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November 01, 2010


Where the Deficit Came From

Justin Fox runs the numbers on the federal deficit if there had not been a financial crisis, and thus no TARP, recession or stimulus package. He finds a result often overlooked: "the giant deficit is mainly the result of the collapse in tax receipts brought on by the recession, not the increase in spending."

According to his model, the "no crisis" scenario for 2010 was "$2.843 trillion in federal revenue and $3.270 trillion in spending, leaving a deficit of $427 billion. The actual revenue and spending totals for 2010 were $2.162 trillion and $3.456 trillion. So spending was $186 billion higher than if we'd stuck to the trend, and revenue was $681 billion lower."












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