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

Making It Up to Push Deficit Reduction: Washington Post Version

Thursday, 23 June 2011 05:08

The Washington Post piece on the new long-term budget projections from the Congressional Budget Office (CBO) began:

"The national debt will exceed the size of the entire U.S. economy by 2021 — and balloon to nearly 200 percent of GDP within 25 years — without dramatic cuts to federal health and retirement programs or steep tax increases, congressional budget analysts said Wednesday."

Actually, this is not what the projections showed. The CBO projections showed that if Congress simply followed current law, letting the Bush tax cuts expire, not fixing the alternative minimum tax, and most importantly, allowing the spending caps in the Affordable Care Act (ACA) to remain in place, then the debt to GDP ratio will soon stabilize and head downwards.

This is the CBO baseline scenario that is actually shown in the graphic accompanying the article, even though it is never mentioned in the article itself. The article focuses of the "alternative fiscal scenario" constructed by CBO, which assumes that Congress will deviate from the baseline in several important ways that will make the deficit worse. This fact should have been explained to readers. 

Instead the confusion is compounded with the assertion:

" If current policies are unchanged and the national debt continues to grow, the U.S. economic output could be as much as 6 percent smaller than current projections by 2025 and as much as 18 percent smaller by 2035."

It is unlikely that many readers would know that "current policies" includes the assumption that Congress will over-ride the spending caps that it voted into law with the ACA last year. It also would have been worth reminding readers that in 2025 per capita income is projected to be approximately 20 percent higher than it is today, so even with this worst case scenario, people would on average still have considerably higher incomes than they do today. In 2035 the projections show that per capita income would be about 40 percent higher.

The article also refers to President Obama's fiscal commission and tells readers:

"That commission produced a plan that would limit borrowing to a little over $5 trillion over the next decade."

This is not true. The commission did not issue a report because it did not have the necessary majority to get a report approved. The report referred to in the article is the report of the commission's co-chairs, Erskine Bowles and former Senator Alan Simpson.

Comments (4)Add Comment
I suppose it is academic
written by flounder, June 23, 2011 6:47
At this point, but the Fiscal Commission was only authorized until a certain date, after which it legally ceased to exist. Since they did indeed run out the clock and the commission expired, even calling the "plan" they proposed a manager's proposal is wrong. It is simply something pushed by a group of citizens and rogues.
written by AndrewDover, June 23, 2011 8:10
1) Letting the Bush tax cuts expire, not fixing the alternative minimum tax, and the spending caps in the Affordable Care Act (ACA) are "cuts to federal health and retirement programs and tax increases."

You can argue whether they are "dramatic" or "steep" or not. But that is the approach we should take, along with reducing tax deductions.

2) Even if the Commission had voted in favor of some proposal, it meant nothing legally. Congress would still have to write enacting laws. And lately Congress has been writing laws that result in deficits.
Given That We Are 10 Years Away from Full Employment
written by Paul, June 23, 2011 9:03
according to Bernanke's latest estimate, no reduction of the deficit is warranted until 2021.

Did John Maynard Keynes never exist? Was The General Theory of Employment, Interest and Money never published? Does anyone read anything before writing on economics?
Bernanke had an amazing comment
written by Rich Gardner, June 23, 2011 1:45
Ben Bernanke professes amazement[ulr]http://abcnews.go.com/US/wireStory?id=13907674 as to how the economy has taken a bad turn lately.

"We don't have a precise read on why this slower pace of growth is persisting," Bernanke said. He said the weak housing market and problems in the banking system might be "more persistent than we thought."

As Tonto said to the Lone Ranger in the midst of hostile Indians: "What do you mean 'we' white man?"

I honestly don't know how this guy can say this stuff with a straight face.

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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.