Tuesday, April 21, 2009

Fall in to the (budget) gap.


See the gap between the two dashed lines? Don't bother to look at the giant sucking wound that is 2009. Go out to 2014. The gap at 2014, that's the Obama deficit.

I mean, shouldn't the foundation of long term budgeting be an effort to bring those two lines together, or at least make them close?

That way, if something bad happens like a drastic reduction in global demand coupled with a near total collapse of the international credit system (I know, it's along shot, but, hey, it could happen, right?) then you could use short term deficit spending to ease the pain.

If you are standing in a hole when someone starts pouring dirt on you, digging the hole deeper, faster, will not get you out of the hole. It will just bury you deeper.
Chart by CBO, but I got it from Mankiw.

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