The Deficit Trap
by digby
If these guys aren’t careful somebody might get the idea that improving the economy will improve the deficit picture without destroying the safety net. Luckily, Andrea Mitchell is there to keep that from happening:
Andrea: Talk to us about the deficit and any prospects for improvement on the unemployment front.
Ron Insana: Well Andrea I’ll take the first part first. The deficit, and this is something I’ve been talking about for many months now, is going to be considerably smaller in fiscal 2010 than most people realize and if you go back to fiscal 9 when we had a 1.4 trillion dollar deficit, we had federal tax receipts fall about 37 percent. That’s simply not going to happen this year as was reported in the March numbers, there was a 129 billion dollar reduction in the deficit from the same month a year ago thanks to rising tax receipts because the economy is growing and falling spending because the bailout’s being paid off. Right now the price tag’s only 89 billion dollars. The Fed may earn that all back this year and give it to the treasury. It could be a net plus to the Federal Government by the time this bailout is over.
Ok, without necessarily agreeing with Insana’s rosy view of the Fed’s ingenious plan to earn a profit for the government, let’s just stipulate that he’s saying that large deficits are affected by a bad economy when the government naturally receives less in tax receipts — and that the deficits are often reduced as an economy improves.
That will not stand. Andrea, boggled by this strange notion, swiftly interrupts:
Andrea: You’re talking about the short term deficit and not the long term looming deficits as Medicare costs and everything else that’s…
Insana (laughing) Sure, you’ve got a hundred… trillion in unfunded liability. And the jury is still out on whether the new health care bill will cost more or will reduce health care costs over time
Andrea: Exactly!
Insana: … and no one can see far enough out to make that kind of projection.
Right, but we know for a fact that “looming deficits” in the next several decades are going to destroy everything we hold near and dear. And anything we might do to ensure that the economy recovers and thrives today so that there will be increased tax receipts due to prosperity in the future is off the table because of that. Bit of a conundrum, isn’t it?
Not to worry, though. As long as the top 1% continue to thrive there will always be some crumbs to fall through the cracks in the table. I’m fairly certain that to celebrate that fact, Insana and Mitchel later shared an orgasm over the Dow reaching 11,000.
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