Friday, February 12, 2010

Is this the best they can do?

Over at Econobrowser, the usually excellent Menzie Chinn has posted a couple of graphs that he says are "particularly relevant in thinking about the US fiscal situation". I think they are too, but in the exact opposite way that they are being presented.

I looked at the first graph and said "holy crap"! Then I noticed it was labeled "US debt/GDP ratio not particularly high", and cracked up. Yes, people, it's true that Greece and Italy have higher forecasted debt ratios than us. They are also the the "I" and "G" in the PIGS whose unsustainable fiscal positions are rocking financial markets. The graph could just as well be labeled, "the USA is an honorary PIG" ( of course that isn't actually true either as the demand for dollar denominated debt is going to be quite a bit stronger than that for PIG issued euro denominated debt, at least we sincerely hope so).

I looked at the second graph and said "this graph is factually incorrect". Then I noticed it was labeled "US structural budget balance not unusual". Note the use of the word "structural" as opposed to "actual". Structural means "what's left after I subtract off some stuff to make the deficit smaller". It is not an official US government statistic and is pretty meaningless.

No matter how you slice it, we are on a path to permanently higher federal spending as a percent of GDP and a much higher level of federal debt. I would like to add something like "at least until November" but the heinous spending binges of the Republicans the last time they were in the Congressional majority doesn't give me any hope for a change of course.

1 comment:

John Thacker said...

Menzie Chinn stopped caring about the deficit and debt the second President Obama was elected, or perhaps was sworn in.