In 2000 the CBO projected our national debt to be paid off by 2010. They are about as accurate as an NAR economist with their projections. Whenever you hear someone reference the CBO as a neutral non-partisan organization, remember this fantastic takedown by Bruce Krasting. The CBO works for the Washington ruling class. Their job is to give the appearance of substance to the fake numbers produced by the corrupt politicians in Washington. This is a must read as it annihilates the bullshit from the left wingers about deficits declining in the next few years. It’s nothing but lies and disinformation packaged by the CBO for their masters.
Experts on the Deficit
Submitted by Bruce Krasting on 03/07/2013 13:40 -0500
Consider two components of the discretionary spending budget; (1) Food Stamps, and (2) the Earned Income and Child Credits.
1) Food Stamps cost the government $82b in 2012, up from $25b in 2003 (325% increase).
2) The Earned Income and Child Credits cost $80b, up from $33b in 2003 (240% increase).
These two categories of spending represent 12.5% of all discretionary spending. These costs go up when the economy is weak, they have never declined.
Now put your economist hats on and project what these two drivers of the budget will be in 10-years. Keep in mind that in a decade the cost for everything, especially food, will be much higher due to inflation. What’s your guess?
According to the CBO the cost of Food Stamps and Child Credits will actually fall over the next ten-years. The CBO believes that Food Stamp costs will be 11% less than today, while Child Credit costs will fall by 3%.
Surprised by that result? I was. Do you believe that these cuts will be realized? I don’t. It would take an economic miracle to achieve those results. The CBO is counting on that miracle happening. The CBO forecast is for uninterrupted growth in the economy. A few of the key variables that the CBO is hanging its hat on:
GDP in the USA is about to soar. 2013 will be so-so, but 2014-2016 will be a rip snorter, After the big surge in growth the economy will stabilize at at steady 2+% growth rate. The CBO is forecasting perfection:
With the great economy, unemployment will fall like a rock – any day now.
Even with all of this good stuff happening, there will be no inflation!
Labor income, as a percent of GDP has been falling for the past forty years! The CBO is forecasting that this trend will not only stabilize, but it will make a huge recovery. And this is going to start any minute now!
The CBO assumes there will be no recessions. Imagine that! Fifteen-years of uninterrupted growth is projected. The CBO has concluded that the business cycle is over. It thinks that governments have finally figured out how to avoid the laws of gravity. History tells a different story.
With all of the great stuff going on in the economy, interests rates will shoot higher. The move up in rates is going to start next year! Forget ZIRP. Forget QE. Forget the Fed. The Fed Funds rate is going to 4.5%(36Xs higher than today). At same time, the long end of the curve is going to get back to 5.5%! The CBO believes that long rates (AKA mortgage rates) are going to triple. This explosion of interest rates will have no, repeat no negative consequences at all! Housing and the economy will continue to boom even though mortgage rates are going back to 7%!
One more piece of the beautiful pie that CBO has created; there will be no OCO costs in the next decade. OCO – Overseas Contingency Operations – is the code word for war. No more of that stuff in our future!
I don’t think that the CBO should be in the business of forecasting wars and recessions. That would be an impossible task. But the assumptions used and the conclusions drawn by CBO will not be realized. Fairyland doesn’t exist, and the business cycle is far from dead. As a result, the economic future will not be as bright as CBO has presented.
When you put all of the pieces of the CBO forecast together you get a trajectory of future deficits/debt that looks manageable. After exploding higher the past five years, the red ink is going to stop. The US debt levels are going to level off. The good news is that big improvement is scheduled to start in just a few months!
I”m not denying that the US economy has stabilized. The 10% deficits we saw in 2009 will probably not be repeated any time soon. But I don’t see how all of the good things the CBO is anticipating can happen. The problem with the CBO’s optimistic outlook is that it has given ammunition to those who would love to ramp up discretionary spending.
Of course there will be more business cycles. There will be stock booms and busts. There will be geopolitical issues that force more of the unwanted OCO. There will be commodity shortages and weather chaos. Other key economic areas of the world will have their ups and downs too. All of these things have happened in the past. They will happen again.
When things do go wrong, the deficits will jump higher than CBO’s projection. With the deficits, the debt will be much larger than assumed. What bothers me is that those who are now pushing the story that deficits aren’t a problem, are the same ones who will be crying, “We never could have seen that happening”, when the SHTF again.
Bernanke, Geithner, Greenspan and many economists like Krugman have all said they missed the dark clouds that were forming in 2006-2007. One of the reasons they all missed the signs was that CBO was telling them that the base case for the economy was blue skies ahead. From the 2006 CBO report.
The CBO never saw 2008 coming. Its projections for debt were way off the mark, about 250%:
AWD says:
The CBO is a joke. Bloomberg is a fucking idiot. The criminals will keep borrowing trillions as long as they are able, and will increase the FSA as much as they can. Every democrat-run shithole ends the same way. Soon, the U.S.A. will be the biggest democrat-run shithole in the world. At least we’ll be able to hang those responsible before long.
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7th March 2013 at 5:32 pm
DaveL says:
“The CBO believes that Food Stamp costs will be 11% less than today, while Child Credit costs will fall by 3%..”
Jim, you missed the footnote…
Note: This prediction is based on the assumption that an all out war with Iran will reduce the U.S population by 15 million people.
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7th March 2013 at 8:29 pm
TeresaE says:
Funny DaveL, I was figuring that rampant inflation was the reason they are expecting the reductions.
Both those line-items are based on being “low” income. With history to guide me, my guess is that millions in the middle class today, are going to wake up sometime in the next decade and be hit with the reality that they are dirt poor, but thanks to inflation they will not qualify for anything AND will be in the top tier of taxpayers. See, the CBO might just be right – bwahahahaha
Or, a war in the South China Sea, I think Iran is nothing but a distraction and the real entry into WWIII will start closer to those freaking islands in Japan. Either way it pits us against our main defense supplier so 15 million dead is a fair call. Hell, if China quits shipping insulin and antibiotics, 15 million may be a low, low, casualty rate.
Anyway, the way I’ve been viewing the CBO and their prognostications is to halve their upside estimates on revenue and GDP increases, then quadruple their estimates on gov spending and inflation.
Kinda like the ethnic factor I’m using to translate the bullshit coming out of Detroit.
How many completely worthless agencies does one country need? Well, with O’care and gun criminals, my guess is we’ll get another 100 or so.
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7th March 2013 at 12:08 am
TeresaE says:
Oh, and deficits don’t matter.
Violating the Constitution for our “safety” (prison) doesn’t either.
Until the day it does. THEN, the day the hangman comes for you, it matters a lot.
Tools. Tools all.
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7th March 2013 at 12:09 am