CBO - Everything Is Going To Be Really-Really Great!

Bruce Krasting's picture


A few snippets of data from the Congressional Budget Office’s Budget and Economic Outlook 2003.


Estimated 10-year budge surplus = $5.6T.

Reality = $6.6T deficit. A 200+% miss.


Estimate for 2012 Debt Held by Public = $1.2T (5% of GDP).

Reality = Debt Held by Public = $11.6T. A 1000% miss.


Estimated fiscal 2012 GDP = $17.4T.

Reality = $15.8T. A $1.6T (10%) miss.



Okay, it was not an easy period to forecast. But the fact is, no period is easy to model and forecast. The CBO assumed that there would be no recessions in the 2004-2012 period. The CBO got hit on the head with that assumption.


I think the CBO is making the same mistakes again in 2013. It has a crystal ball of what the future will look like. The CBO assessment is that there is nothing but blue skies ahead. Some more snippets; this time from the just released 2013 CBO report on our future:


- GDP is about to soar! It going to more than double the current rate! Happy days are right around the corner. The economy is going to enter a sustained period of economic growth – and it’s going to star in just ten-months! Wow!


- Debt is not a problem any longer. Don’t worry about a thing. After ramping up the past five years, the Debt to GDP is going to flatten out, starting really soon.


debtto gdp


- Unemployment will be no problem at all. The rate is going back to 5.5% in a couple of years, and it is going to stay low for the remaining 7-years. There is Zero, repeat Zero (as in nada, no-way-no how) chance for a recession over the next decade. I find this very comforting.



- Inflation is not going to be a problem. either. Not too cold, not too hot – the CPI will average less than 2% for well into the 2020’s. No chance of inflation picking up at all.


- There is even good news for savers. Interest rates will be going up very sharply. By 2015 the 10-year T-bond will be back to 4.5%, more than double where it is today. This backup interest rates will have no consequence to the economy at all. Not to worry one bit.



- There reason that the future is so bright is that the economy will prosper. GDP will grow to $25.9T in 2023. This comes to a 67% (uncompounded) increase. Think of that! We haven’t seen that kind of performance since…well, actually, we’ve never seen it. But who knows? You have to believe in miracles if you work for the CBO.


You can argue with me all you want about those CBO estimates. The fact is, no one really knows what will happen. But the CBO is using one assumption that is almost certain to be proven wrong. It is a very critical assumption: What will labor’s role be in the economy of the future?


- Labor income, as a percent of GDP, has been in a multi-decade decline (rise of the robots). The CBO is anticipating that the trend will not only stabilize, but will completely reverse.


labor income



I think the CBO is out on a limb with this critical assumption. I think they are all wet with the rosy outlook they believe is in our future. If you believe the CBO, the last thing you would do would be to address some of America’s daunting problems. After all, everything is going to be on easy street, so why sweat the small stuff?

I think the CBO has done our legislators, and the country a disservice with this report. I’ll be generous and give the CBO a D+for this effort.



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NEOSERF's picture

Perhaps someone should sue the CBO for overly optimistic forecasts which therefor allowed S&P to issue overly optimistic ratings on home repayment bonds...etc.  Seriously, how in this environment does the CBO put out this drivel without at least one recession forecasted in the next 10 years...Get 60 minutes to interview these idiots...

moneybots's picture

"A 9% approval rating is not a D+. Thats not even an F. Thats grounds for expulsion."


Actually it is grounds for re-election.  After they got 13% approval rating, most  got re-elected back into office.

moneybots's picture

"Okay, it was not an easy period to forecast"


 The reason it was not an easy period to forecast is because it was due to fraud that the estimate was off by 1,000%.


Republicans screamed about balanced budgets and once fully in charge, ran up huge deficits again.  Cheney said Reagan proved deficits don't matter.  They scream about deficits again because a Democrat is in charge. 

nathan1234's picture

The CBO rates an "F" as in "FAIL"

I think these outlooks are a fraud not only on the American people but also on the the financial world, the international investors and the people in the rest of the world.

I guess it's time that the US$ is no longer a global currency but one that can be legal valid tender only in the USA, till such time as the American people bear it.



SmallerGovNow2's picture

Great article Bruce!!!  Wouldn't change a thing except the grade to "F"...

wonderatitall's picture


Setarcos's picture

I have a magical tale to tell from the Land of Oz.

In the early days of the "new economics" of neo-classicism/monetarism/financialism/Freidmanism/Reaganism (whatever) a magic scheme was conjured up called SUPERANNUATION.

It was reely, reely SUPER because all employees and employers had to contribute to a fund to be invested in the economy by private fund managers, who would invest in stocks, shares, real estate and anything capable of generating a profit ... all of which would compound to give EVERYONE an ensured retirement income.

What could possibly go wrong?  All 23 million of us were going to become millionaires by trusting financial advisors to make wise investments and, presumably, take only a small cut from the funds entrusted to them.

OK I was a sceptic from the start and pointed out that, almost by definition, only a minority of any given population can make a profit out of the labour of others; but I was ridiculed and seemingly rightly so for the best part of twenty years, when the first-in on the scheme (though all with prior superannuation schemes, i.e. prior to the universal magic potion) began retiring comfortably at 55, for instance.

But NOW everything is in disarray - including for many early retirees - simply because there is no magic by which everyone makes a profit, nor any way that fund managers can be stopped from skimming.

It was and is all a Ponzi scheme.

There is no magic, as Bruce points out with his examination of projected forecasts.

LawsofPhysics's picture

Well put sir.  Time to execute those motherfucking financial managers, politicians, and all other paper-pushers.  Clean fucking house, no useful skills for delivering designing, building or delivering a real product, then you are soylent green.

Nature will do this for us eventually.  Many tired of waiting.  Unfortunately, Bruce was a paper-pusher who benefitted from all the financial largesse and should be sent to the guillotine with the rest.

These fuckers have had more than ample time to clean house, yet they continue to enrich themselves, fuck them all.

Dre4dwolf's picture

I have the solution, we can erase all the charts, and make them look like whatever we want.

dolph9's picture

Even if the projections are true, it solves nothing.  That is the key.

Remember that everybody is on muddle through mode.  There is no cathartic release, anywhere.  But it is coming, and coming big time.

Peter Pan's picture

Whoever came up with these projections must have been playing with much more than just their calculators.

If they made their pay dependent upon the accuracy of their projections I think we would see a lot less BS.

willwork4food's picture

Huh. But that's the rub. Their pay is directly associated with the calculations their payer's want them to be.

pfairley's picture

Hedgies buying houses in bulk is the latest chapter of the small homeowner getting pushed out of Real Estate. In a previous chapter, big landlords with many apartments spread the legal costs & lost rents into a business by which they profit. The small owner occupied landlord with a 2 family house is bankrupted by one bad tenant with a free government lawyer and left wing eviction laws.

 The govt is also to blame in the latest chapter, but this comment is too long already for more explanations. Hope you know already. Love, Pete

Mediocritas's picture

Love the + in the D+. Haha.

"You really suck, but keep trying!"


Orly's picture

I hear things are getting a bit hairy down under...

Setarcos's picture

Yep, world record (more or less) housing bubble is due to burst.

Acquaintances I have in the building industry tell me it has already happened, but there's a lag between that and reality actually hitting home (no pun intended, because it applies to shopping mall construction, etc.)

The Australian economy has been two-tier for decades, with digging holes in the ground and cutting down trees now virtually the only forms of 'production' supporting the flotsam left after gutting manufacturing/value adding.

At least our banks seem not to have been too exposed to domestic and foreign sub-primes, but who really knows when the shit really hits the fan; perhaps when China says, "OK we've stock-piled enough iron ore, copper, wood chips, etc. to keep us going for years. So sod of Australia, especially because your stupid government has signed for yet another US military base hostile to China."

Intoxicologist's picture

Do they publish this report in comic book format?  I'd like to get a copy as it might be worth something down the road, sorta like my old Spiderman comics!

q99x2's picture

You know what they say about a doubting Thomas.

Bruin4's picture

Cunt nuggets....all of the pricks, they are just cunt nuggets. And the cunt is bernankes ass

Tinky's picture

While we do have the excellent "Limerick King" here on ZH, I'm afraid that you're not quite ready to be crowned "Prince of Metaphors".

Almost Solvent's picture

But aren't cunt nuggets gluten free?

JeffB's picture

I thought it was a great article until you gave them a D+. I just can't fathom any reason to give them anything other than an F, unless F- is an option.


Bruce Krasting's picture

There are some nice graphics. It's 75 pages long. Lots of tables. Thousands of numbers. It must have cost a few million to produce.

How could something with all that "stuff" get an F?

Like I said, I was generous with the D+ (I'm trying to make some new friends over at the CBO, so I didn't want to get too critical....) Also, when I went looking for a closing pic, I did not find one I liked for D or D-, so D+ got the nod.


In truth, it probably should have been a D, or maybe even a D- would have been fairer.

JeffB's picture

I can see your reasoning, and I think you did a good job of making your point, but I think Dead Fred's chemistry prof (post below yours) had it right.

They may have done a lot of work, crunched a lot of numbers, printed up a lot of pages with pretty pictures and graphs and all, but the bottom line is that they are misleading anyone who believes their twisted conclusions which can and will lead to catastrophic results.

The doctor with the excellent bedside manner and friendly receptionists, who kills you because he prescribes the wrong medicine still gets an F in my book.


NEOSERF's picture

Unfortunately a blind monkey throwing darts at a board with a +20% to

-20% range would have and STILL would do better than this group.

newworldorder's picture

You do recall the old joke - of bluffing us with BS.

The MSM is all too eager to perpetuate the lie. This has become projection, presented as "gospel" written by Ivy League Econ Phd's without any real capitalist experience. After all the "public" has to be kept mezmerized daily.

DeadFred's picture

My old chem prof explained why he didn't give partial credit for getting the formula right but blowing the calculations, "When you pre-meds become doctors I don't want you to prescribe ten times the dose for my meds and think it's okay because you had the general idea correct". Sometimes it's important to to be right-right and not sorta-right.

lindaamick's picture

I live in two realities.  

The Radio (NPR and Local stations), newspapers and rags such as WSJ and NYT hail housing recovery, the Obama plan which has already reduced the deficit by $1T, the stock market signalling a robust recovery and jobs coming.

I login to the internet and find that the housing recovery is backed by Hedgefunds and big players buying up single family homes for speculation and profit, that the deficit does nothing but rise, the stock market is pumped by the Fed passing out freebees to BigCorp and BigFinance and the job creation in Jan was really 17K.

WOW.  Who to believe!!!



Dewey Cheatum Howe's picture

What do your 5 senses tell you and which one of the realities sets off your internal bullshit detector? I'm curious to know also.

Orly's picture

I am very curious to know...who do you think?

rsnoble's picture

Oh I thought this was about the Mcdonald's cheddar bacon onion sandwich.  Which btw is pretty good.  Tasting that is.

spinone's picture

Fuck You Bernanke!

Curt W's picture

These people have a great future as fiction and fantasy novelists

monad's picture

A 9% approval rating is not a D+. Thats not even an F. Thats grounds for expulsion.

infinity8's picture

Where's my crack pipe, dammit - I'm all out-of-tune.

disabledvet's picture

If the purpose (and it is) of all the bailouts is to bail out the "individual 50 States" then I agree we've got a long hard slog for our good friends in Federales land. Simply put what can't be budgeted is the American people having a good old fashioned tax revolt as a consequence of it all. Since we all now know that the budget deficit has been nothing more than a straw man oh these many years...why have taxes at all? "just tell the Fed to print more" sounds good to me.

WhiteNight123129's picture

did you know that debt to GDP moved from 160% to 41% since 2002 in Argentina. Ok currency sucked, but the country delevered.


One eyed man's picture

Congress always has a plan to fix the deficit next year. And the CBO dutifully computes it's deficit projections based on Congress's current plan. And if the projections still come out too high, they throw in a few optimistic assumptions of their own. So their projected deficits always seem reasonable and not in any way alarming.

But when it comes time to actually make the cuts or increase taxes, the news media screams "fiscal cliff" and Congress kicks the can another year.

It was Bernanke who coined the term "Fiscal Cliff" to describe spending cuts and tax increases intended to reduce the deficit. So thank you Ben Bernanke for enabling and endoring the huge deficits of the coming decade. You will be the remembered as the Arthur Burns of the 20-teens.

ebworthen's picture

iPhone in every pocket.

EBT card in every hand.

Banker bonuses for securitizing bad debt.

Bailouts for corporations run into the ground by greed.

Re-election of politicians for trampling the Constitution.

0.05% for savers and retirees...

...and Alpo for Dinner.

Carry on U.S.S.A.!


RealFinney's picture

Your being generous with their GDP assessment Bruce: In 2003 GRP was about $11 tr, if they project a 6.4tr increase and we get 4.8tr then I make that a 25% miss.

Bruce Krasting's picture

Right. I was think 1.6=10% of 16. But that is the wrong way to look at it. As you say, the error rate in the forecast is 25%.

I liked that number/thinking better, so I changed it it on my .com.


Thanks - I spun the numbers the wrong way. Shows you how easy it is to do....



Widowmaker's picture

When you run a printing press all things (except rational price discovery) are possible.

Why is everyone laughing?   The joke is on YOU!

nmewn's picture

Don't worry, ObamaCare is about to kick in...in full force, and it'll create 400 million jobs!...400,000 almost immediately!

And its Budget Neutral!


shovelhead's picture


By 2020 we'll be trading squirrel skins for a pigeon dinner.

Mactheknife's picture

Damn...I'm rich!  I've got those little tree rat bastards out the ass at my place.

blu's picture

Bruce, they are very clearly not planning on being around to take any heat when everything will have gone as badly as it will have gone.

For that matter, neither you nor I will be hanging around here bitching about it, in all likelihood, having more pressing matters.

Published GDP is going to bust below 0 and stay there for a decade at least, while unpublished is probably already there. Inflation (in the things we need) will be running 10% annually and deflation (in the things we don't need) will likely be running just as hard in the other direction. Only unemployment will be constant at around 8%, but only because people are vanishing entirely from the statistical measures of employment never to be seen again.

It's gonna be happy happy joy joy for the next 8 months to a year and then this train goes off the rails. Afterwards nobody will recall that the CBO ever published fuck-all.

NEOSERF's picture

True, go myinflationrate.com and plug in the stuff you actually buy.  Same categories as the CPI and it will show your inflation rate vs. publicized one...I am running at about 8% even with the 2009 deflation crash.