Uncategorized

Some important truths about the federal deficit

Economist Dean Baker has a fascinating post at the CEPR blog entitled “A Tale of Two Deficit Charts.” In it, he explains how both Repubs and Dems have been guilty of promoting misleading stories on the origins and future of the federal deficit. The real culprit, Baker argues persuasively, was/is the collapse of the economy that was precipitated by the bursting of the housing bubble.

 Here is the excellent conclusion:

“In short, the real story of the deficit is the story of the economy, which is the problem of letting a housing bubble grow unchecked. The housing bubble was largely kept out of policy debates prior to the downturn, with the then-modest deficits getting far more attention in the media.

Remarkably, even after the collapse of the housing bubble has both wrecked the economy and led to large deficits, there is still little interest in the media in the underlying imbalances that led to the bubble. At the top of this list would be the over-valued dollar that led to large trade deficits. These trade deficits created a gap in demand that was filled by the stock bubble in the 90s and the housing bubble in the last decade.

But that discussion makes both the Clinton administration Democrats and the Bush administration Republicans look bad. As a result, we tend to get a lot more advocacy than accuracy in our policy debates about federal deficits and debt.”

You can read the entire post by clicking here.

Check Also

In rare bright spot, Senate advances bipartisan “second chance” legislation

It’s been a mostly grim week at the ...

Top Stories from NCPW

  • News
  • Commentary

The political compromise that repealed HB2 was enough for the NCAA and ACC, both of which have retur [...]

Conference comes a day after new report lauds benefits of same-day registration The new line-up for [...]

North Carolina’s largest public school system may be warning of “enormous disruptions” without speed [...]

Carol Turner hadn’t lived in North Carolina long before last November’s election. A retired nurse, s [...]

How many times do we have to say it? Well, it’s worth repeating – especially in the aftermath of rec [...]

As the national pundits weigh in on President Trump’s first 100 days in office and the General Assem [...]

How the General Assembly is spending “crossover week” and what it ought to be doing The last week of [...]

To casual observers, the recent controversy surrounding public school class-size mandates in grades [...]

Featured | Special Projects

Trump + North Carolina
In dozens of vitally important areas, policy decisions of the Trump administration are dramatically affecting and altering the lives of North Carolinians. This growing collection of stories summarizes and critiques many of the most important decisions and their impacts.
Read more


HB2 - The continuing controversy
Policy Watch’s comprehensive coverage of North Carolina’s sweeping anti-LGBT law.
Read more