Quantitative evidence the 'Deficit' issue is PHONEY: CBO's single most important statistic!

[ProgressiveEconomist]

Hundreds of economists have pointed out that the most important problem for the economy at this moment is the eight million jobs lost to George W. Bush's financial deregulation crisis and resulting deep second recession. (So far, President Obama's stimulus package has clawed back three million of these lost jobs.)

These economists say the most important problem for the contemporary economy is NOT the ten-year projection of budget deficits Republicans have convinced the media is an "emergency".

Last night, looking at the nonpartisan Congressional Budget Office's deficit projections for 2012-2021 (at http://www.cbo.gov/ftpdocs/120xx/doc12039/01-26_FY2011Outlook.pdf ), I encountered the single most important statistical estimate for policymaking I've ever seen.

The PDF linked above constitutes Republicans' most crucial support for their extremely exaggerated media campaign against the deficit. In appendixes, CBO reports often gauge the SENSITIVITY of their estimates to the accuracy of important assumptions hidden inside their calculations. Table B-1 on page 117 (pdf page 135) of that report shows that the ten-year deficit projection is EXTREMELY sensitive to changes in assumptions about rates of real GDP growth.

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A sustained 1 percentage point increase (or decline) in the rate of real GDP growth would lower (or raise) the 2012-2021 budget deficit by *** $3.1 trillion *** !

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Rates of real GDP growth assumed in CBO projections have a history of being too low compared to what actually happened (see, for example, http://www.cbo.gov/doc.cfm?index=5840&type=1 , Table 10, pdf page 31).

This means that, once the economy gets out of the current phase of the business cycle, the deficit very likely will take care of itself!

A select joint committee of Congress is set to meet soon to figure out how to reduce the ten-year deficit by a paltry $2.4 trillion. The CBO statistic shows that just a one percentage-point increase in the rate of economic growth will more than take care of that task handily. IMO, the committee should focus on how to accelerate economic growth MORE than on likely needless deep government spending cuts.

So, IMO, the crucial CBO deficit report that has dominated national politics for almost two years itself provides quantitative evidence that the "controversy" is largely artificial. The "issue" with which Republicans have saturated the media since before their midterm election victories is phoney, a ginned-up waste of everyone's time!

WHAT'S YOUR OPINION?

[Peace Patriot]

1. Why do Republicans hate jobs?

That should be the Democrats' slogan for the decade!

But only if they mean it.

And I don't hear any clamor from well-paid White House staff, the President or Democratic legislators, who all have jobs, and, not only that, with health care, for jobs for other Americans, nor any FDR-style job creation for the vast poor unemployed. In fact, I rarely hear the word "jobs" at all. What I do hear about is tens of thousands of teachers, fire fighters, police officers, park rangers, court recorders, government clerks and secretaries, environmental inspectors and enforcers, scientists, librarians, janitors, nurses, nurses' aides, teachers' aides, road repairers, airport workers and other government employees--the people who do the work of government, not the bosses--getting laid off at a time when government absolutely MUST ADD JOBS not cut them! When the rich are hoarding their money--a whole hell of a lot of it stolen from the rest of us, one way or another--and are not creating jobs, the government MUST create jobs and, for godssakes, NOT lay off tens of thousands of people. There is no other way to stimulate this Biushwhacked economy!

But you know where I hear of high employment and lots of social spending--in Latin America, in the many countries that have elected LEFTIST governments--and those countries are doing extremely well, in this Bush-induced worldwide depression. Argentina, for instance, formerly the "neo-liberal" basketcase of the continent: 8% economic growth last year, 10% this year! That is a spectacular recovery! High social spending, high employment, booming business! Same all over Latin America where LEFTIST governments have been elected and have had time to reject Wall Street's dictates and implement common sense. You MUST put money in the pockets of the poor majority. You MUST employ people. You MUST!

[ProgressiveEconomist]

11. Leading Rs say openly their #1 goal is 'making Obama a 1-term Prez' 'Deficit emergency'

is a perfect ruse for intentionally tanking the economy so they can achieve their #1 goal.

[RC]

2. Living Wage Jobs

That is what it will take. Without Living Wage Jobs, we will not recover.

[ProgressiveEconomist]

4. The CBO agrees with you! If you click on the 1st LINK in the OP and go to the page

indicated, the same table (at the bottom) shows the sensitivity of the 2012-2021 deficit to a one percentage point increase in wages and salaries' share of GDP.: The deficit would FALL by $171 billion, due to increased tax revenue from workers.

[unblock]

3. yup. this is why social security is a problem as well.

the country is so broke it can't afford reasonable assumptions.

[ProgressiveEconomist]

7. Ba-rup-pup (punch line rimshot)

[BzaDem]

5. We currently have a deficit of over 100 billion each month. That isn't a projection.

Now, I think this is fine for now (and should actually be expanded). But growth alone is not going to erase that in 10 years. It might reduce it to more reasonable levels, but we will still have a deficit of at least a few percent of GDP. Getting an additional one percent of growth above their projections is not easy.

I don't really think the medium term deficit is that big of a deal in the first place. The real issue is the decades following that.

[ProgressiveEconomist]

9. 'Getting and additional one percent of growth above their projections is not easy' Click

on the second LINK in the OP. I anticipated this comment. Economists fear the "rosy scenario" so much they most often err far in the opposite direction.

[ProgressiveEconomist]

12. CBO growth assumptions are summarized on PDF page 134 of the first LINK

They assume only 2.5 percent real GDP growth for each of the years 2016-2021. Actual growth easily could exceed that with wise economic policies. Bill Clinton set in motion an economic expansion that lasted a a record 120 months!

[bhikkhu]

6. If anyone remembers the 2000 CBO prediction of a $5 trillion surplus by 2008...

that was one of the big arguing points for the bush tax cuts in the first place. Of course there was never going to be a 5 trillion surplus, but the CBO has a notorious record for coming up with dubious crap. The farther out they project, the more unlikely it is.

Personally, I wouldn't trust anything anyone predicts in the economy beyond two years from now.

[ProgressiveEconomist]

10. There was nothing wrong with those projections. There WAS something SERIOUSLY

wrong with the "President" for whom the USSC stole the Y2K election.

[McCamy Taylor]

8. So what if we owe money to China? They made a bad investment in W.'s war for oil.

They need to take their losses like a man, the way that all the US investors ripped off by the banksters have been told to take their losses.

What is China gonna do if we don't pay? Refuse to sell us Happy Meals?

[ProgressiveEconomist]

21. ?

[lonestarlib]

13. the 'Deficit' issue is PHONEY

No shit? And all this time I thought republicans were actually interested in the deficit, the debt, the economy, jobs, people...!

[ProgressiveEconomist]

15. Well said!

[JDPriestly]

14. And cutting Social Security will hurt GDP.

Americans who receive Social Security either spend it or pay it back in taxes. Similarly, the Medicare payments go right back into the economy.

Cutting Social Security could cut the GDP. Cutting teachers' jobs (and that has happened and will be really felt this fall), will cut it even more.

The whole economic approach is unworkable.

[ProgressiveEconomist]

20. Other than Rick Santorum, is anybody advocating cutting SS now? Rick Perry

wrote in his albatross of a "book" that he considered SS and Meidcare to be unconstitutional. But he seems to be backpedaling on those positions rather than running on them.

[girl gone mad]

16. You guys still don't get it..

and you're running out of time.

[ProgressiveEconomist]

18. Huh? "Get" WHAT, exactly? And what deadline are you talking about?

[lonestarnot]

22. ginned up too.

:7

[girl gone mad]

23. Not only is the deficit not a problem..

but a larger government deficit is the solution. We need to expand the deficit, now.

Our political leadership didn't get it in 2008 and 2009, when they ignored the advice of progressives and returned once again to the failed neoliberal agenda, propping up Wall Street with massive bailouts and a blatant disregard for prosecution of crimes, then pushing further trade expansion to suppress wages when they should have been reining in the banks and promoting wage growth in line with our past productivity growth.

The administration over-relied on monetary stimulus and undercut fiscal stimulus, a strategy clearly doomed from the start, and one which gave significant ammunition to the anti-government forces on the right.

There is no indication that the President understands macroeconomics well enough to make better decisions now. He had a good opportunity during the debt ceiling debate to show that he was serious about turning things around, but he once again adopted a right-wing framing, attacking deficits when he should have been attacking unemployment.

The next crisis is at hand and we're one year out from the election. The administration doesn't have an indefinite timeline. If they can't show improvement, they'll lose. The only path to improvement is an increased deficit. Talking about the deficit at all right now is stupid politics.

[ProgressiveEconomist]

24. Now you're making sense. IMO there is no conflict between

deficit reduction after 2012 and deficit spending now to create a big national infrastructure bank, re-extend unemployment insurance, and otherwise create jobs a la the WH agenda or Jan Schakowsky's (D-IL) $200 blllion plan.

[xchrom]

17. Recommend

[ProgressiveEconomist]

19. Thank you! Glad you found this info valuable