Saturday, June 25, 2011

Are either Republicans or Democrats really serious about the deficit

In the Congressional Budget Office's (CBO) latest deficit projections (federal debt held by the public) as a percent of GDP (report is here), two scenarios are considered.  Extended-Baseline Scenario where all tax cuts are allowed to expire (Bush and Obama tax cuts) and Alternative Fiscal Scenario where expiring tax cuts are permanently extended.  The graph illustrating this is given below (click on it to enlarge).


The graph clearly shows what happens if tax cuts are left unaddressed.  Data like this leads me to wonder if anyone is really serious about cutting the deficit.  The Incidental Economist (see here) has a very vivid graph (federal revenue and spending as a percent of GDP) that describes what happens under the Alternative Fiscal Scenario (see below, click to enlarge).


As the Incidental Economist points out, note how little Social Security matters in the long run.  Again, are either Republicans and Democrats serious about the deficit?  Are citizens?  My point is, we can tell when people get serious by observing that they begin to address the issue in a way that has real consequences.  Thus far, it appears to me to be little more than ideological ranting.  It is time to "come clean" and craft approaches that respect the data.

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