The U.S. federal deficit fell from around $1.1 trillion for fiscal year 2012 to under $700 billion for 2013, and is projected by the Congressional Budget Office to be below $500 B by 2015. Although it sounds like continuing improvement, the CBO’s projected path is actually unsustainable. Here’s why.
Category Archives: deficits
Observations on the GDP Release and the CBO Outlook
The output gap remains large, even as the external sector supports growth; this outcome is partly due to excessively rapid fiscal consolidation
Links for 2014-01-19
Quick links to a few items I found of interest.
All quiet on the southern front
After a wild ride in 2011-2012, interest rates have settled down on European sovereign debt. For now.
Ironies Abound: Destroying the Village to Save It
I find it strange that self-avowed patriotic Americans are willing to shut down the government, breach the debt ceiling, and throw the world economy into tumult, when those same self-avowed patriots have been asserting that policy uncertainty has slowed down the economy. Let’s stipulate for the sake of argument policy uncertainty has been an important determinant of slow growth [0]; when do we see the spikes in policy uncertainty?
GDP Growth and the Change in the Cyclically Adjusted Budget Balance
Countries that increase the structural budget balance the most have experienced the slowest growth. Here is the scatter plot for the 2008-2012 period.
Coping with high oil prices
We’ve been seeing oil over $100 a barrel and gasoline above $3.40 a gallon for much of the last 3 years. Those prices would have shocked many Americans a few years ago, but have now become the new normal. What has changed and what hasn’t as a result?
“A Forensic Analysis of Global Imbalances”
Just published in Oxford Economic Papers, a paper by Chinn, Eichengreen and Ito. From the abstract:
California economist says real US debt $70 trillion
Or so claims a recent headline. But that’s not what I actually said, as I try to clarify below.
The more you borrow, the more you’ll pay
A key reason to be concerned about high debt levels is very simple– you’re going to be stuck with the bill for the interest payments for the rest of your life.