Congressional Budget Office Can’t Keep Up With US Debt Growth
George Mason University has contended that the Congressional Budget Office, even in the age of supercomputers, just cannot keep up with the national debt. In other words, the growth of the national debt moves quicker than does the technology used to measure it. In 2009, US debt was half of the country’s overall revenue, 10 years ahead of the 2019 prediction made by the CBO in 2007. So, we are in fiscal wonderland floating about in a dazed fit of economic and exchange oblivion. Only US debt growth is the drug. According to the CBO, the national debt is set to increase to 80 percent by 2014. But, it keeps moving its figures higher year after year. This is five years nearer than the 2009 projection, and thirteen years ahead of the 2007 projection.
From George Mason University:
In the five years between the long-term projections calculated in 2012 and 2007, public debt milestones have moved up by nearly a decade on several occasions. In 2007, the CBO projected that public debt would equal up to half of total U.S. economic output by 2019. In reality, public debt-to-GDP passed this milestone in 2009—ten years ahead of the CBO’s 2007 projection. Importantly, the long-term projections used in this chart come from the CBO’s alternative scenario, which incorporates policy changes that were likely at the time. Hence, this is a more realistic projection than the CBO’s baseline scenario.
Using the same methodology, CBO currently projects that debt will reach 80 percent of GDP by 2014, which is five years ahead of the 2009 projection, and thirteen years ahead of the 2007 projection.
This means that the U.S. is slipping down an unsustainable fiscal path at a much faster rate than before. This unforeseen acceleration in the public debt is important because high levels of debt can have a negative impact on the economy. Economists Carmen Reinhart and Ken Rogoff have shown that when a country’s level of debt reaches 90 percent of GDP, its economy could start shrinking by 1 percentage point every year. The U.S reached this milestone four years ago. One percentage point may not seem like a lot, but as Mercatus Senior Research Fellow Matthew Mitchell has shown, if the U.S. had reached this point in 1975, our standard of living could be 30 percent lower than it is today.
According to Mitchell’s figures, that means the US can expect another 30 percent decrease in its standard of living over thirty years. Of course, these figures do not take into consideration QE to infinity, and so one can presumably expect these figures to be moved up by decades…years too late by the CBO.