Wednesday, May 05, 2010

Budget Crisis

Arnold Kling does the historical break down.
 In any event, in a non-recessionary economy, the federal government's ratio of revenue to GDP is generally around 20 percent. While a $1 trillion primary deficit represents less than 7 percent of GDP, it represents about 30 percent of full-employment revenues. Eliminating a primary deficit of that magnitude will not be easy, particularly when the major expenditure components are entitlements, which are under pressure to expand rather than contract.

I do not think it is overstating things to describe our current budget situation as a crisis.

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