I don’t know about you, but when I recently updated this chart I was pleasantly surprised by how much the deficit had improved. In the third quarter of 2012 –the last quarter of the previous fiscal year — the deficit had already fallen to 7.0% of GDP as compared to the peak of 10.5% in the fourth quarter of 2009.
Moreover, with the ending of the tax break on payroll taxes and higher taxes on the top incomes as well as prospects for improved growth in 2013 we may be experiencing the best improvement in the deficit picture since the Clinton presidency. Moreover, the large scale shifting of incomes back to 2012 to avoid higher taxes implies that the last quarter of 2012 could also show a big improvement. This chart clearly shows why all the deficit hawks are keeping quiet on what is actually happening to the deficit