James Pethokoukis

Politics and policy from inside Washington

Closing the budget gap

October 19, 2009

TaxVox tells us why the budget deficit is much worse that what the government is projecting:

Total federal revenue in 2009 amounted to just 14.9 percent of GDP, the smallest fraction since 1950 and far below the 26 percent of GDP spent by the federal government. That gap will narrow in coming years but CBO projects that it will average more than 4 percent of GDP over the next decade, and that’s only if the 2001-2006 tax cuts expire in 2011 as scheduled. Extending those cuts, even only for President Obama’s broad middle class, will mean deficits as far as the eye can see.

Me: Actually, you are looking at a gap more like 6 to 8 percentage points, long term. That is just unsustainable for any extended length of time.

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