Shrinking U.S. deficit shows stability amid market jitters

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• GWEN IFILL:

  Today was the day the Obama administration decided to draw attention to some good economic news for a change. It announced the federal deficit has declined to $483 billion, the lowest level since 2007. The deficit had exceeded a trillion dollars each year during the president's first term.

  But as that news was breaking, the markets embarked on another roller-coaster day, and new polls showed many Americans are skeptical that any economic recovery has trickled down to them.

  That was the setting as I sat down this morning with Treasury Secretary Jack Lew and Budget Director Shaun Donovan.

  Secretary Lew and Director Donovan, thank you both for joining us.

  You have some good news for a change today, the deficit down and continuing to go down to, what, 2.8 percent?

• JACK LEW, U.S. Treasury Secretary:

  Correct.

• GWEN IFILL:

  To what do you attribute that?

• JACK LEW:

  Look, I think that if you look at where we were six years ago, we had an economy that was collapsing, we had unemployment, 700,000 jobs lost a month, and we had markets in chaos.

  The president came into office and took tough action. He stabilized the economy. He put in place an economic program to create growth. He put in a program to reform our financial markets and over a period of years worked with Congress on a bipartisan basis to put in place a balanced set of measures to reduce our deficit, starting with the Affordable Care Act, which reduced the deficit, as well as providing a guarantee of health care coverage, and then doing spending reductions and revenue increases that came by making our tax system more fair.

  It's an enormous amount of progress to have seen the deficit drop by, you know, roughly two-thirds, and to reach a point where it's — we're now in a 10-year period, looking ahead, of sustainable fiscal policy, which is good for the economy. It means that the economy can not worry about crisis to crisis, and the economy can continue to grow. That's a very good thing.

• GWEN IFILL:

  Director Donovan, you said today that this represents a return to fiscal normalcy. A lot of people don't feel like their lives are very normal yet again.

  SHAUN DONOVAN, Director, Office of Management and Budget: Well, it's one of the things that I think it's important for people to recognize.

  As Jack said, we made a lot of progress. We're now not only below 3 percent of GDP, which is a standard many use as a critical milestone, but we're actually below the 40-year average for our deficit.

  So when I say we have returned to fiscal normalcy, we have reached a point where we have really stabilized our deficit in an important way. And I think it shouldn't be lost on the American people that this happened in a year where we moved away from reckless austerity, manufactured crises that had happened on Capitol Hill, to a place where we have been able to have more predictable investments in the economy.

  Job growth is growing faster, over 10 million new jobs over the last 55 months. So we have made real progress through the president's strategy of investing in key things, but we also recognize we have to do more and we have to continue to invest, continue to do that. And that's what I'm going to be focused on as we go into our budget next year.

• GWEN IFILL:

  But the Congressional Budget Office is — which is nonpartisan, which is the gold standard in many respects, at least in this world of partisan accusation, they say — they projected the deficit may start to head back up again in 2016.

• JACK LEW:

  Well, I think if you look at projections over the remainder of this decade, it — we're in a pretty stable place in terms of the foundation that we have built.

  It doesn't mean there's not more work to do in terms of both growing our economy and investing in the things that we need to do in this country, whether it's education or infrastructure, to have a strong economic future. And the difference is, we are in a stable place right now, and that is good for the economy.

  And what we need to concentrate on now is making sure that we maintain the momentum in our economy, so that we don't return to policies that shortchange the present and the future.

• SHAUN DONOVAN:

  We shouldn't ignore the fact that the president has been focused on key strategies for the long-term deficit.

  Jack mentioned the Affordable Care Act. Health care costs are growing at the slowest rate in more than 50 years. You used CBO's numbers. CBO now projects that in the year 2020, Medicare and Medicaid spending is going to be almost $200 billion lower than they were projecting just a few years ago because of the progress we have made on health care.

• GWEN IFILL:

  If the news is so good, then why is it that everywhere I travel this election year, every poll that I read tells me that people don't feel it, they don't trust it, they are still so deeply worried?

  You're telling them in Washington, things are better, and they're saying, not in my life.

• SHAUN DONOVAN:

  Well, you know, Gwen, every night, the president reads letters that come from Americans around the country, and he is getting letters from people who have gone back to work because the economy is getting better.

  Those more than 10 million new jobs that we have created have made a real difference in people's lives. I think what you're hearing as well and the president hears is that, while we have made a lot of progress in our economy, wages aren't rising, particularly for the middle class, in the way that we would want them to see.

• GWEN IFILL:

  Exactly.

• SHAUN DONOVAN:

  And that's why we need to make further investments.

  The president has been focused like a laser on the minimum wage and what we can do to increase the minimum wage, to make…

• GWEN IFILL:

  But many of the people who are affected by these wage problems aren't earning minimum wage. They wouldn't be affected by that.

• SHAUN DONOVAN:

  But they're certainly affected, whether they're construction workers who could increase their wages with new infrastructure projects, whether they could go back and get trained with the investments the president's proposed, so that they could get a higher-paying job, whether it's starting with pre-K for kids to make sure that they have the skills to get those higher-paying jobs a generation from now.

  He's thinking both in the short term and the long term about all the key things we can do to create a stronger economy for the middle class.

• GWEN IFILL:

  Another sign of instability, volatility, whatever you call it, is what we have seen happening in the stock market in the last couple of weeks. And just this morning, the market opened 300 points down almost immediately. By the end of the day, we will see whether it rebounded.

  But does that also makes your job a little bit tougher?

• JACK LEW:

  You know, I think that we focus constantly on, what's the core economic conditions of the United States.

  And I think it's a mistake to look at hour-by-hour movements in markets to get a picture of where the core is. You know, we have seen over the last half-year almost every economic indicator indicating the kind of progress we're talking about, whether it's job growth or the growth of the economy and confidence.

  I think that we're on a trajectory that is very strong in terms of maintaining U.S. core economic growth. Obviously, there are challenges in any day of any year that are outside of your control. You know, the president's policy in 2009, '10, '11 is a large part of the reason why the United States is now looked at by the world as the economic engine of the world.

  And, you know, one thing I will say in terms of the question you asked about the kind of public sentiment, the conditions in 2009 were really bad, and it leaves some bruising that takes some time to get over. I think right now, we have been in an extended period where Washington hasn't been getting to the brink of a crisis, where they're seeing the economy begin to grow.

  And our job is to continue that, which is why it's so important that Washington do its job in an orderly way and that we continue one step after another to make the right decisions.

• GWEN IFILL:

  Secretary of the Treasury Jack Lew and Director of the Office of Management Budget Shaun Donovan, thank you both very much.

• JACK LEW:

  Thank you.

• SHAUN DONOVAN:

  Thank you.