Tag Archives: CBO

Beware of Policies and Legislation Based on the Generational Accounting Scam

The Peter G. Peterson Foundation (PGPF) and its allied army of associated deficit hawks want the Congressional Budget Office (CBO), the General Accountability Office (GAO), and the Office of Management and Budget (OMB) to do fiscal gap accounting and generational accounting on an annual basis and, upon request by Congress, to use these accounting methods to evaluate major proposed changes in fiscal legislation. Generational Accounting is an invalid long-range projection method that doesn’t take into account inflation, the projected value of the Government’s capability to issue fiat currency and reserves in the amounts needed to fulfill Congressional appropriations, and re-pay its debts, the projected non-Government assets corresponding to government liabilities, the likely economic impacts of Government spending, surpluses, and deficits, the impact of accumulating errors on projections, and the biases inherent in pessimistic AND contradictory assumptions. It is a green eye shade method that ignores both economic and political reality.

If you want America to end deficit terrorism and austerity, and to have the fiscal policy space it needs to begin to restore the American Dream, then you need to defeat proposed policies or legislation which puts building blocks in place to bias fiscal policy towards austerity and the economic decline it will surely produce for ourselves, our children, and for their children. Proposed policies and legislation of this kind must be defeated for the following seven reasons. Continue reading

Paul Krugman Still Believes That “the debt” Can Be a Problem for the U.S.

The deficit is now down to under 3% of GDP, and in contemplating that fact, Paul Krugman asks why the deficit hawks aren’t celebrating the precipitous fall from nearly 10% of GDP a few years ago. He then explains that:

Far from celebrating the deficit’s decline, the usual suspects — fiscal-scold think tanks, inside-the-Beltway pundits — seem annoyed by the news. It’s a “false victory,” they declare. “Trillion dollar deficits are coming back,” they warn. And they’re furious with President Obama for saying that it’s time to get past “mindless austerity” and “manufactured crises.” He’s declaring mission accomplished, they say, when he should be making another push for entitlement reform.

All of which demonstrates a truth that has been apparent for a while, if you have been paying close attention: Deficit scolds actually love big budget deficits, and hate it when those deficits get smaller. Why? Because fears of a fiscal crisis — fears that they feed assiduously — are their best hope of getting what they really want: big cuts in social programs.

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CBO—Still Out of Paradigm after All These Years

By Scott Fullwiler

The Congressional Budget Office (CBO) published its long-term deficit and national debt projections last week.  These are the projections most widely cited in policy discussions about long-term “sustainability” of the national debt and entitlement programs.  In this post I focus on a small but very important part of the report—the CBO’s discussion of the “Consequences of a Large and Growing Debt,” which can be found on pages 13-15.  This section can be found in past reports going back several years, and hasn’t change much if it has changed at all during this time.  It is also consistent with the thinking of most economists on these issues.  As readers of this blog will recognize, the CBO’s analysis is “out of paradigm” in that it is inapplicable to a sovereign, currency-currency issuing government operating under flexible exchange rates such as the US, Japan, Canada, UK, Australia, etc.

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What that Letter Should Have Said

By Joe Firestone

On Valentine’s Day, Senator Bernie Sanders sent a letter to the President, authored by himself and signed by 15 other Senators, all Democrats. The letter was a response to the rumors that the President intends to include his Chained CPI proposal to cut Social Security benefits in the budget he will soon send to Congress. It summarized:

“Mr. President: These are tough times for our country. With the middle class struggling and more people living in poverty than ever before, we urge you not to propose cuts in your budget to Social Security, Medicare, and Medicaid benefits which would make life even more difficult for some of the most vulnerable people in America.

We look forward to working with you in support of the needs of the elderly, the children, the sick and the poor – and all working Americans.”

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Dear Dr. Krugman: Please Let Me Explain

By Joe Firestone

Paul Krugman can’t explain why the deficit issue has suddenly dropped off the agenda. He says:

. . . quite suddenly the whole thing has dropped off the agenda.

You could say that this reflects the dwindling of the deficit — but that’s old news; anyone doing the math saw this coming quite a while ago. Or you could mention the failure of the often-predicted financial crisis to arrive — but after so many years of being wrong, why should a few months more have caused the deficit scolds to disappear in a puff of smoke?

Why indeed are they so quiet? Could it be because the deficit hawks have succeeded in getting the short-term result they want, which is a likely deficit too small to sustain the private savings and import desires of most Americans, and also because the political climate is such right now that they cannot make progress on their longer term entitlement-cutting program until after the coming elections have resolved the issue of whether there will be strong resistance to such a campaign if they renew it? Let’s look at the budget outlook first.

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The Five Worst Reasons Why the National Debt Should Matter To You: Part Four, Three REAL Reasons

By Joe Firestone

This is the concluding post in a four part series on the “Top” reasons why the national debt should matter. In Part One, I considered “Fix the Debt’s” claim that high levels of debt cause high unemployment and argued that this is a false claim. In Part Two, I followed with a review of the historical record from 1930 to the present and showed that it refutes this claim throughout this period, and that there is not even one Administration where the evidence doesn’t contradict “Fix the Debt’s” theory. In Part Three I showed that the other four reasons advanced by “Fix the Debt” also had very little going for them. In this part, I’ll give reasons why the national debt does matter, and why we should fix it without breaking America, or causing people to suffer.

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A Plague on All Your Budgets

By Joe Firestone

The Sector Financial Balances Model:

Domestic Private Balance + Domestic Government Balance + Foreign Balance = 0

is an accounting identity that provides a focus for macroeconomic analysis, explanation, and prediction by economists applying the Modern Money Theory (MMT) approach. It leads to a very critical line of thinking about the budget deficit projections produced for our consumption by the Congressional Progressive Caucus (CPC), Congressional Budget Office (CBO), the House, and the Senate. The US has recently had a sharp decline in its balance of trade deficit. It now stands at about 3% of GDP; which means that the rest of the world has a surplus, a balance of +3% of US GDP in its annual trade with the United States.  Continue reading

Applebee’s Obamacare Rant Reveals the Lies of the Deficit Hysteria

By William K. Black

Zane Tankel, a wealthy owner of over 40 Applebee franchises has attracted media attention by denouncing Obamacare and claiming that it will impose such burdensome expenses on him that he will need to fire workers, limit the hours of existing workers so that they are part-time and do not qualify for health insurance coverage, and cancel plans to open new restaurants.  The media reaction has understandably focused on the public rage at such a wealthy man throwing his workers under the bus.  I write to make a different point.  Tankel illustrates some of the reasons why the Congressional Budget Office’s (CBO) projections of a purported U.S. financial crisis arising from the safety net are baseless.

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The “Fiscal Cliff” Validates MMT

By Thornton “Tip” Parker

The fiscal cliff of increased taxes and reduced federal spending resulted from the hasty wedding of Congress and the Administration a few months back when the debt ceiling became a shotgun.  Now, all parties want something different.

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Life After Debt

By Doug Bowles (UMKC)

The CBO’s post-election report released a couple of days ago (apparently in support of advancing the prospects for a Grand Bargain, aka the Great Betrayal) is grounded in relatively pessimistic projections with regard to federal deficit and debt growth.  (See this powerful critique of CBO’s methodology by Follette and Sheiner)  In assessing just how much credibility these projections deserve to be accorded in our policy debate, it might also instructive to remember how wildly optimistic the CBO projections were not so very long ago with regard to complete elimination of the federal debt. Continue reading