The Economic Crisis and the Fiscal Crisis: 2009 and Beyond
Publication Date: February 2009
Publisher(s): Tax Policy Center
Special Collection: John D. and Catherine T. MacArthur Foundation
Keywords: Federal Budgets & Fiscal Policy; State and Local Issues; Taxes and Social Programs; Economic Stimulus
In 2009, the federal deficit will be larger as a share of the economy than at any time since the 1940s. After 2009, we project an average deficit of $1 trillion per year for the next 10 years, under optimistic assumptions. The longer-run picture is even bleaker, with a fiscal gap of 7-9 percent of GDP -- between $1 trillion and $1.3 trillion annually in current dollars. Recent trends in credit default swap markets suggest that although fiscal policy problems are usually described as medium- and long-term issues, these problems may be upon us much sooner than previously expected.