As noted on The Treatment, the Congressional Budget Office is out with its new budget projections. And the bottom line is that CBO expects deficits will be worse than the administration, among others, have been predicting.

They will be worse in the near term. And, yes, they will be worse in the long term.

These sorts of projections are notoriously rough. And the CBO seems to be making some pessimistic assumptions about future growth, although--given the latest economic data--pessimism does't necessarily seem far fetched.

In any event, it's hard to spin this as good news. Earlier today, I happened to be emailing with MIT economist Jonathan Gruber. He drew the following, highly intellectual analogy:

There is this great "Simpsons" episode in Season 1, where Homer goes to buy an RV. When they check his credit report, a flashing light and siren go off.  He asks the salesman "Is that good"?  And the salesman says "Mr. Simpson, when have you ever known that to be good?" I feel the same way--it's just a question of how bad! 

Gruber added one other, very interesting comment:

I still think we are far away from "crisis" debt levels. But what is interesting is that the damage economically is very much tied to how we resolve the banking crisis. If we can demonstrate to the rest of the world that this is a safe place to keep your money, thre is enough extra money sloshing around the world economy that it will happily come here and underwrite our deficit. But if the world loses confidence, then it doesn't matter if it gets much bigger--we are screwed either way.

I can't decide whether that makes me feel better or worse. This much seems certain, though. Deficit spending now makes sense, all the more so because future budget stability depends heavily upon getting the economy to grow more quickly. But, in the long run, we also need to think seriously about ways to raise revenue, perhaps starting with this.

--Jonathan Cohn