Long-suffering fiscal hawks finally got some good news Thursday, when the Treasury Department reported that the government ran a $117 billion surplus during the month of June. Even better news was that the feds ran a surplus for the right reason – spending was down.
Federal outlays were $170 billion, nearly half of the $336 billion the government spent in May, according to Treasury figures. Spending fell 47% from the same point last year, giving us the largest monthly surplus since 2008.
The federal deficit is projected by the Congressional Budget Office to be $642 billion this year, down from the $1.1 trillion deficit the government racked up in FY 2012. If the estimates turn out to be true, this is progress, and just like the June surplus, it’s progress for the right reason: Conservatives have managed to begin bending the spending curve downward.
No, they haven’t managed to get a liberal president and liberal Senate Democrats to agree to net reductions in spending, at least not total spending, but they have managed to force the president and his Senate cohorts to accept reductions in the growth of federal expenditures.
Through the combination of the Budget Control Act of 2011 and several debt-ceiling and shutdown-aversion deals Republicans have managed to put the government in a significantly better fiscal position than it otherwise would have been.
Prior to those deals, the federal government was projected to run record deficits for years, and in fact the White House’s budget saw the federal deficit never falling below $500 billion per year ever again. Now, deficits are projected to be just 2.1 percent of gross domestic product in 2015.
Economic growth – as weak as it is – also plays a role, and the growing economy proves an important point that spending cuts are not the economic doom liberals say they are. Every time the GOP has pushed to cut spending, liberals trot out the same tired old charts and graphs claiming that trimming the budget even a little bit will bring economic pain.
The opposite has proved true. The economy did not go into the toilet after Congress cut spending, and in fact those spending cuts have helped save Washington from a fiscal crisis, at least for now.
This should all warm every fiscal hawk’s heart. Spending cuts, big ones, can be used to improve our budget position without harming the economy and without raising taxes.
As long as Congress commits to cutting spending over the long term, there’s no real reason to worry about economic harm because such a commitment will provide economic certainty and allow the economy to adjust to changing realities.
Spending cuts coupled to economic growth are a guaranteed prescription for better fiscal health, and June’s surplus helps prove it.
Because spending cuts don’t harm economic growth, there’s no real need to raise revenue through tax increases either. Liberals like to claim that tax hikes are necessary because we can’t cut our way out of the current fiscal mess. This is simply not so.
Because we’ve bent the spending curve downward without harming the economy, future federal borrowing needs have been reduced, giving us needed breathing room and reducing the likelihood of a Greek-style debt crisis in the near term. We simply don’t need to raise taxes to solve our deficit problems.
Cutting spending now and committing to cut it in the future also help with our long-term budget issues. Those issues, driven entirely by entitlement spending, are going to require serious, fundamental reforms to solve. The spending cuts that have been achieved give us breathing room to address those problems without a panic-driven flight to tax increases. Congress can examine comprehensive tax and entitlement reforms without feeling pressured to simply take the easy way out.
In all, June’s surplus shows that spending cuts are the right policy for putting our country on sound fiscal footing. Congressional Republicans should be recognized for the fruits of their hard-won victories and budget hawks everywhere should take heart that we have some much-needed proof that we can make progress on our budget problems without taking money from the American people.
Matt Cover is Content Editor at Rare. Follow him on Twitter @Matt Cover