Should We be Worried About the Deficit Now?

Source: Beat the Press
by Dean Baker

“Back in the old days we used to argue about whether we needed to balance the budget. With a deficit of more than 6.0 percent of GDP, that question seems pretty much moot. If we wanted to balance the budget with tax increases, we would need to increase revenue by almost a third. If we tried to do on the spending side, we would need cuts in non-interest spending of almost 29 percent. Neither of those seem close to politically realistic. And splitting the difference, tax increases of 15 percent, spending cuts of 14.5 percent, doesn’t look remotely plausible either. So, we can forget about balanced budgets (thankfully), but the question is then how large a deficit is too large? There actually is a relatively simple answer to this one. A deficit that leads to inflation is a deficit that is too large.” (11/13/23)