Reading the news these days, you might think our debt problem has been solved: the federal deficit has been revised downward and is falling to its lowest level in five years. Yesterday, however, Congressional Budget Office (CBO) Director Doug Elmendorf made clear that he, for one, does not subscribe to that view.
In an op-ed in POLITICO, former Senate Budget Committee staffer James Carter and Fiscal Commission adviser Paul Weinstein advised lawmakers to look beyond the short-term fiscal picture and the next ten years to the longer term. They note that too much focus has been on improvements in the near term due to legislative changes and technical re-estimates.
Late last week, the Washington Post's David Fahrenthold published a piece claiming that "big government is mostly unchanged" since 2010, when lawmakers turned their attention towards fiscal issues and Republicans took control of the House.
Frequent readers of this blog will be familiar with projections of long term debt. But the Peterson Foundation has found an interesting interactive way to present that informs the viewers about what the long-term outlook looks like and what the possibilities are going forward.
In his column in today's Wall Street Journal and an accompanying audio clip, David Wessel takes on the question before Washington: Is the budget deficit falling, or does it pose a serious threat to the nation's prosperity? His answer: Yes to both. On one hand, the budget deficit is shrinking, due in large part to the recovering economy but also due to some of the savings lawmakers have enacted over the past year.
Yesterday, we noted the revisions that CBO has made to its historical budget data going back to 1973, in light of the Bureau of Economic Analysis's revisions to GDP numbers going back to 1929. Although the nominal dollar totals are unaffected, numbers that were estimated as a percentage of GDP have all been revised downward, as a result of the higher GDP. We pointed out that the revisions were noticeable but certainly not huge.
Nearly two weeks ago, the Bureau of Economic Analysis released its GDP report with a $560 billion upward revision for 2012. As we explained at the time, the BEA has adopted a new accounting system, which changes the way GDP is measured. Now R&D and artistic creation are accounted for as investments, instead of as immediate expenditures. As a result, GDP appears larger than under previous measurements.
Detroit's recent bankruptcy makes it the largest municipal bankruptcy in our nation's history as the city seeks to restructure $18 billion in debt. However, this didn't just happen overnight, it was the result of years of deficit spending and inadequate revenues compounded and demonstrated in particular by its pension program.