CBO Releases Latest Budget Forecast: Hilarity Ensues
We won't spend any time discussing the accuracy of the "impartial" Congressional Budget Office: we already did that in August 2011 when we showed that back in 2001 the CBO forecast total 2011 public debt would be negative $2.4 trillion; instead the real number was positive $10.4 trillion, a delta of only $12.8 trillion. We also won't spend much time on the just released CBO headline grabbing projection that the 2013 budget deficit will be under $1 trillion, or $845 billion to be precise. Instead we will show the progression of the CBO's baseline forecasts for the period 2012 and onward. We will also note that the now-forecast 2013 budget deficit of $845 billion was supposed to be a deficit of just $585 billion one short year ago, a token 40%+ error rate, but in the immortal words of Hillary Clinton: "who cares." Of course we should note that if we apply the same forecast error to the 2013 budget, it means the real final deficit print will be $1.2 trillion - just a tad more realistic. Finally, we will certainly note that while the CBO believes 2013 may see the first sub $1 trillion deficit in 4 years, a number which will decline modestly in the coming years, the deficit then proceeds to grow and grow and grow, until we reach 2024, at which point the US deficit returns to $1 trillion once again... and never gets smaller. And this is the optimistic version.
The chart below shows the progression of the CBO's Optimism in the past 4 years. The black line is the most disturbing one, if not so much for Obama whose second and (for now) final term ends in 2016, then certainly for the unlucky sod who gets to follow in his footsteps.
The epic implosion toward the end of the forecast period can be confirmed by looking at the CBO-forecast annual change in debt held by the public: it drops to just $949 billion in 2013, declines to 2015, then just pulls a Birinyi ruler, and hits $1+ trillion in 2022 and never drops.
What happens next? Well, the CBO did not provide an extended Long-Term Budget outlook beyond 2023 just yet. For that we will have to go back to the last time it did, in June 2012. The summary is shown below. We will merely note that as of this moment, the "Extended Alternative Fiscal Scenario" is the baseline.
We let readers do the math.