Economists' Outlook

Housing stats and analysis from NAR's research experts.

The Latest on the Budget Deficit

In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses the federal budget deficit.

  • The federal budget deficit continues to shrink.  For the month of July, the deficit was $98 billion.  Though large, it is down from $117 billion this time last year.  The 12-month cumulative deficit is also shrinking.
  • The reason for a smaller-sized deficit is that the housing market is recovering nicely and contributing to economic growth.  As more people work, more pay taxes and fewer receive government benefits.  Sequestration of automatic government spending cuts is also helping reduce the deficit.  In addition, the profits from Fannie and Freddie are turned over to the government since these organizations have been effectively nationalized.
  • Though it is good news that deficit is falling, it is still a deficit (too much spending in relation to tax revenue) and still very high by historical standards.  Only faster economic growth can eventually help turn a deficit into a surplus – as happened during the late 1990s.
  • In today’s world economy, Germany is the only notable economy with virtually no deficit.  That is due to low unemployment in the country.  Munich in particular has only a 2 percent unemployment rate, with Bavarian Motor Works (otherwise known as BMW) cranking out cars for exports.  Germany did have high unemployment a decade ago and was known as the sick man of Europe.  However, the labor market reform which permitted companies to easily fire workers led entrepreneurs to aggressively hire workers (Companies do not like to hire if they cannot fire).  In addition, unemployment benefits were sizably reduced.  The consequent job creations are contributing to a healthy German economy.
  • The falling U.S. deficit is good news for homebuyers.  Lower budget deficit will mean less pressure for the interest rates to rise quickly over time.

Notice: The information on this page may not be current. The archive is a collection of content previously published on one or more NAR web properties. Archive pages are not updated and may no longer be accurate. Users must independently verify the accuracy and currency of the information found here. The National Association of REALTORS® disclaims all liability for any loss or injury resulting from the use of the information or data found on this page.

Advertisement

Comment Policy

The opinions expressed in reader comments sections on this website are those of the reader and not NAR or REALTOR® Magazine.

About Economists' Outlook

Visit this blog daily to see what NAR experts are saying about the economy, the housing market, and other factors that will impact your business.

Housing Minute

Housing Minute is a monthly video series highlighting the latest housing data from the National Association of REALTORS® in a minute or less.