One of our two political parties is still saying that the United States faces a "spending crisis" that must be immediately addressed by further cuts to federal spending.
If we do not cut spending, the Republicans say, our debts will spiral out of control and the country will implode.
The good news, for those who don't relish the thought of the country imploding, is that this fear-mongering appears to be seriously overblown.
Our debt and deficit crisis is actually getting better fast.
The deficit itself is now shrinking quickly, and--as evidenced by today's super-low interest rates--the bond market is not worried about our ability to maintain our debt load over the long haul.
The ongoing budget deficit, furthermore, is not just the result of a "spending problem." It's also the result of a "low tax problem," at least relative to most prior history.
Over the long-term, if we don't get our health care and military spending under control, we will face a big deficit problem. But we don't today.
Don't believe it?
Our deficit is still high in absolute dollars, but it's now shrinking rapidly. And this chart does not show the impact of this year's tax increases and spending cuts.
As a percent of GDP, our current deficit looks even less extreme. If the deficit-reduction trend continues, which it should, we'll soon be back in well-charted waters!
The reason that the deficit is now decreasing, meanwhile, is a result of two factors: Spending (red) has plateaued, and tax revenue (blue) is recovering again.
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