Friday, August 28, 2009

$3 to $7 trillion CBO Underestimate of the deficit

I am no expert on the budget, but my pundit record is a documented 100% accurate. When I was revising my introductory economics text in 2000, I spent about one hour examining the CBO’s budget projection of a $4 trillion surplus by 2010. I concluded that there would be no surplus to speak of (Paul Gregory, Essentials of Economics, 5th edition, p.166). This conclusion was easy. The surplus disappeared if we dismissed the improbable assumption that nominal government spending would increase 2.3 percent a year (versus the historical rate of 7.6%) and recognized that the peace dividend of 1998-2000 was a one time event. The CBO projection also assumed that there would be no recession between 2000 and 2010.

I just repeated the same hour-long exercise with the CBO’s August 2009 projections, which estimate that the cumulated deficit will grow by $7 trillion between 2008 and 2019. Without even looking at the revenue side of the equation (which looks too optimistic to me), I conclude that the CBO projection underestimates the cumulated deficit by $3 to $7 trillion. The deficit grows by $3 trillion if we use the growth rate of government spending over the previous eleven years. It grows by $7 trillion, if we use the historical rate of growth of government spending since 1970. The CBO projection also assumes there will be no recession over the next eleven years. A recurrence of recession would raise the cumulated deficit by a considerable amount depending on its severity.

Even if we accept the CBO’s optimistic revenue projections, I doubt that the growth of spending can be reduced below rates of the last decade or the longer term rates. If I am correct, gross federal debt will be between 110 to 130 percent of GDP in 2019. Federal debt held by the public will be between 80 to 100 percent. These figures do not include the potential impact of an expensive federal government health care reform. These national debt ratios will make the United States look like Italy and Spain.

I therefore have to join the chorus that such deficits are not sustainable and conclude that the alarming deficit projections we have seen are underestimates of the true situation unfolding.

17 comments:

  1. 我對自己的信心已超越別人對我的評價........................................

    ReplyDelete
  2. 我是天山,等待一輪明月。.........................

    ReplyDelete
  3. Packers and Movers Bangalore - Reliable and Verified Household Shifting Service Providers Give Reasonable ###Packers and Movers Charges. Cheap and Best Office Relocation Compare Quotation for Assurance for Local and Domestic House Shifting and Get estimates today to save upto 20%, ***Read Customer Reviews - @ Packers And Movers In Bangalore

    ReplyDelete
  4. There are many products and services that can be used to assist consumers and businesses. These benefits include computer repair, troubleshooting and live chat. Problems with telephone service are not uncommon and often require expert technical assistance. These ten companies received high marks for their pricing and quality of services. These firms are the best in the tech provider field. Our site offers free assistance for antivirus software downloads, setup and uninstallation, as well as virus removal. Garmin.com/express | Garmin Express | garmin instinct | Magellan GPS Update | Magellan Roadmate Update | Navman Update | Navman GPS | Navman Mivue 740 | Belkin Setup | Belkin.Range | Belkin.Setup | belkin n300 setup | belkin ac1200 | Rand McNally GPS Update

    ReplyDelete
  5. We offer the best online technical support for your home or business pcs and notebooks. Technical assistance is available via email and telephone calls. Our technical support team is available 24 hours a day to help customers with technical problems. If you have any questions, I am always available for your assistance. bitdefender support | Canon Printer Offline | amazon.com/code | Cash App Login | Paypal Login | Linksys Extender Setup | Roadrunner Email | Bitdefender Login | Avast Login | Roadrunner Email | Amazon Prime Login | www.amazon.com/mytvn | Netgear Extender Setup | Belkin Setup | Webroot Download | Norton Download | Belkin N300 Setup

    ReplyDelete
  6. Packers and Movers Gurgaon Provide Reliable, Safe and Certified Service Provider list, Get Free ***Best Price Quotaition and Compare Charges. ???Hassle free Household Shifting Services, High Quality packing Material, Office Relocation, Car Transportaion, ###Local and Domestic Shifting Service @ Packers And Movers Gurgaon

    ReplyDelete
  7. QuickBooks Error Code H202 is one of the most frequently occurring errors of QuickBooks. QuickBooks Error Code H202 is mainly associated with multi-user mode. Quickbooks error H202 pops up with the message- ‘You are trying to with a company file that is located on another computer and the copy of Quickbooks cannot reach the server of the computer’.
    Read our other error blogs:
    How to fix QuickBooks Error Code C=44 ?

    How to Resolve QuickBooks Error Code C=272

    ReplyDelete
  8. Very educational and elegantly composed post. myassignmenthelp has been a pioneer inside the Best Assignment Help online administrations. Make a request now for proficient work and followed through on schedule.

    ReplyDelete
  9. Helpful Post.myassignmenthelp the fastest assignment help service in Australia where you can get writing assistance from leading assignment helpers at most reasonable prices.

    ReplyDelete
  10. Have you encountered Quickbooks error 12152? Some issues in the internet connection settings can result in the occurrence of specific errors in the QuickBooks. QuickBooks Payroll Update Error Code 12152 is one of the errors due to the problem in the internet connection settings.

    ReplyDelete
  11. Occurence of QuickBooks Sync Error Code 3003can be attributed to the failure of synchronization of the database. For more help, you can reach out to QuickBooks enterprises support Number at +1-888-485-0289.

    ReplyDelete
  12. https://www.forsatnet.ir/And most importantly, the Xiaomi Redmi 9 is priced at around $ 100

    Also the negative points of this phone are:

    The macro lens and the angle lens of this phone are of medium quality

    ReplyDelete
  13. Sometimes when you login to Quickbooks, you may see an error message on the screen “ Error :Server Busy”. This error can be quite annoying at times since it does not allow you to access the Quickbooks on your computer system. Quickbooks Server Busy Error is encountered when the window is getting updated in the background or when Quickbooks is shutdown abruptly. Confliction in the Intuit pro series also lead to this error.

    ReplyDelete
  14. Experience the methods of having a comfortable delivery is not possible only in sleep and روش‌های داشتن زایمان راحت کدامند؟ imagination; You can also experience a comfortable delivery while awake. The pregnancy route itself is a complex and sensitive one;

    ReplyDelete
  15. My Account-Login If you're an being Spectrum client who has not placed an order on our new website, please do with creating a new web.
    Spectrum Login
    webmail.spectrum.net
    spectrum webmail

    ReplyDelete