Another US government shutdown, another cash crunch. The deficit problem has deep roots, with conventional wisdom blaming runaway spending. Yet a closer look at the data reveals a more nuanced picture. Beyond fiscal philosophy, economic cycles and demographic shifts are clearly at work.
A proper assessment requires constructing quarterly deficit figures as a share of GDP — absolute deficit levels inevitably rise over time, making ratio analysis essential. While fiscal balance data appear monthly, nominal GDP is reported quarterly, necessitating aggregation: a four-quarter moving sum of fiscal balance divided by a four-quarter moving sum of nominal GDP. The red line in the chart reflects this calculation.
