Chart of the Day: Our Economy’s Real Problem

Here’s some grim news, courtesy of Brad DeLong. We all know that the economy is operating well below its potential, a problem that congressional Republicans, to their eternal dishonor, are flatly unwilling to allow anyone to deal with. But things are worse than that: the economy’s potential has been going down too. The chart below shows the evolution of the CBO’s estimate of potential GDP between 2007 and now¬†

Add up both the drop in potential GDP and the fact that we’re operating well below even that, and the American economy is running at about $2.5 trillion under its forecast from only a few years ago. Congressional action probably can’t fix this entirely, but it could sure fix a lot of it. It’s scandalous that we’re wasting our time talking about invented nonsense like Benghazi and the fiscal cliff instead.