The Lost Budget Decade

Budget aficionados have long warned that the U.S. budget is on an unsustainable path. That’s old news (but important).

The new news, which I hope you’ve noticed, is that those warnings have become more urgent over the past year or so. Why? Because our future problems have moved much closer.

Over at the Committee for Economic Development, Joe Minarik has a nice chart that illustrates how rapidly the budget outlook deteriorated:

Joe’s chart shows two projections of the U.S. publicly-held debt. The blue line shows the history of the debt (measured relative to the size of the economy), as well as a projection of the future debt based on analyses by the Congressional Budget Office released in late 2007. The red line shows a similar projection, but based on CBO budget analyses released in January of this year.

As you can see, the day of debt reckoning has moved much closer. For example, our debt will hit 60% of GDP twelve years earlier than forecast (which Joe rounds down to a decade). And, of course, it will keep rising thereafter.

Bottom line: The warnings of budget experts have become much more urgent because our room for maneuver has gotten much smaller.

3 thoughts on “The Lost Budget Decade”

  1. And yet we have Paul Krugman, in a blatant exhibition of disingenuous hyperpartisanship over analytical integrity and good-faith, doing essentially a 180 on the level of harm/risk he associates with our projected medium and long-term fiscal imbalance vs. the assessment he presented in 2003 (when he wanted to criticize the Bush tax cuts), so he could now advocate more stimulus spending.

    In 2003 Krugman was expressing great worry/fear over the projected long-term fiscal imbalance (deficits and debt-to-GDP) once the Bush tax cuts were factored in, saying that a problem that had already been very difficult to solve had been made downright impossible to solve, and we were thus firmly on course for extremely adverse consequences. He told readers that he is “terrified about what will happen to interest rates once financial markets wake up to the implications of skyrocketing budget deficits… we’re looking at a fiscal crisis that will drive interest rates sky-high”, describing this fiscal outlook as a “really scary…threat to the federal government’s solvency”, saying “the conclusion is inescapable. Without the Bush tax cuts, it would have been difficult to cope with the fiscal implications of an aging population. With those tax cuts, the task is simply impossible. The accident, the fiscal train wreck, is already under way”. http://www.nytimes.com/2003/03/11/opinion/11KRUG.html

    In August, 2009 Krugman was looking at a significantly WORSE projected long-term fiscal imbalance in terms of the numbers and in terms of the difficulty of solving it and avoiding extremely adverse consequences (given the greater proximity to the baby boomer bulge of seniors), and, in response to (legitimate) worry about this fiscal outlook expressed by others, he insists emphatically and persistently that, while the outlook is “bad”, it is clearly something we “can handle”, and that those who were expressing a level of concern similar to his in 2003 were “hysterical” and that the only way “to make the debt look scary” is to ignore the clear lesson of history to the contrary – a comparison with the post-WWII era which is not only absurd, but moreover was a history with which he was undoubtedly quite familiar when writing in 2003, so if the only way to “make the debt look scary” is to ignore that history, why did he express such fear about the fiscal outlook back in 2003? http://krugman.blogs.nytimes.com/2009/08/23/how-big-is-9-trillion/ and http://krugman.blogs.nytimes.com/2009/08/28/the-burden-of-debt/

    On February 4, 2010, Krugman doubled down on his propagandistic, bad-faith “analysis” regarding the level of costs and risks posed by our projected long-term fiscal imbalance, speaking incessantly of “deficit hysteria”, “fear-mongering”, and “scare tactics”, and adds that although the long-term outlook is “problematic”, “even the long-term outlook is much less frightening than the public is being led to believe.” http://www.nytimes.com/2010/02/05/opinion/05krugman.html?ref=opinion

    There’s absolutely nothing wrong with someone opposing large deficits at one time under particular conditions and/or due to one type of policy and opposing them under other conditions and/or due to another type of policy, but there’s something very wrong with an expert abusing the trust placed in him by virtue of his expertise to mislead people about costs, benefits, and risks we face and which we wish to consider in assessing related policy alternatives.

    h/t Jim Glass from last August http://www.scrivener.net/2009/08/krugman-versus-krugman-on-deficits-and.html

  2. Would you kindly translate your site into German because I’m not so comfortable reading it in English? I’m getting tired of using Google Translate all the time, there is a handy WordPress plugin called like global translator which will translate all your pages automatically- that would make reading posts on your great blog even more pleasant. Cheers dude, Writing Info!

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