994 to about 61% today. The deficit is shrinking not just on a current year basis, but also as a burden to future generations.

This improvement is even more remarkable considering that the Iraq war is costing approximately $100 billion per year, and that reconstruction costs for Katrina are also in the past twelve months’ data.

If not for these factors, the deficit would be nearly in balance and certainly less than 1% of GDP.

Furthermore, when state budget surpluses are taken into account, the current US government deficit is closer to just 1% of GDP. This consolidate figure including state budgets is actually a better measure of the fiscal health of US government overall and is more accurate in terms of comparing to other countries.

Speaking of which, Italy, Germany, Japan, and France continue to run deficits in excess of 3% of GDP. That is far higher than the US percentage of 1.5%, or 1% for all government. Italy’s accumulated deficit is 100%, Japan’s is 100%, and the EU as a whole is close to 65%.

It can easily be argued that there is in fact no current budget crisis in the US.

This is not to say that curtailing the deficit further would not make sense. Nor is it to ignore the long-term problems posed by the need to fund social security or Medicare. Those are budget issues that need to be addressed.

Nevertheless, the clamor over the current deficit is blown way out of proportion. It may simply be lingering pessimism in the press, or it may be supported by those advocating tax hikes.

Or, it may be that the people advocating tax hikes have a lot of allies in the press, and that both camps have an ideological vested interest in convincing people that the economy is in the tank and the federal government needs to grow even further.

I suspect the economic gloom and doom in the press will continue...at least until the next time a Democrat occupies the White House, when the same economic situation that prevails today will suddenly be reported as positive news.