Celebrating deficits of slightly below $1 trillion after four years of $1 trillion+ deficits? Really?
I know European denialism says otherwise, but perpetual deficit spending of 5% of GDP when public debt is about 100% of GDP = Eventual default.
These deficits are not perpetual, though. They're only during times of economic distress. If we planned on running a deficit for the next 100 years solid, then yeah, we'd probably be heading toward a default.
WHAT? We've been running a deficit virtually ever single year over the past half century! Our debt is over 100% of GDP now. Your attitude was fine in 1970-something, but we are way past that point.
I'm not talking about deficits in general. I'm talking about deficits in excess of 5% of GDP, which is what you were complaining about. The federal budget never needs to be balanced, but it does need periods where it is outpaced by growth of GDP.
Thank you for bringing up the 1970s. 1950s-70s we ran deficits virtually every year, but our debt declined because our GDP grew to the point where that debt was chump change.
You are correct that 5+% of GDP deficit perpetually will lead to default, because the GDP will never grow 5% perpetually, in fact it rarely does in a single year. However, the federal government can run deficits infinitely if it keeps it around and below that threshold. A deficit locked in at 2.5% of the GDP can last for an eternity without ever being balanced. The
nominal number that is the national debt can be $20, $50, $100 trillion dollars, as long as we have a GDP of $21, $51, $101 trillion. We'll be okay.
Right now, we're about $1 trillion behind on nominal GDP with our nominal debt (15.6 to 16.6). The debt is expected to grow to $18.4 trillion by the end of 2016. If we grow our nominal GDP by 18% over the next four years, guess what? We'll be back in the green at 18.45 trillion GDP and thus a shrinking Debt-to-GDP ratio, and we won't have a debt problem.
Think that's impossible? Our nominal GDP grew by 12% over the last four, during "economic malaise." 18% nominal growth over a four year period can be done, in fact it will be. Now, after 2016 the debt will start rising at a ridiculous pace again, but we don't need to start slashing entire programs to fix that. All we have to do is move things around to bring down below growth.
This is why it is not a myth but FACT that booms lower the debt. The debt was shrinking by the early 90s, not just when the surpluses happened, and parts of the mid-1980s during the Reagan deficits because the Debt-GDP ratio was declining aka the REAL debt. The surpluses just switched things into turbo drive.
And if we get some minor spending cuts done, such as to the military, it'll make the goal GDP even smaller.
