Friday, September 20, 2013

Actually, the CBO Study Predicts DOOM

A local pundit's website prints only half the story from the CBO.

The half that Ryan's office didn't feed them?  It's far, far, worse.’s the thing: that forecast, as the CBO notes, does not factor in “the harm that growing debt would cause to the economy.”  Hey, that would be a good thing to know, right? Well, you have to dig deeper into the CBO study to find those numbers.

And when you take into account stuff like how deficits might “crowd out” investment in  factories and computers and how people might respond to changes in after-tax wages, you find the debt is much, much larger, closer to 200% of GDP.

The CBO:

Projected budgetary outcomes under the extended alternative fiscal scenario are worsened by the economic changes that result from its policies. With the effects of lower output and higher interest rates incorporated, federal debt held by the public under the extended alternative fiscal scenario would reach 190 percent of GDP in 2038—about 80 percentage points greater than that under the extended baseline with economic feedback— according to CBO’s central estimates.

Further, in the "worst case" scenario, debt would be TWO HUNDRED FIFTY PERCENT of GDP by 2038.  The CBO refused to guess what might happen in that case, because they have absolutely no precedents to follow.


Jim said...

My Financial Institutions professor in Business School warned us about "crowding out" in 1974. The national debt at that time was less than half a trillion dollars.

J. Strupp said...

I come back to this blog after weeks, and it's like nothing changed. Please stop commenting on economic matters, Dad. You are so out of your league on this.

Dad29 said...

Won't change what's right, and Krugman won't change what's wrong: his BozoNomics.

We note they haven't worked, at all, in 6 years of trying. Talk about out of the league....

Dad29 said...

By the way, Jimbo, your money-and-banking prof never mentioned disappearing T-Bill/Bond collateral, either.

As Strupp undoubtedly knows, Fed purchases have hobbled banks by sucking up about 1/3rd of UST debt issued in the last few years.

That means that the bank-to-bank repo market (and non-financials-to-banks plus vice-versa, too) is near dead.

I'm sure that Stupp also knows that the velocity of collateral has also suffered as a result.

And there's no question that he knows Stimulus has been absolutely useless. He's undoubtedly compared the results in the US to those in Germany--where the Gummint actually DID cut back on spending and debt.

Right Struppster??