Don’t dismiss big budget deficits

May 24, 2009

While I know it’s fashionable to laugh off the big budget deficits that the U.S. is running and to pooh-pooh the chances of an S&P debt downgrade, guess who doesn’t think it’s a big joke? The Congressional Budget Office. This, from the blog of CBO Director Doug Elmendorf:

Thus, the large deficits that CBO projects for the years after the economy has returned to full employment are more worrisome. Moreover, the sharp increase in debt this year and next raises the risk that investors might lose confidence in U.S. government debt as a safe haven. This risk heightens the importance of putting the budget on a sustainable path as the economy returns to full employment.

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