More Re Temporary Spending and the Budget Deficit

December 16th, 2011 at 5:32 pm

Like I said earlier, I don’t want to spend a lot of time on a point that’s completely unwelcomed in the current debate, but instead of all this drama around how we’re going to pay for extending the payroll tax cut and UI, the smart economic move would be to add them to the deficit.

How can I be so cavalier, you ask?  Here’s why: Since they’re temporary, the UI and payroll extensions will have almost no impact of the longer term deficit.  Let me show you.

Based on this CBO score of the costs of the two measures, the figure below plots their impact on the deficit/GDP ratio through 2019.  It starts out as a fraction of a percent and goes to almost zero pretty quickly (it doesn’t get all the way to zero because of servicing the added interest on the debt).

Source: CBO (see text for link); my calculations

Add to this the costs to growth and jobs of failing to renew UI and payroll, and all I’m sayin’ is that fears about their impact on the budget deficit should not be the slightest bit convincing.  Unless, that is, you’re inpenetrable to facts, in which case, it’s a major, job-killing, deficit disaster!

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2 comments in reply to "More Re Temporary Spending and the Budget Deficit"

  1. Tom in MN says:

    You can’t expect conservatives to believe a hockey stick plot like this.


  2. David says:

    Are you really serious? This President has continued to spend at a record pace and the deficit is not his fault? This another attemt to cover up the truth which is we are BROKE and for the life of me I can not see how liberals can not see that. It a littany of its not my fault by both parties and right now I do not care how it happened. Spending has to be brought into line with revenues and we do not have a revenue problem it is a SPENDING problem. Until liberals quit kicking the can down the road and realize that it has to be dealt with it is NEVER going to be fixed.
    Also the “payroll tax cut” is a very very bad idea. It robs social security of its revenue as that is its only source. It is a look at what I did for you so I can get reelected deal and it is wrong…..period.


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