Wednesday, May 8, 2013

The rapidly shrinking deficit.

Yes, it's true, the deficit is shrinking, despite what you might have heard.  According to the CBO, seven months into fiscal year 2013, we've accumulated a $489B deficit.  Some might attribute this to austerity, but t'is not so.  Spending increased by 1.6% (slower than inflation), while revenues shot up 26.7%.  Therefore, rather than force the sort of deep cuts that a Balanced Budget Amendment (which the evidence shows would result in deeper deficits) would entail, we just need to slow spending, in order to allow revenues to catch up and erase the deficit.



So it makes sense, right?  If timed right, the deficit will be crossing the zero line when bond rates rise. Or in other words, when the economy is bustling and moving towards full employment, no one's going to give a damn about bond rates, because we won't be carrying an annual deficit; instead, we'll be paying down our debts, just as Keynes said we should be doing.  Which, by the way, is exactly the opposite of what Republicans and George Bush did, when they had full control of Congress and the White House in the previous decade.

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