Yesterday, Former Treasury Secretary and director of the National Economic Council Larry Summers argued that “budget deficits are now a second-order problem” and the focus should instead be on economic growth. Although the piece is in many ways insightful, it could perpetuate the myth in Washington that our debt problems are either solved or are no longer a pressing concern.
The release of the Congressional Budget Office's (CBO) Long-Term Budget Outlook is one of the big events in the budget world, and we'd like to think that this blog is as well: the update of our CRFB Realistic Long-Term Baseline. Based off of the ten-year CRFB Realistic Baseline and CBO data, our long-term baseline draws a plausible path for where our future deficits and debt are headed.
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.