Recession and Deficit

Max explains that the economic downturn has caused little of the increase in the deficit. Though, as he explains, the administration does have one amusing way out of that:

It is possible that the GDP gap is understated, which means the cyclical component of the deficit would be as well. For instance, if you factored in labor force drop-outs, the unemployment rate now could be measured in excess of seven percent. So an adjustment to the observed deficit for 2004 assuming "full employment" -- a move from seven to five percent, rather than five-point-something to five percent -- would knock the stuffing out of the observed deficit.

So if they liked, the Bushies could claim the structural deficit is actually much lower than the observed one. The fly in this ointment however, is that they would also be admitting that unemployment now is much higher than apparent. If they had any interest but their own at heart, they would admit this. It would even give them an excuse for more tax cuts. But nooooo . . . .