Turns out, if you raise taxes and cut spending, deficits decline. That’s precisely what the US has done over the couple years. It raised both payroll taxes and taxes on high earners at the beginning of the year as part of fiscal cliff negotiations. And it cut spending—messily—with the sequester. Here’s the result, per the US Congressional Budget Office.
Another result: Moody’s upgraded its outlook on the US government’s AAA rating to “stable” from “negative” yesterday.