Economist Michael Feroli of JPMorgan makes a great point in a new report about the fiscal cliff. Almost whatever the outcome, he points out, it will do little to nothing to change the nation’s lethal long-term budget trajectory. Focusing, as the current negotiations do, on a completely arbitrary ten-year budget window is a complete distraction. The national debt will still be rocketing higher:
In the chart [above], the green line indicates the CBO’s projections for publicly-held debt as a percent of GDP assuming a continuation of current tax and spending policies. In this scenario debt-to-GDP is projected to reach 247% in 30 years time.
The President is currently pushing for $1.2 trillion of revenue over 10 years, or about 0.6% of GDP over that same horizon. Assuming that increase in revenue as a share of GDP persists after 2022, and taking account of the saving from reduced federal debt service payments, publicly-held debt (the yellow line) will still amount to 226% of GDP in 30 years.
