High-Water Mark for Fiscal Doves
We’re a long way from the Tea Parties of 2010. With yesterday’s updated budget projections showing mitigated debt, fiscal doves have a stronger case right now than they have since before the economic crisis.
Three charts show where we are, having cut spending and raised taxes on high earners in the debt ceiling and fiscal cliff showdowns.
The first, from the Congressional Budget Office’s Budget and Economic Outlook report, shows the big-picture view of the debt projection for the next 10 years:
The debt might not be going down. But the CBO doesn’t expect it to balloon in the near term, either. Instead, it will stay at around 75 percent of Gross Domestic Product.
In the short-term, the projected deficits have been lowered considerably, thanks to the fiscal consolidation that’s already taken place. The Center for American Progress’ Michael Linden graphs the changes based on the CBO’s yearly reports:
And in the medium-term, only two major categories of spending are supposed to rise significantly: government health care expenditures, and debt service. In all other categories, spending is supposed to remain relatively steady, or decline as a percentage of GDP over the next 10 years (with the exception of Social Security spending, which is supposed to increase slowly).
Taken together, these trends and projections can make a simple and coherent case for deficit dovishness: the debt has been stabilized for the next 10 years. True, it’s projecting to be increasing again by the end of the 10-year budget frame, but that’s almost solely due to health care cost growth. Even at Washington’s pace, 10 years should be enough time to figure out some way to lower health care spending. With some relatively minor tax increases at some point along the way, we can avoid having to make major spending cuts.
These newest projections might help explain why the White House and Congress have moved from trying for a debt “Grand Bargain” to years ago to vacillating on what to do about the sequester. The federal budget is still unsustainable, but for now the reckoning is far off enough for Obama and company to give weight to the fiscal doves’ views. Of course, the situation may not be as rosy as the CBO and other analysts make it out to be (which isn’t cheery at all). But for the political purposes of a President with a backlog of items on his agenda, it’s rosy enough.