Thursday, August 12, 2010

US Debt: Arguing to Close the Barn Door after the Horse has Already Bolted

The reality of large deficit and growing public debt in the US is mostly an artifact of the Great Recession. Once economic activity is back to normal, the US will be back to a situation where it has "the usual" structural deficits.

If you want to understand this situation, here is a post by Paul Kasriel of the Northern Trust bank. This picture from that post shows you that the worst is over, so most of the venom about deficits is very much like trying to close the barn door long after the horse has run away...

Bottom line? You can ignore all the political posturing about "can't pay for state aid, or unemployment extension, or any fiscal stimulus" as just so much hot air. The reality is that the economy is slowly healing and the federal government's books are slowly coming back into balance. You would never believe this if you simply listened to the political rhetoric of the right in the US.

No comments: