Friday, January 11, 2013

Speaking Of Deficit Reduction...

This article (from which the above graph is taken) summarizes a couple of others saying the same thing: we're already on a nearly-sustainable trajectory toward fiscal sanity.

See the orange line in the image? That shows the debt trajectory under the status quo -- which includes the Budget Control Act approved in 2011 and the American Taxpayer Relief Act (the bipartisan Biden/McConnell fiscal deal) signed into law last week. Under this scenario, the debt, as a percentage of the economy, will dip through the end of the decade before climbing again. 
Which is why that red line in the image is interesting. 
As the CBPP sees it, if policymakers agreed to about $1.4 trillion in additional debt reduction, the country would be on a "sustainable path." This does not, to answer your next question, include the sequestration savings, which are due to kick in next month.
In other words, for all the handwringing, if policymakers can agree to a balanced deal to replace the sequester sometime over the next seven weeks, they'll practically be done with debt reduction for a long time.
I admit I'm not enough of a student of the finer points of economics to judge all this. But I like graphs, and this one seems more encouraging than one might assume from the rhetoric coming from the teabagging zones of D.C.


Anonymous said...

I thought you might like as an adjunct to your article/blog post.
A few highlights:
- US interest payments are only 10% of GDP right now
- This is due to low interest rates despite rising debt levels
- A reasonable way to keep interest rates low is to keep demand for US treasury bonds high
- Demand can be kept high by a growing economy, which will keep the US as a desirable place to invest

My commentary:
- Perhaps broad spending cuts and tax rate increases aren't the answer in the short-term; the decrease in GDP may not be worth the benefits right now
- Maybe the focus should be on growth related investments (either govt or private sector; maybe military or domestic)
- maybe deficit reduction measures can wait until the GDP is growing at >3% again, when tax increases and mild spending cuts can be better tolerated


P.S. I had my first experience with a blakemore tube (and the pathology requiring such) a few nights/mornings ago. Interestingly enough, a few days later I happened across an article on another blog titled "Operating on the Hypercritically Ill". Of course, the writing style seemed awfully familiar. Your post was a good reminder that being a surgeon (of any subpecialty) doesn't end when the procedure is over & that it benefits everybody to work well with the critical care team. I was also not aware of the use of intravenous vitamins for patients on steroids, but that'll be today's literature search.

Sid Schwab said...

Wow, PT!! That's exactly the argument liberal Nobel prize winning economists like Krugman and Stiglitz have been making forever. Welcome into the light!

Ah, yes, Blakemore tubes. Nasty, horrible things, for a nasty, horrible situation.

Sid Schwab said...

And speaking of Paul Krugman, PT: sing it, Loudon.

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