The Tax Hike Canard
The Right Way Down the Fiscal Cliff
Martin FeldsteinMARTIN FELDSTEIN is George F. Baker Professor of Economics at Harvard University and President Emeritus of the National Bureau of Economic Research. He was Chair of the Council of Economic Advisers from 1982 to 1984. This article is adapted from his remarks at the December 3 SIEPR Prize Ceremony at Stanford University.
Obama's Fiscal Year 2013 budget. (Larry Downing / Courtesy Reuters)
Five years ago, the United States' budget deficit equaled 1.5 percent of GDP and its national debt stood at 36 percent of GDP. This year, the deficit will exceed $1 trillion, or seven percent of U.S. GDP. Over the same period, the debt ratio has doubled to 73 percent of GDP.
Although the United States' economic weakness has contributed to the booming deficit and debt ratios, it is only a small part of the whole story. According to projections by the U.S. Congressional Budget Office, without significant reforms, the deficit would still add up to more than five percent of GDP a decade from now, even if the economy were operating at full capacity. Inc