Are we shrinking the deficit too quickly? (1 Viewer)

Burtifus

Hall-of-Famer
Joined
Jul 8, 2001
Messages
3,472
Reaction score
409
Age
41
Location
Lakeview
Offline
Interesting read:

CBO: Deficit Shrinking At Fastest Pace Since WWII As GDP Sputters - Investors.com

The main take-away from the Congressional Budget Office's new fiscal and economic outlook is that, collectively, Washington has put deficit reduction way ahead of jobs and growth.

After a burst of stimulus and financial rescue outlays in 2009, the fiscal retrenchment over the past three years was arguably steeper than at any time since World War II (see chart). Now, with stimulus and bailouts no longer clouding the picture, there's no question that the deficit is shrinking faster than it has in more than 60 years. Based on existing policies, CBO projects the deficit will shrink to 5.3% of GDP in fiscal 2013, down 3.7 percentage points since 2010.
 

dapperdan

Super Forum Fanatic
Joined
Jul 29, 1998
Messages
11,564
Reaction score
7,856
Age
58
Location
Juanita Beach, WA
Offline
Are we shrinking the deficit too quickly?

At this point, we're talking about too different things: 1) the actual decline in the deficit versus 2) the projections provided by the CBO. Big Difference...

CBO – Everything Is Going To Be Really-Really Great!
.
Tuesday, February 5, 2013

CBO – Everything Is Going To Be Really-Really Great!

A few snippets of data from the Congressional Budget Office’s Budget and Economic Outlook 2003.

Estimated 10-year budge surplus = $5.6T.
Reality = $6.6T deficit. A 200+% miss.

Estimate for 2012 Debt Held by Public = $1.2T (5% of GDP).
Reality = Debt Held by Public = $11.6T. A 1000% miss.

Estimate for fiscal 2012 GDP = $17.4T.
Reality = $15.8T. A 25% miss.


Okay, it was not an easy period to forecast. But the fact is, no period is easy to model and forecast. The CBO assumed that there would be no recessions in the 2004-2012 period. The CBO got hit on the head with that assumption.

I think the CBO is making the same mistakes again in 2013. It has a crystal ball of what the future will look like. The CBO assessment is that there is nothing but blue skies ahead. Some more snippets; this time from the just released 2013 CBO report on our future:

- GDP is about to soar!- Debt is not a problem any longer. Don’t worry about it any more. After shooting up the past five years, the Debt to GDP is going to flatten out, starting really soon.

It’s going to grow at more than double the current rate! Happy days are right around the corner. The economy is going to experience a period of sustained economic growth – and it’s going to start in just ten-months! Wow!

- Debt is not a problem any longer. Don’t worry about it any more. After shooting up the past five years, the Debt to GDP is going to flatten out, starting really soon.

- Unemployment will be no problem. The rate is going back to 5.5% in a couple of years, and it is going to stay low for the remaining 7-years. There is Zero, repeat Zero (as in nada, no-way-no how) chance for a recession over the next decade. I find this very comforting.

- Inflation is not going to be an issue. Not too cold, not too hot – the CPI will average less than 2% for well into the 2020’s. No chance of inflation picking up – it’s silly to worry about inflation risks – really, it’s a non issue for at least a decade.

- There is even good news for savers. Interest rates will be going up very sharply. By 2015 the 10-year T-bond will be back to 4.5%, more than double where it is today. This backup in interest rates will have no consequence to the economy at, in fact the higher interest rates will help propel the economy higher. Not to worry about this asumption, interest rates don’t matter any more..

- There is a reason that the future is so bright.The economy will prosper. GDP will grow to $26T in 2023. This comes to a 67% increase. Think of that! We haven’t seen that kind of performance since…well, actually, we’ve never seen it. But who knows? You have to believe in miracles if you work for the CBO.

You can argue with me all you want about those CBO estimates. The fact is, no one really knows what will happen. But the CBO is using one assumption that is almost certain to be proven wrong. It is a very critical assumption: What will labor’s role be in the economy of the future?

The economy will prosper. GDP will grow to $26T in 2023. This comes to a 67% increase. Think of that! We haven’t seen that kind of performance since…well, actually, we’ve never seen it. But who knows? You have to believe in miracles if you work for the CBO.

I think the CBO has done our legislators, and the country a disservice with this report. A great excuse to do nothing for a few more years has been created. I’ll be generous, and give the CBO a D+for this effort.
http://brucekrasting.com/cbo-everything-is-going-to-be-really-really-great/
 

Attachments

dapperdan

Super Forum Fanatic
Joined
Jul 29, 1998
Messages
11,564
Reaction score
7,856
Age
58
Location
Juanita Beach, WA
Offline
The argument in the article is linked to in the original post has this quote:
Based on existing policies, CBO projects the deficit will shrink to 5.3% of GDP in fiscal 2013, down 3.7 percentage points since 2010.
but the shrinkage of the deficit argument assumed by the CBO is not that the deficit itself will shrink per se, it's that the GDP component of the debt-to-GDP % is somehow going to skyrocket. Possible, I guess. It's also possible that I'll wake up next to Brooklyn Decker tomorrow morning. The probabilities are about the same. (Any reason for a gratuitous photo of Brooklyn Decker is reason enough for me)
 

Attachments

Galbreath34

Very Banned
Gold VIP Contributor
Joined
May 8, 2008
Messages
32,273
Reaction score
30,812
Offline
If you want to establish a track record, you look at an actual track record, not a few results.

If you said the Saints track record at the end of 2009 was 0-3, you'd have a distorted view of their season.

The CBO has been making projections since the mid-70s, at least go back to the 1990s to get a sense of their track record. http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/76xx/doc7680/11-09-econforecast.pdf starting on page 12. This covers from near the start to 2004, and you can probably Google the results from 2005 on.
 

dapperdan

Super Forum Fanatic
Joined
Jul 29, 1998
Messages
11,564
Reaction score
7,856
Age
58
Location
Juanita Beach, WA
Offline
If you want to establish a track record, you look at an actual track record, not a few results.

If you said the Saints track record at the end of 2009 was 0-3, you'd have a distorted view of their season.

The CBO has been making projections since the mid-70s, at least go back to the 1990s to get a sense of their track record. http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/76xx/doc7680/11-09-econforecast.pdf starting on page 12. This covers from near the start to 2004, and you can probably Google the results from 2005 on.
The entire point is that the CBO is banking on GDP growth results that have never occurred in U.S. history in order to achieve the deficit reduction results that they're forecasting.
 

efil4stnias

Play at your own risk
Joined
Jul 9, 2001
Messages
34,168
Reaction score
34,077
Location
Covington
Offline
The argument in the article is linked to in the original post has this quote:


but the shrinkage of the deficit argument assumed by the CBO is not that the deficit itself will shrink per se, it's that the GDP component of the debt-to-GDP % is somehow going to skyrocket. Possible, I guess. It's also possible that I'll wake up next to Brooklyn Decker tomorrow morning. The probabilities are about the same. (Any reason for a gratuitous photo of Brooklyn Decker is reason enough for me)
I didnt read a single word you wrote.

cant.stop.staring.....stalker style.
 

BIG E

SR is my life!
Joined
Aug 11, 2008
Messages
15,103
Reaction score
31,492
Offline
The argument in the article is linked to in the original post has this quote:


but the shrinkage of the deficit argument assumed by the CBO is not that the deficit itself will shrink per se, it's that the GDP component of the debt-to-GDP % is somehow going to skyrocket. Possible, I guess. It's also possible that I'll wake up next to Brooklyn Decker tomorrow morning. The probabilities are about the same. (Any reason for a gratuitous photo of Brooklyn Decker is reason enough for me)
I've given up hope on them balancing the budget, but I will never give up hope of waking up next to that.
 

Galbreath34

Very Banned
Gold VIP Contributor
Joined
May 8, 2008
Messages
32,273
Reaction score
30,812
Offline
The entire point is that the CBO is banking on GDP growth results that have never occurred in U.S. history in order to achieve the deficit reduction results that they're forecasting.
Considering GDP was routinely in double digit growth in the 70s, I'm assuming you've got some odd "true" history I have no access to.



Despite the lack of strict rules, the arrangement appears to be working. For one, the CBO routinely succeeds in frustrating Republicans and Democrats alike. The agency also has a strong track record. A study in the journal Polity examined the accuracy of economic forecasts made by the White House, the Federal Reserve, and the CBO between 1979 and 1997. During that time, the administration's forecasts were the least accurate and the CBO's were the most accurate. (The Fed forecasted inflation as accurately as the CBO but wasn't as good on gross-national-product growth and unemployment.) The study also found partisan bias in the White House forecasts: Republican administrations tend to exaggerate inflation while Democratic ones exaggerate unemployment. Neither of these tendencies shows up in the CBO's projections.
How nonpartisan is the Congressional Budget Office? - Slate Magazine
 

dapperdan

Super Forum Fanatic
Joined
Jul 29, 1998
Messages
11,564
Reaction score
7,856
Age
58
Location
Juanita Beach, WA
Offline
Considering GDP was routinely in double digit growth in the 70s, I'm assuming you've got some odd "true" history I have no access to.




How nonpartisan is the Congressional Budget Office? - Slate Magazine
What I'm talking about (and the blogpiece is using as it's basis), and what the CBO is using as it's assumption base, is not any individual year (that you'd be referring to in the 1970s), but the average growth over a 10 year period. The 10 year average growth is used to keep it apples-to-apples with the CBO. Also, for some unknown reason, you are using Nominal GDP growth. The CBO is using Real GDP growth.
 

Galbreath34

Very Banned
Gold VIP Contributor
Joined
May 8, 2008
Messages
32,273
Reaction score
30,812
Offline
Look at the 10 years in the 70s, there's not a single year in single digit percentage growth. Tell me how the 10 year period is then less than that? Be a man.
 

dapperdan

Super Forum Fanatic
Joined
Jul 29, 1998
Messages
11,564
Reaction score
7,856
Age
58
Location
Juanita Beach, WA
Offline
Look at the 10 years in the 70s, there's not a single year in single digit percentage growth. Tell me how the 10 year period is then less than that? Be a man.
Also, for some unknown reason, you are using Nominal GDP growth. The CBO is using Real GDP growth, no one uses Nominal GDP growth when discussing these issues, it's pretty much useless. Look at the chart headline.

You are using the wrong data. Very simple.

But I am being a man...hence the Brooklyn Decker photo op. :)
 

Galbreath34

Very Banned
Gold VIP Contributor
Joined
May 8, 2008
Messages
32,273
Reaction score
30,812
Offline
The real or nominal growth they predict is not higher than ever in history, period. At least real world data.

They're projections, and of course, could be wrong, but they have a track record of projecting low at least as often, in fact more, than they have projected high.

You claim they consistently project high, and that they project a never seen rate (your emphasis, not mine). Both "facts" are outright lies. Man up and say you were wrong about that, but still don't trust the projection. That can be true. Your claims about the "track record" and about things never happening, though, were both either being misinformed or lying for hyperbole and to support your distrust. It's ok to distrust a prediction, but it's not ok to support your distrust with factual errors.

For the record, I think this projection is probably too sanguine too, but not because the CBO is generally too optimistic or because the projection is ludicrous in projecting something unthinkable or unseen in history.
 

dapperdan

Super Forum Fanatic
Joined
Jul 29, 1998
Messages
11,564
Reaction score
7,856
Age
58
Location
Juanita Beach, WA
Offline
The real or nominal growth they predict is not higher than ever in history, period.
Let's start at a baseline for the discussion: Nominal GDP Growth is an entirely different beast than Real GDP Growth. So you cannot say: The real or nominal growth they predict...it's either Real GDP growth or Nominal GDP growth. The nominal GDP growth is immaterial for the discussion.

So your sentence should read: The real growth they predict is not higher than ever in history, period.

But I'm pretty certain that it is higher than any 10-year period in history, at least in modern times (Post-WWII).
 

Galbreath34

Very Banned
Gold VIP Contributor
Joined
May 8, 2008
Messages
32,273
Reaction score
30,812
Offline


Just curious, which upward trend has the most gentle slope of all in that chart?
 

Create an account or login to comment

You must be a member in order to leave a comment

Create account

Create an account on our community. It's easy!

Log in

Already have an account? Log in here.

Users Who Are Viewing This Thread (Users: 0, Guests: 1)

 

New Orleans Saints Twitter Feed

 

Headlines

Top Bottom