Happy Friday

Just a few reasons why things are looking up for the U.S. Fiscal position (the largest single component of the American economy):

1) The economy is growing, jobs are being created, and tax receipts are growing as a result. Nearly 300,000 non-farm jobs were created in April. No one is saying employment levels are where they need to be, but they're trending in an encouraging direction. (http://www.bls.gov/news.release/empsit.nr0.htm)

2) Since February the federal government has been operating under Statutory Paygo, meaning any additional spending must be accompanied by an equal offset- it's the law. This combined with #1 will reduce the deficit. The President has also frozen all non-security discretionary spending for the next 3 years. This freeze is expected to reduce federal expenditures $1.1 trillion over the next 10 years. (http://www.whitehouse.gov/omb/budget/fy2011/assets/tables.pdf - Table 2 ; http://budget.house.gov/laws/CRS-stat-paygo.pdf)

3) Expiration of the Bush Tax Cuts. For individuals earning more than $200,000/year, rates will return to pre-cut rates- accounting for an estimated $678 billion over 10 years and further reducing the deficit gap. 39% of these cuts went to the 99th percentile of income earners, while the middle 20% of income earners recieved 8.5% (and under Obama will continue to). These cuts have caused the lowest level of federal tax collections as a share of GDP since 1950. When these temporary cuts are allowed to expire tax levels will not exceed those of the Reagan Administration. (http://www.cbpp.org/cms/index.cfm?fa=view&id=1811)

4) Healthcare reform. Officially this will reduce the deficit around $100 billion over the next decade of outyears and one $1 trillion the following decade (http://www.cbo.gov/ftpdocs/113xx/doc11355/hr4872.pdf). This is likely a very conservative scoring as it only accounts for direct cuts, not savings or efficiency gains, for example through the dozens of pilots it establishes to learn about cost control.

5) National Commission on Fiscal Responsibility and Reform (http://www.whitehouse.gov/the-press-office/executive-order-national-commission-fiscal-responsibility-and-reform). The President's Budget lays out a plan to cut the deficit in half by 2015, from 10% of GDP to 5%. The (very) long-term sustainable rate of deficit spending is equivalent to the economic growth rate, e.g. the ability to finance current borrowing with future growth in a non-zero sum fashion. The 50% reduction in the size of the deficit is an enormous accomplishment; the President's FY 2011 Budget released in February represented the largest reduction in the deficit in over 10 years. The previous Administration never proposed a budget that reduced the deficit, not one penny. Obama's budget reduces it over $2 trillion in the outyears, before throwing in the commission and likely the largest domestic policy reform in 50 years- healthcare.