If you think the budget deficit and national debt are in bad shape now, you ain’t seen nothing yet.
So say Alan Auerbach, an economist at the University of California, Berkeley, and William Gale, vice president of the Brookings Institution.
“By 2019, even if everything goes the way the Obama administration wants, and the economy recovers and grows steadily over the next decade, the deficit will be 5.5 percent of GDP,” they write on CNNMoney.com
That’s “an extremely high figure in good times,” the duo point out. “And the debt-to-GDP ratio will hit 82 percent, its highest level since just after World War II.”
But wait a minute, it gets worse, “Things aren't as likely to go as well as President Obama hopes,” the economists explain.
“The economy has already performed worse than was assumed in the budget projections, and the projections are based on heroically optimistic assumptions about the political discipline Congress will impose on itself.”
So what’s the solution?
“Policymakers can thread this needle by committing now to future spending cuts and tax increases, while at the same time being careful not to undo the current stimulus or hurt economic prospects right now,” the economists maintain.
The short-term picture isn’t pretty for the budget deficit either. The gap already broke past $1 trillion in June for the year ending Sept. 30.
"Many private analysts still expect the fiscal-year deficit to top $2 trillion," Insight Economics analyst Steven Wood told Dow Jones.
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