Wrong direction
A good chart requires little explanation. The Grumpy Economist provides a great explanation of what is happening with the deficit and debt:
"To get GDP back to the trend line, we need 10 percentage points of extra growth, on top of the 2.5% per year or so of trend growth. That's two years of 7.5% growth, which nobody is forecasting any time soon. This 'catch-up-to-trend' growth has been the pattern of past business cycles. But what if we keep stumbling along at 2.5% - 3% growth for many years, racking up trillion dollar deficits each year we do so?
Third, to make it just a little more scary, notice the subtle flattening of the green 'potential' line. Trend growth itself is slowing down. The trend grew at 4% in the 1950 and 1960s, slowed to 3% through 2000. It is 2.5% in the 2000s and the CBO's forecast is down to 2.3% for the 2010s.
Back to the family analogy: Yes, dip into savings or use the credit cards if you lost your job, but a new one is all lined up for 6 months from now. But maybe this family is facing a long and uncertain spell of unemployment, and it's going to end up working at Wal-Mart for a lot less money than before. Racking up debt with alacrity isn't such a good idea in that case."
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