Listening to politicians in Washington, there is no doubt that America's huge deficit is leading to the end of the world as we know it. They never fail to describe in horror the effects of ballooning government spending on the future of our children.
Here's the problem. It ain't that bad.
According to the nation's official budget scorekeeper, the nonpartisan Congressional Budget Office, if politicians simply do nothing, the deficit will fall from today's 8.5% in 2010 to 1.2% in 2021. The historical average from 1971 to 2007 was 2.8%.
So what's the catch? Real simple. Congressional leaders are simply unable to let the current tax cuts expire. Allowing taxes to rise to their pre-2001 level in late 2012 would drop the deficit to less than half their historical average. Don't let the pre-2001 tax level scare you, taxes as a percentage of GDP were below the post-war average in the late 90s, the budget was balanced and the economy was roaring.
That doesn't mean we pull the trigger if the economy is still growing slowly and it doesn't mean that we don't still have work to do on the budget.
What it does mean is that current hyperbole is simply out of control.