The fiscal ski jump

December 2, 2012

A nice turn of phrase from Bill Watson, who adds:

The out-years of the [CBO] forecast suggest cliff-jumping may be, not just survivable, but actually pretty good for the jumper’s long-term health. Ten years past the cliff, federal debt is just 58% of GDP, which is a whole lot better than the 90% the CBO forecasts if the deficit stays where it is. …

Maybe cliff is the wrong analogy. Maybe we’re all standing at the top of a very steep ski jump. No doubt the ride down would be terrifying. (Remember the skier who bounced off the runway on ABC’s Wide World of Sports?) But once, with skill and luck, the descent was safely navigated, maybe the U.S. economy would launch itself back to higher growth and employment.

(Minor editing for continuity.)

The questions here are how much short-term damage the cliff/jump will do to the US economy and whether we’ll be better or worse for it in the years to come. There’s a range of opinion on both, to be sure. What would you say? Do it and find out? Or avoid the risk?

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