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- Apr 30, 2014
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What's a "very big" deficit to you? What's "very big" deficits to MMI, or Jeager
Yes, this is an important point. The current deficit is 2.5% of GDP. CBO forecasts that to increase to three, four, and then five percent of GDP over the next ten years. That's about as big as I think it should get under "normal" circumstances. As a result, in my mind, we don't have a lot of room to get things done, unless of course we begin to behave more intelligently and maybe get lucky so that the projections turn out to be a bit more gloomy than the eventual reality.
We wouldn't be tied down like this if we hadn't effed up with another round of SSE. Huge mistake, as Frumpy might say, although he probably supported it at the time.
Now I figure some of the MMT supporters here in town would tell me not to worry about stepping on the gas a bit more, that the way to avoid that trillion dollar deficit in 2026 is to make the investments I support, deficit spending another one percent of GDP along the way if we need to. They may be right. But let's remember that the political environment is going to be determinative. We should and hopefully will spend more on smart investments and cover some of that expense by adjusting for some of the giveaways to wealthy households over the recent GOP administrations. Things probably won't change much, whether we like it or not.