Do people like Joe Scarborough really NOT understand the difference between short-term deficits and long-term deficits?  Apparently not.  [  http://www.huffingtonpost.com/2013/03/05/joe-scarborough-paul-krugman-charlie-rose_n_2810389.html?utm_hp_ref=business&ir=Business ]  The brain should be able to carry two thoughts at once, but maybe not in Washington DC.

In the short- and medium-run, deficits are falling, and rather fast.  The deficit as a percent of GDP is falling from a high of 10.1% of GDP in 2009 to a projected 5.3% of GDP this year (2013) and 2.4% of GDP in 2015.  So in the short run, we really don't have a deficit problem.  The debt-to-GDP ratio has stabilized, and will in fact fall.  [ http://www.cbo.gov/publication/43903 and http://www.cbo.gov/publication/43907 ]

Of course, in the short run our problem is making sure we get out of the lingering slow economic growth we face, and making sure that we don't make the mistake of enacting budget changes -- such as the sequester -- that will do that.  Much of the budget changes that Congress has been making have been working against what we need for the economy, and what the states are doing is not helping either.

In the longer run, of course we have a huge budget problem.  We face huge budget deficits if we do not change programs like Medicare and Medicaid (even though Social Security is not really much of a problem).  But combined these three programs would eat up the entire revenues of the federal government in about 15-20 years.  This is obvious and has been well-known to everyone for a long time.  What is needed is long term changes to Medicare and Medicaid, and our medical care system.  

According to the CBO, our deficits and debt start growing again around 2020, and continue to grow (see figure below).  They continue to grow for a couple of reasons -- demographics of the baby boom, leading to structural problems for Medicare and Medicaid, and because we have built in now a lower level of revenues (about 18-19% of GDP) because we have made the Bush-era tax cuts permanent (that is the main reason why the "extended alternative scenario" shows such deficits, but the baseline scenario does not).  These parallel policies cannot stand.  Before the vast growth in the elderly population (expected to double between 2000 and 2035), the average revenue the federal government was taking in for decades was roughly 20% of GDP or higher (and that is what the baseline scenario assumes).  if we now are taking in less than that, and the demands on the social insurance programs are higher, how can this be sustained?


 
This is why the problem with the budget is a LONG-TERM problem, but not a SHORT-TERM problem.  And, furthermore we make the problem worse by cutting the budget in the short run.