The Mostly Solved Deficit Problem

Sooo.. it turns out that Obama has more or less fixed the fiscal stuff, and pretty soon might have stabilized the debt at an ok level too. Yelling about 16 trillion always sounds bad, but a 70% debt/gdp ratio is probably a good and healthy level.

From Krugman:

The Center on Budget and Policy Priorities has a graph:

The vertical axis measures the projected ratio of federal debt to GDP. The blue line at the top represents the projected path of that ratio as of early 2011 — that is, before recent agreements on spending cuts and tax increases. This projection showed a rising path for debt as far as the eye could see.

And just about all budget discussion in Washington and the news media is laid out as if that were still the case. But a lot has happened since then. The orange line shows the effects of those spending cuts and tax hikes: As long as the economy recovers, which is an assumption built into all these projections, the debt ratio will more or less stabilize soon.

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