STRIP THE BUSINESS CYCLE OUT AND AMERICA STILL RUNS A 6.1% DEFICIT — THE FIFTY-YEAR AVERAGE IS 3.7% — THIS IS NOT THE ECONOMY, IT IS THE PLAN

Every recession makes a deficit look worse than it is. Tax receipts fall, unemployment payments rise, and none of that is a decision anybody made. Economists call those automatic stabilizers, and the honest way to judge a budget is to take them out and look at what is left. The Congressional Budget Office did exactly that this morning. With the cycle stripped out, the United States runs deficits averaging 6.1% of potential output every year from now through 2036. The average across the last fifty years, measured the same way, is 3.7%. So the answer to whether this is the economy or the plan is: it is the plan. Nearly double the half-century norm, over a stretch with no recession assumed anywhere in it. The stabilizers themselves barely move: CBO has them trimming deficits by 0.2% of potential output through 2029 and adding 0.1% after that. This is the part the bond market has already read. The thirty-year sits within a whisker of where it was in January 2007, and the Treasury Secretary said this morning he has not bought anything yet. Those are not two stories. Somebody has to hold this paper, the amount of it is set by policy rather than by weather, and the yield is whatever it takes to make them. A budget that only balances in a boom you never get is not a budget.