Punching Stupid and Evil in the Face Since 1986!

"We are on strike, we the men of the mind. We are on strike against self-immolation. We are on strike against the creed of unearned rewards and unrewarded duties."-John Galt

Friday, August 20, 2010

Why do we keep asking the CBO what they think?

Chalk it up to one more inaccurate prediction by the CBO. This week in the new budget update the CBO claims federal debt would stabilize in 2012 for almost 10-years at a manageable 68% of GDP under current law. The problem? The CBO bases that claim on a sustained 2% real growth starting next year. In the same economy where we are loosing more jobs every month, not fewer and just this week 500,000 claims went in for jobless benefits.

To put it kindly, the CBO's forecast seems "already outdated" after data Thursday showed initial jobless claims hit a nine-month high of 500,000 last week, said American Enterprise Institute economist Kevin Hassett.

Harm Bandholz, chief U.S. economist at UniCredit Research, put it more bluntly: "It's ridiculous."
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In the fine print, the CBO noted a higher-than-usual degree of uncertainty surrounding its economic projections. But its forecast for the next several years implies an economy strong enough to withstand fiscal tightening on an unprecedented scale. Both the current spate of weak economic data that point to stalling job growth and historical budget data suggest that the CBO's view is, as Bandholz put it, "hopelessly optimistic."

The CBO sees the TARP-adjusted budget deficit falling from 9.8% of GDP this year to 4.2% in fiscal 2012. Outside of demobilization from war, there was only one other time when fiscal policy tightened even half as much. That was the 5.4% of GDP tightening from 1936 to 1938 that helped extend the decade-long Great Depression.

Regrettably most of the figures coming out of the CBO are wrong. They are overly optimistic and often don't look at the whole economic picture. Until this Administration gets a handle on burdening small business and their lust to demonize businesses that create jobs we will not experience this kind of growth. The debt levels we currently maintain are unsustainable and insurmountable for future generations.