Apr 15, 2013 at 3:52 pm
As I noted here, and despite the current dominance of austerity budgeting, President Obama made an important point when he released his budget last week when he asserted that “…nothing shrinks deficits faster than a growing economy.”
Just a one percentage-point increase in real GDP at a time like this–when we’re still below potential and the Federal Reserve isn’t about to snuff out new growth–lowers the 10-year deficit by $86 billion (see Table 2-5 here). There’s the initial boost in added revenues that the extra GDP growth spins off, followed by lower interest payments.
Or, you can just go with what Jung (I think) described as neurotic behavior: even though it’s not working, just keep doing the same thing and hope the results turn out differently.
Source: OMB Analytical Perspectives, Table 2-5.
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