A Little Less Fiscal Drag In the Budget

April 12th, 2013 at 9:06 pm

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.


Source: OMB

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One comment in reply to "A Little Less Fiscal Drag In the Budget"

  1. Perplexed says:

    -“I don’t want to make a huge deal out of 0.7% of GDP…”

    Maybe not a huge deal overall, but if you convert it into “number of jobs,” its a pretty big deal to those families! We need to quantify the damage being caused by deficit hawks in terms of people to better understand that the world can benefit in some cases from the extinction of certain species.