Republicans in the House of Representatives recently caved and allowed a simple vote on raising the debt limit of the United States. Their hand-wringing about the debt is disingenuous, but more importantly, it is part of a campaign to confuse America’s workers about the real deficit, which must be addressed urgently-the deficit in jobs, which according to the non-partisan Congressional Budget Office cost the economy about $730 billion in lost production.
The CBO has projected that the federal budget will have a deficit of $514 billion. It projects next year it will continue to decline to $478 billion. These are large numbers, but in economics it is always useful to put numbers in a broader context. In the case of deficits, it is useful to compare that to the size of the economy. Just as a $200 bet in a March Madness office pool looks different if you are Microsoft founder Bill Gates or an undergraduate intern in the office. As a share of the Gross Domestic Produc—the value of all of the goods and services produced in the United States, the deficit this year will be about 3.0 percent of GDP, falling to 2.6 percent next year. Between 1974 and 2009, the average deficit was 2.7 percent, so these numbers are not out of the ordinary.