The Deficit Problem We Don't Have
My latest post for Bloomberg View discusses the structural deficit through a detailed analysis of the numbers:
If those so-called deficit hawks would stop moralizing long enough to look at the data, they might find something surprising: That data almost entirely undermine their argument.
Yes, the long-run path of spending on federal health programs remains a serious and legitimate source of concern. But the numbers show that our current fiscal deficit is well within control -- as have been the deficits of the last five years.
For this post, I have calculated estimates of the current structural fiscal deficit from 1949 to 2012 with data from the Office of Management and Budget. These estimates come from breaking down the deficit into its components -- spending by individual program and revenues from each tax -- and computing their sensitivity to the output gap over time through linear regression. My estimates of the output gap come from the Congressional Budget Office.
For fiscal year 2012, the annual structural deficit was $325 billion, or 2.1 percent of GDP.