NPR logo Obama Team Accentuates Positive In $1.3 Trillion Deficit Report

Obama Team Accentuates Positive In $1.3 Trillion Deficit Report

Treasury Secretary Tim Geithner says the administration squeezed the still-record deficit by "carefully managing" the financial bailouts.    Manuel Balce Ceneta/AP Photo hide caption

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Manuel Balce Ceneta/AP Photo

Obama Administration officials clearly suspected that when they reported that the fiscal year 2010 deficit was a record $1.294 trillion, there would be a tendency in the media and the Republican opposition to seize on that figure.

But while that gargantuan amount sure sounds frightening, there's actually a fair amount of good news in Friday's report, the administration would like you to know about.

And in their news release, administration officials make sure to mention all the good stuff first before getting to reporting the Mt. Everest of deficits.

For instance, the bailouts cost a whole lot less than was earlier estimated.

Due to careful stewardship of the emergency programs, their effect on the deficit was much smaller than previously estimated. The Troubled Asset Relief Program (TARP) had outlays of just $9.0 billion in FY 2010, which was $25.9 billion or 74 percent below previous estimates from July 2010.  Aid to Fannie Mae and Freddie Mac was $52.6 billion in FY 2010 – $16.4 billion or 24 percent less than the most recent forecast. This played a large part in reducing the deficit, which as a percentage of gross domestic product (GDP) fell to 8.9 percent, down from 10.0 percent of GDP in FY 2009. This improvement – 1.1 percent of GDP – was the most rapid one-year improvement since FY 1987.

"By carefully managing the emergency initiatives to stop the financial panic and by accelerating our exit from those investments, we have significantly lowered the cost to taxpayers, bringing the costs of the financial rescue down by more than $240 billion this year.  However, we still have a long way to go to repair the damage to the economy and address the long-term deficits caused by the crisis," Secretary Geithner explained.

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See, there is good news buried in that $1.294 trillion deficit figure. The administration news release doesn't get to that deficit figure, by the way, until the fifth dense paragraph due to all the good news it wanted to share first.

It should be said that it's not a complete surprise that the deficit was a record coming out of a downturn as severe as the Great Recession, with the increased federal spending on not just the economic stimulus but unemployment insurance and food stamps as well.

Also, it's important to remember that experts on government finances are much more concerned about the long-term structural deficits like rising health care costs that will make Medicare unsustainable than short-term deficits.