Joe Weisenthal — How To Close The Deficit Without Raising Taxes Or Cutting Spending

When the economy improves, unemployment goes down, and deficit/GDP shrinks, as tax revenue goes up. When the reverse happens, deficits rise. Duh, right?

But not so fast...

The post-2009 period is associated with a virtually unprecedented pursuit of government spending and deficits (as far as the eye can see!). Not only did the deficit go up because tax revenue collapsed, but Obama announced a historic stimulus the likes of which weren't seen since the New Deal

And yet! The relationship holds. Even when the government purposely spends like crazy to increase the debt and fight the weak economy, deficits/GDP have shrunk alongside unemployment. There is a big gap between the red and blue lines, perhaps in part because the downturn was so severe, but the clear lesson is that spending to reduce unemployment does have the effect of reducing deficits as a share of total GDP.

That's part of why John Boehner's chart of of Medicare spending exploding the deficit is in economic lala-land.

Dueling charts.

Business Insider
How To Close The Deficit Without Raising Taxes Or Cutting Spending
Joe Weisenthal