Bruce Krasting's picture

The Congressional Budget Office (CBO) is out with its annual report. It’s a blockbuster. This 165 page monster is filled with dozens of charts, graphs and detailed projections. It will be talked about for weeks. The report provides a dismal outlook for the economy. There is one data point I'd like to focus on.

Here is the CBO forecast for real GDP for 2012 and 2013:




The 1.1% Real GDP number for 2013 surprised me. The CBO’s expectations are way under those of both the “Blue Chip” economists and the Federal Reserve:



What does it mean if the economy is going to slow, as CBO now thinks? Some consequences:




The CBO now forecasts Social Security to run into trouble in just a few years. This is a very substantial change in the outlook for SS. Changed fortunes make it certain that America’s favorite entitlement program will be on the table for a significant re-vamp.

The CBO has answered two critical question:


1) In what year does SS first goes into deficit (including interest)?

2) What is the size of the SS Trust Fund when #1 has been achieved?

Key data is here:



Using this information, we can estimate the Trust Funds (TF) balances over time, and compare them to what SS forecast in its report to Congress ten-months ago:


SSTF's "Intermediate" (Base) case:


The bottom line is that the SSTF is going to top out three years ahead of “schedule” and be $800B shy of what it was “supposed” to be.

I think the CBO report has created a big headache for a good number of folks in D.C. Most of them are running for office this year. They certainly won't be able to wave the CBO report as a measure of how well they are doing.



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Eric L. Prentis's picture

The amount of money for Wall Street bailouts, crony capitalism, the military and corruption is unlimited. The financial elite use the Federal Reserve to print electronically as much money as possible to cover up their misdeeds. The financial elite want it all, even our social security (SS) retirement money, which was paid for until 2039, before the ruling class destroyed the economy in the credit crisis. Talk about SS is to scare the people.

honestann's picture

The CBO is ALWAYS grossly optimistic.  This time too.

What we really need is for the collapse to happen before the republican primaries are finished... or lacking that, before it is too late for RonPaul to run on a third party ticket.

TheMerryPrankster's picture

why doesn't the FED create "social security bonds" that pay 7% interest and are restricted to people 50 or older to allow them to invest their money into the social security fund and pay them enough interest on their investment that they would perhaps not need to collect social security when they get old enough to retire?

a 7% annual interest rate should allow one to double their investment in 7 years. So a 50 year old could triple their 401k/ira in 15 years and perhaps have enough to retire on.

Trillions for bankers, but not one cent for the average savers trying to build a nest egg for retirement. It's no way to run a bloody country.

honestann's picture

It's no way to run a bloody country.

But it is a way to run a bloody country into the ground... which is their intention.

dexter_morgan's picture

As bad as all that sounds........if I were a betting man I'd bet it's actually worse than that report lets on.

NEOSERF's picture

Don't know how the graphs are configured but I can never see them Bruce (everyone else's on ZH I can see fine)...IE9 here

Bruce Krasting's picture

I hear you and will fix this. Promise!


the grateful unemployed's picture

somebody is gonna get fired

SirPlayomic's picture

What? The SSTF doesn't hold any assets and is certainly not a trust fund. Repeat after me: it is a ponzi scheme, end of.


TheMerryPrankster's picture

What? Wait a minute are you saying they ran out of unicorns?

now I'm pissed.....

aerial view's picture

Interesting article; yet, there appears to be an unlimited amount of money for bank bailouts, foreign aid and wars: why doesn't this make sense (rhetorical)?

kaiserhoff's picture

Nice catch Bruce, but I think it should be OMFG!

tempo's picture

The CBO report is probably wildly optimistic because of the global glut and imbalance in labor cost between the USA/EU and China/India/Korea. For example, Foxconn produces nearly all AAPL products that provide the social networking addiction for 100's of millions. To create jobs and economic growth in the west greater than the increase in deficit spending, our workers must compete with Foxconn where workers are paid $5/day w/o benefits/vacations and are willing to live 20 persons to a dorm room, work 6 days per week, 12 hours per day in dangerous working conditions. The contrast between real workers at Foxconn and the pampered life in the USA/EU where our job is milking the system for more entitlements will not last. The end game is ugly.

geno-econ's picture

Actually CBO report makes sense. After election, no matter who wins, there will be a a huge call for facing up to our economic problems and a recognition stimulus and stimulus spending prior to election did not work.  Only other option is cut more government spending which will drive economy into further decline.  Get Ready 

honestann's picture


Implement massive austerity in the federal government and the economy absolutely BOOM.

Massive austerity for regular folks MIGHT BE bad for the economy... IF... what they're cutting back on are products created in the USSA.  If they're cutting back on products made in china or other foreign countries, that has no negative impact on the economy.

Just like Greece, regular folks need to DEFAULT on their bogus fiat debts which they were scammed into accumulating by the predators-that-be and predator-class (primarily the federal reserve and large financial institutions with government collaboration in the form of laws, FannyMae, FreddieMac, FHA, etc).

It is the purveyors of fiat who need to EAT IT.

Smiddywesson's picture

They will talk about austerity, but history tells us all they will do is talk.  We passed the point of no return a long time ago.  Cutting spending isn't going to avoid the collapse.  In fact, the collapse is underweigh right now. 

Don Levit's picture

Real GDP, according to an article on financialsense entited The GDP Deception, is simply money supply times money velocity.

Ten years ago, the money velocity ws 2.0.  Today, it is 1.6.  Without the increase in money supply (increased debt), the real GDP would have decreased markedly.

I understand the asset part of the debt gerts factored into the GDP immediately.

What happens to the liability part?  Where is that factored into the financial dynamics?

Don Levit

Catullus's picture

Under both CBO’s baseline and its alternative fiscal scenario, the aging of the population and rising costs for health care will push spending for Social Security, Medicare, Medicaid, and other federal health care programs considerably higher as a percentage of GDP. If that rising level of spending is coupled with revenues that are held close to the average share of GDP that they have  represented for the past 40 years (rather than being allowed to increase, as under current law), the resulting deficits will increase federal debt to unsupportable levels. To prevent that outcome, policymakers will have to substantially restrain the growth of spending for those programs, raise revenues above their historical share of GDP, or pursue some combination of those two approaches.

There you have it.  They've been warned.

It also means that even if the economy grows and government revenues increase, the government cannot continue to increase spending as a percentage of that increased revenue.  They're basically saying the government can't grow out of their problem by "stimulating" the economy.  To say that increased deficit spending doesn't matter flies directly in the face of what the report says.  Take that Krugman!

Zero Govt's picture

Good article (again) Brucie

it's not like SS hasn't had 40-50 years to see the demographics (problemo) approaching ...yet still it's hit the political mangers full in the face like it was a 'surprise' ..Doh!

so another State social and financial engineering failure 

It's not like everything and every time the State intervenes it ends in total collosal failure now is it? ..Doh!.. Doh!.. Doh! ...Doh! ...Doh! ...Doh! ..etc

So what to do? Well the SS will try to rearrange the deckchairs on the Titanic (of course, why face-up to a problem today when you can pass the buck to tomorrow like a spineless Govt tosser). They'll cover their ineptness in as much snake oil and disengenuous BS as possble and predicatbly string it out right to the point of drowning

Govt: the most predictable pile of shit in history

ReeferMac's picture

Love your articles Bruce, thanks for sharing!

Element's picture

REAL GDP growff will be about 1.1% in 2013?

And best-case REAL deficit will be at least 13.5% of GDP in 2013?


"... Brownie, you're doing a heck of a job! ..." - Goldman Sachz, Feb 1st 2012

mendolover's picture

Makes me wonder what the real numbers will be.

Mr_Wonderful's picture

Imminent: BOJ to beat down the Yen.

falak pema's picture



OT but interesting on BRIC front.


Russia Needs An Economic Strategy If It Wants To Compete With The Rest Of The BRICS Felix GoryunovRussia Beyond The Headlines | 8 hours ago


Read more: http://rbth.ru/articles/2012/01/31/russias_economy_needs_a_change_of_strategy_14280.html#ixzz1l7sM1lel

Interesting as the article is I found this very thought provoking :

These neoliberal strategies that the Russian economy continues to follow were borrowed by then-President Boris Yeltsin’s team of reformers from the United States. Today, many progressive Western economists recognize the problems with this neoliberal ideology and point to the phenomenal successes of China, whose ruling elite adopted a national development strategy that converged state planning and industrial policies with market guidance and encouragement of enterprise. This makes it more obvious that Russia’s decision to proclaim the supremacy of market forces in economic development was critically wrong...

Oligopoly goulash...à la Putin, is like Ben And the Fed....very non free market! But that's another story, as the "free market" and loch ness monster look like being first cousins!

masterinchancery's picture

Is the CBO talking about the mythical Trust Fund here, because there sure isn't a real one.

Moe Howard's picture

Social Security? That's so Greatest Generation. It's dog food and solent green for you fuckers. I have always considered FICA to be a mafia tax on earnings, one step below protection money, as the only thing it protects against is tax jail.

Hobbleknee's picture

Does this mean the government will revise its budget "cuts", since they were based on +5% annual growth for the next decade?  Or do they think we'll make up for it with double-digit growth at the end of the decade?

ebworthen's picture

The CBO isnt' selling any ETF's or mutual funds.

They aren't economists from a pension fund or the BLS.

The former head of the CBO was raising the alarm about the deficit over 6 years ago.

Bankers will keep getting bonuses as Congress moves retirement age to 72-1/2, guts medicare, and hands the populace over to the sharks and barnacles of big pharma and corporate healthcare.

The American sheeple will probably let them, unless they get their heads out of their asses, off the couch, and load the rifle.

OldPhart's picture

The fuckwads in congress won't stop at 72 1/2, we'll soon be seeing 85 as the full retirement year.  Gotta get back to the expectation that very few will be alive to actually receive social security.  My current retirement date is supposed to be 67, but I expect that will change in the next few years to somewhere near 70.

Bloodstock's picture

We Believe In The Truth, We Believe In Ourselves!


marathonman's picture

Truth is treason in an empire of lies.

Ron Paul 2012

Marty Rothbard's picture

Dude! 2019 is the year before I turn 62.  Good bye retirement, hello catfood!  Well, at least Ron Paul is proved to have been right all along, once again. 

TheMerryPrankster's picture

Eat a can of catfood and you have had a single meal, but learn to trap ferral cats with your catfood and you have a  trade. Imagine cat fur mittens and hats, and delicous smoked cat jerky and tasty cat kabobs on a hickory smoked grill. mmmmm

The future is about survival, and the world has provided an abundance of ferral cats.

Perhaps god has a plan after all.

Buy 2 vans, one marked "pest removal"

the other marked

"exotic cuisine"


Don't make me write your damn business plan for you. I want to see some charts by next week and a couple of good business names to copyright.

scaleindependent's picture

The CBO report is a manual  of "Privatize gains and socialize losses"

TPTB are sending out smoke signals of what is to come; More Wealth transfer from society to the banksters.  More money via QE, bailouts, mega-bonuses, and vaporizations will go to the criminal class. This will create a depression and the economy will falter and someone has to pay for it and that will be Social Security, savings, education, society, inflation tax, etc. etc.

AldousHuxley's picture

stop military spending and you will have more than enough money to sort out internal affairs.


also stop medical subsidies for rich doctors and fat lazy smoking crack addicts.


allow retirees to retire outside of US and use medicare dollars they put in to non-US doctors. AMA = doctor's union thugs


also, time to start cracking down who's really disabled.



GeezerGeek's picture

I find it curious that the one budgetary item you wish to end - military spending - is in the U.S. Constitution while the others that you wish to 'sort out' are not.

I am in favor of maintaining a strong Department of Defense while opposed to using it as a Department of War. The whole social safety net - Social Security, Medicare, Medicaid, SNAP, etc. - should be dismantled. It would be difficult to come up with an equitable plan to properly account for already-paid Medicare and SS taxes, but continuing all those unconstitutional programs is the only way that the U.S. may be able to survive economically.

To continue to allow the central government to spend beyond its means and beyond its authority will lead to doom, while failing to defend the country militarily would be a disaster in a different way. I reject your suggestions entirely.

StychoKiller's picture

How convenient of you to ignore the coporate welfare numbers...

SeattleBruce's picture

"stop military spending and you will have more than enough money to sort out internal affairs."

Not with $1.5T deficits, and an increasing, massive debt load.  We need to stop our addiction to FRN - the private Federal Reserve System.  Replace debt based money with non-debt based money and base the money supply on a logical number related to the real economy, with pegs to real prices.  Hold those that are responsible for creating the non-debt money supply, and holding price inflation in check accountable to success (they can be replaced) and totally accountable to fraud (they'll be on a public commission - with stiff criminal consquences for fraud.)  No more back room dealings on the money supply = more accountable government.  Til that happens, the current system will never be displaced, and the war is good for business mentality will persist as a path of least resistance.


chirobliss's picture

Ii'm with you Hux. I just don't get this addiction to war... then again I was military for quite a while, unlike most of these pasty white diabetes ridden blowhards that would wet their diappers if exposed to a combat environment., but they just luuvv it for everybody else.

OldPhart's picture

Umm, I was a US Marine...and I did a bit more than wet my diapers on occasion.

Moe Howard's picture

The neo-cons weren't and they are quite willing to have you and yours die in thier wars, while they fill the jobs you empty. Can't let Iran get the bomb, doncha know, but it's ok North Korea got one. What a fucking joke.


BTW, US Army Infantry 20 years 6 days.

Obadiah's picture

To be a veteran is so bad assed.  I bow at you fellas feet. Thank you for risking it all.

I just can't imagine once you woke up to the real reasons you were at total risk for these criminal satanic mfr's that you didn't put that killer training to good use... well maybe you'll still get a chance?


The bottome line.  I stand below you and your kind.

TheMerryPrankster's picture

don't want to rain on anybody's parade, but there aren't that many "fat crack smokers" - it leads to weight loss, lack of apetite and no money to buy food with anyhow.

you want to go after those "fat smack croakers" thats where the money is.

Dead Canary's picture

Don't be sad. Unicorns will save us!

ebworthen's picture

Yes, and don't forget the Skittles Fairies!

TheMerryPrankster's picture

Skittle fairies breed in unicorn shit. Just sayin.