Thursday, April 10, 2014

NY Times on the Smaller Budget Deficit

by Calculated Risk on 4/10/2014 06:29:00 PM

First an error ...

From the NY Times: Tax Revenue Soars, Decreasing Deficit, U.S. says

Over all, the deficit is expected to equal 4.1 percent of gross domestic product in 2014, down from nearly 10 percent in 2009, during the depths of the recession.
Actually in February the CBO projected the deficit to be 3.0% of GDP in fiscal 2014 (4.1% was for fiscal 2013). Next week the CBO will update their projections, and I expect the deficit projection for 2014 to be revised down again.

NY Times:
The deficits in the next few years are expected to stay at 2 to 3 percent of gross domestic product, before widening sharply again toward the end of the decade.
It depends on what "widening sharply" means, but the CBO is projecting 3.4% in 2019 and 3.7% in 2020.

And this is a key point:
“It is the fastest four-year reduction in deficits since the demobilization after World War II,” [said Ernie Tedeschi, head of fiscal analysis at ISI], “but it has come in the middle of an economy that is not yet healed from the worst recession since the Great Depression.”
The economy would probably be better off (more employment, faster GDP growth) if the deficit hadn't been reduced so quickly.