I don’t want to make a huge deal out of 0.7% of GDP, nor do I want to create the impression that fiscal policy is moving in the right direction. It’s not. But I give the White House and my old pals on the econ team over there credit for raising the 2014 budget deficit as a share of GDP above current law.
First, pull in your talons, deficit hawks. The deficit is still scheduled to shrink next year under the President’s budget from around 6% of GDP this fiscal year to 4.4% in 2014. But, if current policy were to prevail next year—i.e., if neither the President’s nor the other budgets were adapted—the deficit ratio would shrink to 3.7% of GDP. So, a bit less fiscal drag thanks to the fact that the administration replaces the sequester with more back-loaded spending cuts and implements some jobs measures as well.
And yes, I know that none of this is at all likely to happen, but I just wanted to point out that this budget is less austere than you might have thought–or at least less so than what we might be in for.