Deficit Watch, July 2006

The latest numbers from the US Treasury indicate that we are still in danger of balancing the budget.  Crossover day for receipts and outlays would be January 12, 2009—shortly after the next presidential election.  Here’s the updated chart (click to enlarge).

If you’ve been watching this blog for any length of time, you already know that I’d like to see the deficit settle down between 2-3% GDP.  That’s the debt-burden-neutral deficit.  (In fact, I’d like to see “balanced budget” redefined to “the fiscal budget that maintains a constant debt-to-GDP ratio”—primarily because it would immediately force economic growth, the denominator, into the national debate about so-called fiscal responsibility.)

Anyway, if current trends keep up, we are in danger of overshooting that neutral debt burden target.  I have some remedies in mind, and they don’t include slowing the economy, but that’s for another article.