RENEE MONTAGNE, HOST:
Let's explore the state of the deficit a little more for today's bottom line in business. Yesterday, we talked about the House Republican plan to address it, after Congressman Paul Ryan released the party's proposal. Senator Patty Murray will put out the Senate Democrats' alternative soon. And then, at some point, the president will offer his plan on the deficit.
Let's bring in David Wessel, economics editor of The Wall Street Journal, as we do many days. Good morning.
DAVID WESSEL: Good morning, Renee.
MONTAGNE: So where doe it stand, as of today?
WESSEL: Well, actually, today, the Treasury reports on the first five months of the fiscal year. And according to Congressional Budget Office predictions, the government spent about $500 billion more than it took in through February. That's a smaller deficit than the about 580 billion for the same period last year.
Turns out that revenues are up a lot. People who could shifted their income into 2012 to avoid the January 1st increase in income taxes. The payroll tax rate has been boosted, and the IRS is behind on paying tax refunds.
Spending is up, but only a little bit. It's really about half a percent ahead of last year. And the deficit's projected to be big for this fiscal year, but it'll be the first time in five years that the federal government has managed to keep the deficit below $1 trillion, partly because the economy slowly is healing.
MONTAGNE: Okay. So Congress hasn't finished work on spending bills for this fiscal year. It's already beginning to talk about the budget for next year, the one that begins, what, October 1st?
WESSEL: Right. Even by Washington standards, this year is pretty messy. As of March 1st, of course, spending was cut across the board, because of the much discussed sequester, which is beginning to ripple through the government. On March 27th, the government runs out of authority to spend altogether. The House has passed and the Senate is working - with some hesitation - on bills that would get us through the end of this fiscal year, keep the government operating through September 30th, while trying to figure out how much of the sequester to undo, while, as you point out, the House and Senate budget Committees are beginning to show their budget outlines for next year. I wonder how even the members of Congress keep this straight.
MONTAGNE: I was just thinking: This is seriously complicated. How did the House and Senate budgets for next year, 2014, I mean, look? Is this all part of some grand compromise that's emerging?
WESSEL: No. If this is a compromise, we're really in trouble. Basically, the two sides are making their opening bids, but as Bob Bixby, a deficit hawk in town says, they're starting from where they were three years ago. The Paul Ryan budget, as you said, looks a lot like the one he had before. He really would reshape federal benefit programs. He'd wipe out the deficit in a decade.
He keeps the Obama upper-income tax increases, though - the ones that were enacted at the beginning of this year - but draws the line at any additional tax increases. He relies on four-and-a-half trillion dollars of spending cuts over 10 years. Then you have the Senate Democrats, who come out with their budget today. They're not going to try and balance the budget over 10 years, and they're going to call for about a trillion dollars in tax increases and a trillion dollars in spending cuts. So there's a lot of room between them.
MONTAGNE: So where's the president in all of this?
WESSEL: Well, besides the schmoozing up with Congress, we're still waiting to see his budget, but he has put out this one-page sheet that says I'm willing to cut Medicare. I want to raise taxes more. And in this provision that Democrats detest - including Tom Harkin, as we heard earlier - he wants to cut the way that Social Security cost-of-living adjustments are.
That would save $130 billion over 10 years. That's a big deal, but the Republicans don't seem to see it that way.
MONTAGNE: David, what is next, then?
WESSEL: Well, it looks like there'll be some deal to keep the government going past March 27th. It's not clear whether that deal will include lifting some of the across-the-board spending cuts, or making the sequester more flexible. House Republicans don't seem to be at all interested in moving in Mr. Obama's direction, drawing the line on anymore tax increases, even though they know there's little chance that Congress will actually pass a significant deficit reduction plan that relies strictly on spending cuts.
Democrats aren't all that eager to join the president in putting benefit cuts on the table, so we're going to see a lot of noise and - I'm afraid - not much progress for the next few weeks. One interesting thing, though, if the stock market was worried about this, you sure can't tell it. The DOW Jones industrial average has set a new record each day for the past six days. It's up more than 10 percent so far this year.
MONTAGNE: Well, that's a bit of good news to end this conversation on. David Wessel is economics editor of The Wall Street Journal. Thanks a lot.
WESSEL: You're welcome. Transcript provided by NPR, Copyright NPR.