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Home Publications Blogs Beat the Press Making It Up to Push Deficit Reduction: NYT Version

Making It Up to Push Deficit Reduction: NYT Version

Thursday, 23 June 2011 04:56

The NYT ran an AP article on the new long-term budget projections from the Congressional Budget Office (CBO) that began:

"The national debt is on pace to equal the annual size of the economy within a decade, levels that could provoke a European-style crisis unless policymakers take action on the federal deficit, according to a report by the Congressional Budget Office."

This is not true. The CBO report did not warn of "a European-style crisis." The reason it did not is that a European style crisis does not make sense in the context of the United States. The United States can never be like Greece or Ireland for the simply reason that we print out own currency.

In the event that we actually ran up against serious constraints in credit markets the United States would have the option to have the Fed buy up its debt. Greece and Ireland do not have this option. This could create a risk of inflation, but there is not the risk of insolvency that euro zone governments face.

The economists at CBO know the difference between the United States and the euro zone countries, which is why they did not make the comparisons attributed to them in this article.

Comments (4)Add Comment
written by izzatzo, June 23, 2011 5:28
"The national debt is on pace to equal the annual size of the economy within a decade ..."

Container experts have also discovered that within a decade contents of containers will equal the size of the containers that contain them.
written by AndrewDover, June 23, 2011 7:52
Why can't the Federal Reserve buy the Treasury debt on HuffPost?

"Secretary Geithner will at that point make an announcement that in three days there is an X billion payment on Treasury bonds coming due. He will say that the government does not have the money in the bank and will therefore have to miss this payment."

"If the government had to default on its debt, it would shake the financial markets even more than the collapse of Lehman in September of 2008. We would see a freeze-up of lending and companies would be forced to dump millions of workers, as they could no longer meet their payrolls."

written by bg, June 23, 2011 8:55
After all, even the NY Times is dumb enough to reprint an AP story without fact-checking. Once a sucker, always a ...
"Greece and Ireland do not have this option"
written by Paul, June 23, 2011 9:11
Well, if Greece and Ireland, instead of Germany and France, ran the ECB, they would have this option and there would not be any problem in Euro land.

So the AP story is correct: just like our current debate over the debt ceiling, the European problems are not economic or financial, but rather just political gamesmanship. Germany has no more respect for Greeks than Repubs have for Dems.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.