Did you hear the great news? The deficit came down. From 2009 to 2010, the deficit level fell by $125 billion. According to Stan Collender, writing at Capital Gains and Losses, "this by far is the biggest one-year nominal drop in the deficit that has ever occurred."
But nobody is very excited about this development. Nor, honestly, should they be. The real news today is the latest jobs report: The economy shed 95,000 jobs and the overall unemployment rate held steady at 9.6 percent. The private sector actually created some jobs, but those gains were more than offset by layoffs in the public sector. As my colleague Jonathan Chait points out, this largely reflects the fact that local and state governments have been cutting back spending, in order to balance their budgets.
Local and state governments wouldn't have to do that if they had more money. And they'd have more money if the federal government provided it to them. That's what President Obama and his allies wanted to do, citing evidence that aid to the states is among the very best ways to boost the economy at times like these. But conservatives said no, citing concerns about the deficit. Those conservatives prevailed.
Some of these conservatives who blocked more state aid were basing their position on principle. They think the potential damage of running higher short-term deficits, even modest ones, outweighs potential gains in employment. Or they simply don't buy the Keynesian logic of deficit spending to boost growth. I think the majority of mainstream economists would disagree, as would I, but at least it's a substantive prefrence.
But some of the conservatives, particularly those within the Democratic Party, were thinking more about politics. Running higher deficits, they thought, would incur the wrath of voters and make re-election difficult. Well, now they've gotten their way. The deficit is coming down. Let's see how much the voters care come November.