by digby
I assume Lord Saletan makes a very good living:
Hey, Democrats! Here’s an idea: If you rein in spending and borrowing, you won’t have to win another debt-ceiling increase a year from now.
— Will Saletan (@saletan) October 11, 2013
I. just.can’t.
The United States is up against the debt ceiling right now. If we wanted to avoid more borrowing, we’d have to stop running deficits altogether. Immediately. And that would hurt.
The U.S. federal government currently takes in enough tax revenue to pay for about two-thirds of its spending. So balancing the budget right away would mean cutting spending by 33 percent, hiking taxes by 50 percent, or some combination of the two.
Most economists will tell you this would crush the economy. As Paul Krugman points out, cutting government spending by 33 percent all at once would trigger a recession. Once that happened, deficits would soar higher as tax revenue fell and safety-net programs expanded automatically. So, to stay under the debt ceiling, we’d have to keep cutting.
Once the dust settled, Krugman estimates, eliminating the deficit that much would cause GDP to fall by around 10 percent and trigger a 5 percent rise in unemployment. Maybe more. This is basically what Greece did to deal with its debt crisis. And Greece still hasn’t yet eliminated its deficits, even after years of massive austerity.
Now, obviously you could reduce the deficit more gradually than this — most Democrats and Republicans are in favor of a softer approach here. But as long as the United States keeps running any deficits at all, the federal government will continue to accumulate more debt and will need additional borrowing authority. Even the most ambitious deficit-reduction plans now on the table will still require future debt-ceiling hikes.
On the other hand, there’s also ample evidence that this deficit obsession is pretty much bullshit from start to finish.
But it’s a helluva good way to turn the US into a banana republic for real.
Update: See David’s post below, as well.
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