Good News, Bad News and the Tipping Point

Wednesday September 2nd, 2015   •   Posted by Craig Eyermann at 3:43pm PDT   •  

28421806_SWe have good news and bad news on the U.S. government’s budget deficit for 2015. First, the good news from Reuters:

The U.S. budget deficit is likely to fall by $60 billion in 2015 due to strong revenue gains, the Congressional Budget Office said on Tuesday, enabling the government to stave off default without a debt limit hike perhaps through early December.

The CBO said it now estimates a $426 billion deficit for fiscal year 2015, down from its $486 billion forecast made in March. It also forecast a fiscal 2016 deficit of $414 billion, a reduction of $41 billion from the previous 2016 estimate.

The new forecast would bring the deficit to its lowest dollar amount since 2007, and as a 2.4 percent share of U.S. economic output, it would be below the 50-year average.

Now the bad news, which was picked up and emphasized by the Washington Times in covering the same news story:

The good news will continue for a couple of years as the economy belatedly but fully rebounds from the recession of December 2007 to June 2009. By 2018, though, debt will rise as government spending grows and the economy will cool again, the CBO said.

“The growth in debt is not sustainable,” CBO Director Keith Hall said in presenting the estimates. “At some point, it’s going to get to a very high level. Obviously, you can’t predict tipping points, but at some point this becomes a problem.”

Tipping points often only become clearly evident in hindsight. That’s something that is almost part and parcel of “why change so often happens as quickly and unexpectedly as it does”, to quote, historian Malcolm Gladwell.

Which is to say that when such a tipping point with the nation’s debt arrives, it will do so both quickly and unexpectedly. At least that would be the perspective of the people who are responsible for putting it into that state in the first place.

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September 2015
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