Chart of the Day
Posted at 11:45 a.m. on Nov. 12, 2012
– Gavyn Davies has a chart based on data from the Congressional Budget Office showing the impact on the national debt of different scenarios for addressing the “fiscal cliff” spending cuts and tax increases set to take effect at the end of the year.
“If the fiscal cliff is allowed to take full effect on 1 January, then the path for federal debt held by the public would follow the CBO ‘baseline policy’… Under this baseline (blue line), the debt ratio would peak at 76.6 per cent of GDP in 2014, and then decline to 58.5 per cent in 2022. The US debt crisis would, in effect, be over, though the economy would probably fall into recession in 2013.”
“At the other extreme, if almost all of the cliff were postponed indefinitely, then the debt ratio would continue to rise rapidly, reaching 90 per cent by 2022 (red line)… If the compromise plan outlined above were implemented for two years, followed by full implementation of the cliff when the economy is assumed to have recovered in 2015, then the debt ratio would follow the green line.”