Closing the Deficit Requires an Open Mind, Not an Open Wallet

J.D. Foster / May 12, 2010

The typically staid pages of the Washington Post Business Section were graced this morning with subtle humor from the virtual pen of the ever-sober, oft sagacious Steven Pearlstein. In a piece titled “Keeping an open mind on solutions to the budget deficit”, Pearlstein neatly lays out the argument one typically hears from open-minded liberals today. What makes the argument humorous is that they really believe they can pull this off.

The essential of the argument is simple enough. Using Pearlstein’s numbers, federal spending is running at about 26 percent of Gross Domestic Product (GDP). Revenues tend to run at about 19 percent, and we can sustain a deficit of about 2 percent of GDP. That leaves a gap of 5 percent of our economy, a big number. Pearlstein then suggests what he regards as an eminently fair and reasonable proposition – a 50-50 split between tax hikes and spending reductions; 2 and a half percent of GDP each in tax hikes and spending cuts. (more…)