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Remember the deficit? The mismatch between annual revenues and spending, which ballooned to a record $1.412 trillion in fiscal and was threatening to destroy America? The subject of a dozen-odd panels, commissions, marathon negotiating sessions? The horrific force that was going to turn America into the next Greece? The gigantic iceberg the United States was steaming toward?

Well like many icebergs today, it’s melting—as a political issue and as a real-world phenomenon.

Fiscal year 2014 ended last week, on September 30. And while we won’t get the final numbers until later this week, the numbers are essentially in. Through the first 11 months, the deficit was $589 billion, compared with $755 billion in the first 11 months of fiscal 2013, a decline of 22 percent. But that understates the progress. In months when corporations and individuals have to file quarterly income tax payments—January, April, June, and the current month, September—the government typically turns a profit. In September 2013, the government reported a surplus of $75.1 billion. The surplus for this September should be even higher. Why? According to the Daily Treasury Statement of September 30, government collections of combined individual and corporate income taxes were up about 16 percent in September 2014 from September 2013. A monthly surplus of $100 billion for September would bring the final deficit for the year to $491 billion—a decline of nearly 28 percent from fiscal 2013, and a two-third decline from the peak year of 2009. (Historical deficit figures can be seen here.)

Now, $491 billion—for simplicity’s sake, let’s just call it $500 billion—is still a very large number. But context is everything. The U.S. economy, which recovered from its first-quarter contraction to grow at an annual rate of 4.2 percent in the second quarter, is about $17.3 trillion. That puts the annual deficit at less than 3 percent of GDP. What’s more, the amount of government debt held by the investing public, $12.77 trillion on October 2, has essentially stabilized. Between March 31 and June 31, the amount of debt held by the public actually shrank by $47 billion.

Many of those who specialize in complaining about the size of the annual deficit have failed to grasp that deficits (and surpluses) are highly procyclical. That is to say, the factors that help drive the budget into deficit in the first place make them much worse. When markets crash and millions of people go out of work and companies rack up huge losses, tax collected on income, payrolls, and capital declines fall sharply. At the same time, spending on unemployment benefits and food stamps automatically rises. When things are really bad, the government spends a lot more on auto and bank bailouts and stimulus spending, and cuts taxes—further exacerbating the problem. That’s how we got trillion-dollar deficits.

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