The Sources of the Budget Deficit

Two key political points on the recent deficit numbers. One, per Michael Ettlinger and Michael Linden, is that this is primarily about Bush legacy policies and the economic downturn rather than the results of any new post-election initiatives:


We’re not just seeing here that Bush’s policies were irresponsible, but an illustration of what was so irresponsible about them. When a giant recession comes, you wind up running large deficits. Then you need to pare back afterwards and start reducing your debt-GDP ratio. And it’s really unhelpful to heard into that situation with a pre-existing large debt overhang.

The other point is what Tim Fernholz says here—large looming structural deficits are a reason to start reforming the health care system ASAP not a reason to delay action. It’s very fair to say that the proposals on the table in congress don’t go as far as would be ideal in terms of changing the long-term cost equation. But that’s a reason to put additional constructive ideas on the table and open up political space for bolder action. Stalling the legislative process—and ultimately hoping to derail it—will only make things worse.