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CBO - Everything Is Going To Be Really-Really Great!
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.
- 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.
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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You are such an optimist. Only 10% inflation and a full year until the train wreck? I'd bet you on that but you'd probably pay me in rapidly inflating BennieBucks
GDP is already contracting in real terms. It's only by pure manipulation of statistical data that it can be proclaimed otherwise.
There are three main lies in government:
1. The check's in the mail.
2. The statistics support us.
3. We promise we won't cu....
My guess is that we will have a 200%+ debt/GDP by 2025. The politicians have discovered that trillion dollar deficits are basically accepted by most voters (except for some Tea Party types who are viewed as far out of the mainstream), so we are never going to see subtrillion deficits again.
And in a few years we may have another recession that politicians will use to justify $1.5 trillion or $2 trillion deficits.
Your guess is wildly optimistic in my opinion.
With your own numbers, how could it go up to only to 200% over the next 12 years? The only theoretical chance for that happening is GDP rises strongly over that period, at least nominally, due to high inflation.
Well, I was leaving myself a little wiggle room. "by 2025" means it could happen in 2025, or possibly before. But I agree with you. Before 2025 seems much more likely.
You never know. There might be a huge debt implosion/hyperinflation episode in Japan that could put the fear into US politicians and cause them to cut the deficit. But I am probably being optimistic again. A Japanese debt implosion seems very possible, but I think that most people in the US would watch that and say "Well, it couldn't happen here." and continue on just as before.
China must be advising the CBO how to Goldilock the books.
Nasty.
Watch the reversal in the yen pairs as the Euro takes a breather. The surprise pair? No surprise: Cable. Watch for jumpy upside candles as the market digests mongo profit-taking.
:D
Speaking of Britain, does anyone besides me think that Quentin Tarantino looks like Richard III?
http://uk.news.yahoo.com/richard-iiis-face-revealed-first-time-500-years-133121027.html
Yes profit taking, notice the Dow on close, just in time for the next leg or final flow on monies - that being retail. Fleecing the dip buyers late to the party, poor mom and dad investors. So we are probably in the final stages of a stock bubble. Top? Unsure.
Bearish signs emerging is HK slaughtered last session (everyone study your pre 1987 crash cues), EUR sell off with Euro stocks (Monday). POMO won't be able to stop an avalanche sell off, also the 30yr bond collapse a week or so back is a warning sign to the Fed, they encourage all in on equities. Bonds could collapse, yields spike. We may just get our central bankers will be punished trade.
Sounds like the EURJPY is going to get blistered on that day. I'll be waiting.
:D
What are the chances Draghi lowers rates this week?
what are the chances that Draghi lowers his trousers this week?
ben dover
Good, the EUR sell off probably freaked him also the PIIGS spreads widening. His brain is wired to the 'we get EUR bid on USD weakness, so I print'. When the ECB prints, markets rally and USD sells. But...
*Blue market ARS (ARSB=) closed +1.7% 7.56/59 having hit 8.0 last week, traders suspect C/B intervention.
The inflation beat-down emerging markets continues on and on...with darling of the Keynesian lunacy legacy: Argentina.
Andy Xie on MarketWatch had a half-way interesting article the other day about dollar strength and inflation in emerging markets. Basically, they borrow to the hilt when they have relative currency strength but when the USD comes back on them, their financing costs go through the roof and they're left holding their own bags.
"In a dollar bear market, the liquidity goes into emerging economies, causing their currencies and asset prices to appreciate. The double gains attract more inflow, eventually causing inflation.
When the dollar changes direction, so does liquidity. The virtuous cycle on the way up becomes a vicious one on the way down.
The emerging economies already suffer inflation. The liquidity outflow leads to currency depreciation, which worsens inflation."
That's what happened with the Asian contagion and the previous South American financing crisis.
It is hard to understand him because he writes like a third-grader but at least his English is far better than my Chinese.
http://www.marketwatch.com/story/consequences-of-a-strong-dollar-andy-xie-2013-02-04?pagenumber=2
:D
I saw that article, good timing for Andy, the thing is for at least 8mths the Asians have been mad buying USDs, more so oilers, companies etc. It seems like a diversification out of YUAN and into USDs to offset inflation. They are following the Brazilian/Argentina inflation rule book for companies and inflation eating own country currency values. The dollar has been somewhat stable for the last 6mths, it should have collapsed under 0.79 Monday, but Europe caused it to spike. Story goes a sh*tload of shorts were squeezed and quickly covered, so the bearish bets on the USD are not as strong as you would expect.
I would say that the inflation to war story is gaining traction. For me, it is Japan and China getting closer than Israel and Iran.
If we do get war, USTs may not be as bid as Asian inflows will pick up. Could sink the USD and USTs, as Asian countries bring cash/investments back home. They might go bid, as the West tanks...until we go to war.
A theory.
Interesting theory; exactly the opposite of what you think would happen.
I understand a Chinese destroyer locked and loaded on a Japanese ship last week.
Getting scary.
I bet if we buried him for 500 years under a parking lot, he'd look Exactly like Richard III.
Maybe a bit taller.
Well, the scoliosis thing...so it works out.
Kinda looks like him...
Poor Tarantino, he looked hammered on UK television when that awful reporter tried to pick a beef with him over gun violence etc. dumbest interview i have seen in a long time
I understand the same look was given by Richard III when he was asked about axe control.
He reportedly said, "Yeah, I need that %@&* like I need a hole in the head."
(Forgive me. I simply couldn't resist.)
:0
and the CBO is supposed to be apolitical. Trust me this is not the case and never can or will be under Obama.
Per Adam Button over at forexlive.com:
The numbers assume automatic spending cuts on March first and fiscal cliff taxes. Overall, the projections look rosy but the political risks are so high and changeable that they make any estimate a pure guess."
So, it means that if we can all just get along, everything would be great!
I've been saying that for years...about 25 years, in fact.
:/
What a nice present from the CBO for Valentines Day. However I get the feeling their real intention is to screw us again. Beware of the Greeks and the CBO bearing gifts.
Ministry of Propaganda.... when there is ZIRP and $85MM/ mth printed dollars being used to provide liquidity to banks by buying MBS and USTs......what do the Gov't figures mean / show..?
There is no reason to buy equiites except for the Fed...
The Fed is being used as a blunt tool to transform the socio-political landscape in the US. Would :
It is not about "financial" performance any longer...it is about changing the socio-political landscape.
Not going to end well....
Don't know if it is going to end well, but am quite sure it will end where reality wishes it to. Certainly going to be painful tho.
Congressional Budget Office ... Oxymoronic entity doing moronic job ... a dozen monkeys each guessing could come up with a better estimate. Politicians are in the over-under business ... Over promise, Under deliver
A D+ grade for a 1000 percent miss? Is February 5th, reward the incompetent day?
What is the budget for the CBO? $100 million a year at least?
With hundreds of people to do research and they miss by a mile, the grade should be F. And that is being generous.
Nobody was able to predict Lehman. Ok. Hank was. What was his research budget?
Thank God we finally got rid of these tax sucking leaches. Oh, wait.
The CBO miss on purpose. It's a lot of work. They get a $100M per year budget from Congress to be clever because Congress really needs clever mo'fos right now.
Bruce gave them a D+ for being mo'fos.
See the CBO didn't fail, they did their <cough> job, but it was a shitty back-stabbing job for lying mo'fos. Which they do really really well.
So it's like they should get an A+ for motherfuckerology or something.
Now, now. Bruce is just being harsh.
No worries. Everyone gets a trophy.
:D
Everyone gets a trophy.
Except the people paying for the people making the laws about everybody getting a trophy, designing the trophys as well as the proper politically correct trophy awards guidelines and trophy enforcement administration, passing them out and employed by the State Trophy Regulatory Commission and Dog Shit Recycling Facility.
D+ You are not generous, you are encouraging them to better their confidence-building game.
I would give them AAA, so they are peaked, only sliding down from there.
Urge states to legislate away these useless DC divisions. That's the only trophy they deserve.
Interest rates will go up when the account is gold based.
That trick has already been tried, but will probably still work again.
F---. CBO should be disbanded and/or sentenced to prison time for enabling the spendaholics in DC.
Non-partisan gets you just as fucked up of an answer.
Mehhhh...assumptions are all too ludicrous to even debate any further.
Unbelievable that anyone would approve the release of this garbage! Shame on us for paying attention! lalalalalalalala
What would really be great would be instead of a chicken in every pot, could we get free pot with every chicken?
:D
http://www.youtube.com/watch?v=Hf53oFb4IKA
Free pot with every chick sounds better ...
In a lot of places, if you've got the former the latter is free. Just don't make the mistake of marrying the latter..............trust me.
Meh.
Meh....eh... Free pot with every chicken...May I ask how much does the chicken cost?
Couldn't help it but thinking of the spiderman towel give-away.
Can't trust those fucksters (eh fraudsters).
"Yeah, that ain't workin, that's the way you do it...
You play the sheeple on-a CNBC
You get your pot for nothin and your chix for free."
We are definitely in dire straits.
Bruce,
The Government and it's ancillary agencies are, first and foremost, in the business of bolstering confidence in the system. If the CBO happens to get it even close to right-as opposed to egregiously wrong- with one of its forecasts that will simply be a happy accident and nothing more.
Bruce - Thanks again for your excellent analysis.
The CBO is a non accountable Division of Congress. It serves no function other than to serve the Majority Leaders of Congress and the Executive Branch, in whatever numbers those institutions need to have to support whatever rosy economic picture they want to present to the public
If they were a Division of any Fortune 5000 company, most would be fired without recourse.
Your assignment:
read a 10Q
"Fired, blackballed & laughed @...all the way to their jobs at Hardee's.
I think the CBO is right with their 4.5% projection on rates. Problem: inflation will be around 9 to 10%. Excuse me, non-BLS inflation will be around 9-10%.........................
The Federal Reserve Bank of St. Louis did an extensive study of CBO projections, and their conclusion based upon empirical evidence and exhaustive analysis, was that the CBO projections are in fact... USELESS.
http://research.stlouisfed.org/publications/review/12/01/21-40Kliesen.pdf
Now there's another grand use of time and funds.
Forsooth!
Mayhaps they shoulda taken a look at the FED's very own proprietary models which likewise have been about as useful as a bucket of warm shit in the hot afternoon sun.
(cynicism)