Oh Lord, this is just what we need. A spike in deficit fever …
by digby
Well, this worked out awfully well:
Broad tax cuts made permanent during the fiscal cliff fight last year have dramatically darkened the nation’s long-term budget outlook, congressional budget analysts said Tuesday, nearly doubling the projected size of the national debt over the next 25 years.
The biggest driver of federal spending — health care programs – is rising more slowly than in the past, according to a new report by the nonpartisan Congressional Budget Office. But a New Year’s Day law that permanently extended the George W. Bush-era tax cuts for the vast majority of Americans is projected to drive borrowing from outside investors to 100 percent of the economy by 2038. Previous projections showed the debt drifting down to 52 percent of GDP by that time.
Krugman explains why this is not actually a crisis although I’m sure the Villagers have been digging in the closet for their last case of smelling salts all day long.
Meanwhile, we have the administration so energetically patting itself on the back for lowering the deficit that it’s falling flat on its face. It cannot seem to make the connection that its buying into that insane austerian obsession as early as 2009 helped make this economic recovery so anemic.
Oh, and there’s this problem too:
This morning, the Census Bureau released its report on income, poverty, and health insurance coverage in 2012. It shows that from 2011 to 2012, median household income for non-elderly households (those with a head of household younger than 65 years old) increased 1.0 percent from $56,802 to $57,353. However, that modest growth barely begins to offset the losses incurred during the Great Recession. Between 2007 and 2011, median household income for non-elderly households dropped from $62,617 to $56,802, a decline of $5,815, or 9.3 percent. Furthermore, the disappointing trends of the Great Recession and its aftermath come on the heels of the weak labor market from 2000-2007, where the median income of non-elderly households fell significantly, from $64,843 to $62,617, the first time in the post-war period that incomes failed to grow over a business cycle. Altogether, from 2000 to 2012, median income for non-elderly households fell from $64,843 to $57,353, a decline of $7,490, or 11.6 percent.
Golly, if only our obsession with tax cuts and the deficit didn’t contribute heavily to income inequality, poverty and wage stagnation we might we might get somewhere. But they can’t help themselves:
In suggesting that falling deficits were something to celebrate, or at least politely applaud, Obama helped make the case for maintaining the policies that got us there. One major reason that deficits are shrinking so quickly right now is because both Democrats and Republicans agreed to a deal during the 2011 debt-ceiling crisis with significant spending cuts: $900 billion in upfront cuts and $85 billion more this year due to the automatic cuts under sequestration.
The Obama administration has acknowledged before that these cuts haven’t been a good way to reduce the deficit. “Bad policy is driving down the deficit more quickly than anyone intended,” as Treasury Secretary Jack Lew admitted in May. Economists almost uniformly agree that fiscal contraction has slowed GDP growth this year, which Obama noted in passing during his speech. But Obama ultimately made his case against sequestration without explaining Democrats’ fundamental change of heart on the 2011 deal that wrote them into law.
Oy. Let’s see if that “fundamental change of heart” sticks once the get a load of those new deficit numbers. The stupid runs strong on this.
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