Deficit disorder

Gratuitous animal picture.

Lately there have been many news reports and expressions of public anxiety about the growing federal deficit. In his blog, Nobel laureate and NY Times columnist Paul Krugman asks an interesting question: "what would things look like if we hadn’t had 8 years of gross fiscal irresponsibility from the Bush administration? "

Here's what he had to say:

There were two big-ticket Bush policies. One was the tax cuts, which cost around $1.8 trillion in revenue; add in interest costs, and we’re presumably talking about more than $2 trillion in debt. The other was the Iraq War, which has cost at least $700 billion, and will cost more before we finally extract ourselves.

Without these gratuitous drains on the budget, it seems fair to assert that we’d be coming into this economic crisis with a federal debt around 20 percent of GDP ($2.8 trillion) smaller than we are. And that, in turn, means that we’d be looking at projected net debt in 2019 of around 50 percent of GDP, not 70...

The bottom line, then, is this: the irresponsibility of the Bush years has left us poorly positioned to deal with the current crisis, turning what should have been an easily financed economic rescue into a more difficult, anxiety-producing process.

There's more on the debt/deficit issue here.

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GOAT ROPE ADVISORY LEVEL: ELEVATED