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Tuesday, August 26, 2003

When 290 is more than 401


According to the latest CBO estimates, the United States will be running a $401B deficit for this fiscal year, the largest since 1992. Of course, the Democrats are driving this point into the ground, saying the deficit will never go bellow $300B in the 2004-2013 period, while Republicans say they have a plan to grow the economy. This ignores two things. First, using the deficit total as a boogeyman is wrong. What is important is the percentage of GDP the deficit makes up. In 1992, the $290B was 4.5% of GDP. Today, the $401B is only 3.7% of GDP. This leads to the second point. To project fiscal data 10 years into the future is useless. Tax receipts may go up due to an economic boom, making the cuts revenue neutral. The cuts may be expanded or contracted by a future Congress. Or aliens may come to earth and use us for lunchmeat. Both parties should focus on the present instead of manipulating data to fit their visions of the future.

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