Who's up for another trillion-dollar deficit?

I assume the answer to that question is, well, everyone.  After all, no one thought that cutting less than $40 billion in spending would reduce a $1300 billion deficit by more than a third, did they?

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The federal budget deficit will top $1 trillion for a fourth straight year, congressional budget analysts said Tuesday, the smallest since the Great Recession hit in 2009. …

The $1.1 trillion deficit is the smallest deficit figure — both in nominal terms and as a percentage of the economy — since the Great Recession.

The CBO says that changing policy would bring deficits down further, but would have other serious consequences:

The CBO said that allowing the George W. Bush tax cuts to expire on schedule in January and making deep cuts to the Pentagon and other agency budgets would shrink future deficits and begin to tame the national debt.

Still, the nation would pay an economic price for such austerity measures, the CBO said. Raising taxes and cutting government spending would slow economic growth and increase unemployment. The CBO projected that the jobless rate would hit 8.9 percent by the end of this year and rise to 9.2 percent by the end of 2013.

You know what else might work?  Actual reductions in spending.  Eliminating vast bureaucracies that interfere with economic activity.  Unlike tax hikes and doc fixes, that would at least have the novelty of not having been tried before.  And that doc fix that Democrats want to pass to keep medical providers from revolting over ObamaCare just got more expensive, too —  increasing $26 billion to $316 billion from a CBO estimate that just came two months ago.

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This isn’t the only bad news, either.  In another projection that the Post didn’t include in its report, the CBO now estimates GDP growth will start slowing again (via Jim Geraghty):

In part because of the dampening effect of the higher tax rates and curbs on spending scheduled to occur this year and next, CBO expects that the economy will continue to recover slowly, with real GDP growing by 2.0 percent this year and 1.1 percent next year (as measured by the change from the fourth quarter of the previous calendar year). CBO expects economic activity to quicken after 2013 but to remain below the economy’s potential until 2018.

That’s hardly a resume for re-election for Obama and his economic team.  Vote for us — our policies keep America below its potential until well after we’ll leave!  I guess that’s a restatement of Hope and Change, but with a cold dash of reality dropped into the mix.

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Duane Patterson 11:00 AM | December 26, 2024
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