The federal deficit is widely named the nation's biggest problem.
But New York Times columnist Paul Krugman says the problem is already "pretty much" solved.
While the federal budget deficit has increased, admits Krugman, don't worry. It's supposed to happen that way. The deficit is supposed to increase in a depressed economy to support demand.
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Economic recovery will increase tax revenues, while simultaneously pushing down spending on items like unemployment benefits.
Don't believe it? It's already happening, he says, adding that it's also happening at state and local levels.
But will economic recovery be enough? Yes, “pretty much,” Krugman answers.
The nonpartisan Center on Budget and Policy Priorities, he notes, projects that the ratio of debt-to-gross domestic product (GDP) will be only slightly higher in 2022 than now after taking into account the planned $600 billion in tax increases and $1.5 trillion in spending cuts.
Longer-term projections indicate a ballooning deficit as an aging population boosts healthcare and Social Security costs, Krugman concedes.
Yet issues that might face us decades in the future might be better addressed by politicians in the future, he argues. "Why, exactly, should we believe that it’s necessary, or even possible, to decide right now how we will eventually address the budget issues of the 2030s?"
Social Security might run out of funds to pay full benefits in 20 or 30 years, he says. "So the plan is to avoid cuts in future benefits by committing right now to … cuts in future benefits. Huh?"
On the other hand, projections might be off and benefit cuts might not be needed, he argues.
The "deficit scolds" will of course disagree, he says. "They love living in an atmosphere of fiscal crisis: It lets them stroke their chins and sound serious, and it also provides an excuse for slashing social programs, which often seems to be their real objective."
Others disagree.
The national debt topped $16 trillion, more than the economic output of the entire country, in 2012, warns the Orange County Register in an editorial. The nation's GDP hasn’t been smaller than its debt since 1947.
"The federal government simply cannot sustain over the next four years the trillion-dollar annual deficits it posted the past four years," the paper asserts.
Video: Economist Predicts 'Unthinkable' for 2013
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