Tuesday, June 5, 2012

Not that we should be worried or anything


Some more good news out of the Congressional Budget Office this week. If you have been reading this blog for any amount of time, the following should not come as any big surprise. From The Hill:

U.S. debt is on track to be nearly twice the size of the U.S. economy by 2037, the nonpartisan Congressional Budget Office (CBO) warned Tuesday.

The new CBO report states that increased entitlement spending driven by the retirement of the baby boomers and insufficient revenue is making the long-term outlook for the national debt increasingly dire.

Under CBO’s most likely scenario, in which lawmakers extend current tax rates and fail to curb entitlement spending, debt held by the public would reach 109 percent of the economy by 2026, and it would be almost 200 percent of GDP by 2037. 

Many economists have warned that if debt held by the public approaches 100 percent of GDP, it can bring on the kind of fiscal crisis being felt in European countries today, in which governments must suddenly slash spending and laying off workers in the face of rising interest rates caused by spooked investors. 

We're assuming the CBO is using a linear model to predict the revenue captured by letting the Bush-era tax cuts to expire because people will shield their money as they always do when taxes are raised, resulting in less revenue generated than previously assumed. That's just the way things work.

Besides, we believe any additional revenue generated through raising taxes is absolutely small potatoes compared to the massive looming liabilities of our big three four entitlement programs: Social Security, Medicair, Medicaid and ObamaCare.

For a graphical representation of what this looks like, please go to the CBO link, here (difficulties inserting image).

Not pretty, huh? But when we said "good" earlier we meant it in the Chip Diller context. Recall it was Treasury Secretary Timothy Geithner when being questioned by Congressmen Paul Ryan (R-WI) who said of both his and Ryan's budget proposals

“We’re not coming before you to say we have a definitive solution to that long-term (debt) problem. What we do know is we don’t like yours."

In other words...

A complete and abject failure of leadership from this administration in this particular area. We await to see Governor Romney's proposed solution.



Doo Doo Econ said...

When living off of your credit card, it is always prudent to increase expenses and anticipate higher future earnings.

Dean said...


Androw said...

Awesome, you said it so well!
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