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Krugman: CBO Doesn't Know How To Read Its Own Report
Submitted by Robert Murphy via Mises Canada blog,
Paul Krugman reads the latest long-term forecast from the US Congressional Budget Office (CBO) and he likes what he sees. Even though the nearby graph is the CBO’s projections for the growth of federal debt, Krugman nonetheless offers this rosy commentary:
Nick Bunker notes an important point about the CBO’s new long-term fiscal projections (pdf): The budget office has marked down its estimate of long-term interest rates…
This markdown has the effect of making the budget outlook — which was already a lot less dire than conventional wisdom has it — look even less dire. But there’s a further point worth emphasizing: the CBO has just declared an end to the debt spiral.
You’ve heard the story: the more debt we have, the more we pay in interest, so the bigger the deficit, and the faster debt grows, until boom, we’ve turned into Greece, Greece I tell you.
…So we turn to Table A-1 on page 104 of the CBO report, and we learn that for the next 25 years CBO projects an average interest rate on federal debt of 4.1 percent and an average growth rate of nominal GDP of 4.3 percent. And this means no debt spiral at all.
Now, wait a second, you may say: higher debt will mean higher borrowing rates, because people will fear that we’re about to turn into Greece, Greece I tell you. That was the theme of quite a few analyses…
As many of us pointed out, however, such results were driven almost entirely by the euro crisis; high-debt countries that borrow in their own currencies haven’t seemed to face anything like the same costs…
I don’t want to say that debt doesn’t matter at all. But it clearly matters a lot less than the fearmongers tried to tell us.
Huh, even though that graph–which I took from the cover of the CBO report–looks pretty scary, apparently the report actually shows that the budget outlook “is even less dire.” I mean, Krugman tells us that the CBO has declared “an end to the debt spiral,” and some of the numbers on page 104 of the report apparently mean that the fearmongers are full of it–we don’t need to worry about the debt getting out of control.
In contrast to Krugman’s optimistic assessment of what the CBO report says, here’s a decidedly different take:
The gap between federal spending and revenues would widen after 2015 under the assumptions of the extended baseline, CBO projects. By 2039, the deficit would equal 6.5 percent of GDP, larger than in any year between 1947 and 2008, and federal debt held by the public would reach 106 percent of GDP, more than in any year except 1946—even without factoring in the economic effects of growing debt.
…Beyond the next 25 years, the pressures caused by rising budget deficits and debt would become even greater unless laws governing taxes and spending were changed. With deficits as big as the ones that CBO projects, federal debt would be growing faster than GDP, a path that would ultimately be unsustainable.
…How long the nation could sustain such growth in federal debt is impossible to predict with any confidence. At some point, investors would begin to doubt the government’s willingness or ability to pay its debt obligations, which would require the government to pay much higher interest costs to borrow money. Such a fiscal crisis would present policymakers with extremely difficult choices and would probably have a substantial negative impact on the country.
Even before that point was reached, the high and rising amount of federal debt that CBO projects under the extended baseline would have significant negative consequences for both the economy and the federal budget…
Well gee whiz, what kind of fearmonger wrote this shoddy analysis? As Krugman gets sick and tired of pointing out, talking about the debt leading to a “fiscal crisis” and spiking interest rates just shows how ignorant the analyst is, because everybody knows this type of thing can’t happen to the United States. You would think that someone describing the CBO analysis would finally get it, since–Krugman has just assured us–the new CBO report shows that there will be no debt spiral and that the fearmongers are full of it.
So where did I grab the above analysis? The Heritage Foundation? The Wall Street Journal? John Cochrane’s blog?
Nope, I quoted the above from the Executive Summary of the new CBO report itself. But it doesn’t appear until page 3 of the report, so I’m guessing most of Krugman’s readers won’t see it.
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with all due respect to Mr. Krugman, he might be wrong this time ... CBO after all is the Guvernment!
Please.
Please..
Somebody please....
Ebola. There's a handy outbreak over Niger way ...
Broken windows...
Go investigate...
Do Something!
Retire, for fucks sake
Go away
Disappear
Learn to use a nail gun
Run away
Goddamnit!
It is irresponsible letting this man run amok.
Lead by example.
Personally take in 100 2 legged sand fleas
Peak Krugman
"GDP = C + I + G + (X-M)" is a false formula. Keynes (Krugman) was wrong all along.
Krugman is anencephalic.
He has no penis? I never heard that about him before.
No brain, sure, everyone knows that, but missing yet another important organ is really making me feel sorry for the guy.
Government accounting.... You know that once you go work for the gov't as an accountant, the private sector won't take you back?
Clearly none of you understand the exciting new field of doucheonomics.
Post Krugman
Krugman is going to have a sex change operation so he can be the first person to be a Nobel Prize winner as a male and female.
When the US dollar crashes Krugman will say because there wasn't enough debt and stimulus.
By the time dollar crashes, none of us will be alive, certainly not Krugman who is in his 60s
Boy are you in for a surprise.
"federal debt of 4.1 percent and an average growth rate of nominal GDP of 4.3 percent."
Gee, a 4.3 percent NOMINAL GDP growth rate to eternity. Like who doesn't believe that's going to happen. I mean, at some point we have to assume there are monkeys writing this shit at the CBO. And then they take this poop and fling it at us like we are idiots.
This is what "experts" always do- they take current data, and extrapolate it out to eternity. Interest rates are never going up! Wanna bet? Never is a LONG time.
Calling it data is way too kind. I prefer hedonically manipulated, seasonally adjusted, propagandized fabricated bullshit supporting a pre-determined conclusion. Shoot, I'm probably being too kind as well.
HaHaHa!! I stand corrected in a grand way!!! Thank you!
When I read 4.3 percent growth, I laughed. Whatever, Krugman has lots of money but he looks like an unhappy freak. Whatcha gonna do?
Exactly! I will take the "under" on both projections.
Of course, the debt forecast doesn't take into consideration the UNFUNDED entitlement programs, which are growing faster than nominal GDP growth currently and probably faster than the forecast too.
http://www.heritage.org/federalbudget/entitlements-historical-tax-levels
Exactly! I will take the "under" on both projections.
Of course, the debt forecast doesn't take into consideration the UNFUNDED entitlement programs, which are growing faster than nominal GDP growth currently and probably faster than the forecast too.
http://www.heritage.org/federalbudget/entitlements-historical-tax-levels
I think our Krugman is malfunctioning
Looks like Jay Carney's propaganda writer was reassigned. Go union!
1 rope + 1 lampost -1 NY Times economist = bullish
I can't wait until I can go home and see that video on the internet, "2 bankers, 1 Rope"
Winners of Nobel Peace Prize should not pontificate in areas where they lack expertise...or something like that
Paul Krugman is a fatuous oaf so I fed him to my tiger:
http://fedtoatiger.blogspot.com/2014/04/dr-paul-krugman-is-fed-to-tiger....
Alert the Nobel committee!
Your tiger will get gas, an inflated ego, and then become pretentious.
PETA will want a meeting with you about this.
Bring a bomb dog for the PETA meeting.
Bring a dope sniffing dog.
Look, PETA gave me a down-vote over it.
You must excuse me now while I go commit suicide.
Now that is a Nobel Prize winning formula for Economics.
#winning#theonlywayKrugmancanbewellhung
After the collapse, when municipalities can no longer afford to provide street lights, all alleys will be dark alleys, where I will look forward to meeting Mr. Krugman one day.
Krugman is in the same category of idiocy as Obozo... and has a Nobel price to prove it, too.
In my mind, Nobel awards became contrary-indicators in 1994.
http://www.nobelprize.org/nobel_prizes/peace/laureates/1994/
Save the bankers at your own peril.
"an average growth rate of nominal GDP of 4.3 percent"
BWAAAAHAHAHAHAHAHA.
Yeah, talk about rosy commentary!
Somewhere beyond "rosey" is the realm of mind fuck.
Dunno. Mind fuck implies he knows what he is doing and the deception is on purpose. It may have indeed started out that way, you know, lie a little bit, help the economy. But like the fed, the more you do, the more you gotta do. So instead of more printing to support the printing, we are talking about more lying to support the lying. Then his reputation is at stake. Then it gets interesting--cognitive dissonance. He starts to bridge the gulf between what he says and reality by believing it himself. Now we are talking delusional, as in stark raving batshit crazy, mad. No meds for this. Without the lies he is ontologically and epistemologically insecure. HE CANNOT BACKTRACK NOW!
Just a guess, ya know...
As time goes on, and each quarter fails to reach the goal, we will be treated to stories of how "we can still make 4.3%...if only the next 12 quarters come in at 10.5%!"
Never doubt the Hockey Stick. Eternally one quarter away, but eternal nevertheless.
For a minute I thought nobody had noticed
FUCK YOU KRUGMAN
and the horse you rode in on, SLUGMAN.
Thats not a man baby.
CBO's projections are worth far less than a bucket of warm piss. In 2000, the CBO predicted a surplus of more than 3.5% of GDP for 2009. We got a deficit of nearly 10%.
You have to be crazy or a delusional idiot to take any projection by the CBO as anything but a fantasy:
http://voices.washingtonpost.com/ezra-klein/2010/08/research_desk_how_ac...
yeah, but leave it to krugman to take it the next level of crazy...
Krugman...you are a chode, a chode I tell you
Let's see what the projections are when the USD loses reserve currency status.
pods
Let's see what the projections are when the stock market drops 70%.
This man is either insane or the worst apologetic Obama political hack EVER!
I don't see the either/or...
Why the or ?
That was some nice synchronicity sir.
The latter; and fuck that socialist fish wrap the New York Times for giving this sociopath any ink or bandwidth.
Rather, bless the NYT for publishing Krugman, thus giving fair warning to those who might otherwise be fooled.
Krugman's a complete moron, like most these days at NYT.
What I find the most vomit-inducing are the reader's comments on Krugman's articles. Fawning, full of adulation. Like a smarmy cult that feel that they are the only ones with the intellect enough to truly understand economics, laughing at all the poor commoners that aren't smart enough to follow his logic.
OT, but not:
Is Paul Krugman Leaving Princeton In Quiet Disgrace?http://www.forbes.com/sites/ralphbenko/2014/07/14/is-paul-krugman-leavin...
That was very satisfying. Thank you.
Krugs has to be a pathological liar to continue to put this shit out and not vomit openly in public every time the bad taste of his lies and twisted logic bubble into his mouth....I often wonder how he could have been raised to generate this type of thinking?!
The bearded potato speaks!
O.K. kids, this means we can have 200% of income be debt!
This high form of math can only be understood by the most cultured amongst us.
Such as a corrupt government, or a PhD economist; "Lovely fabric Emperor, it shimmers!".
Pure Bullshit Kruggery.
CBO estimates have always been wildly optimistic and Krug knows this. Go back 10 years or 20 years and look at the projections and they had nowhere near the amount of debt/debt growth that is now reality.
LOL!
Krugman vs the CBO who's correct? Uggg I think my brain just tried to divide by zero.
Your avatar is a good one for this.
Right. All the CBO assumptions have been so accurate in the past.
Since 1980, there have been nine years where GDP grew over 4.0% AND it has not happened since 1999.
"Debt held by Public", Did they just delete the debt held by fed? That was easy.
If we can just print our way out of any problem, why pay taxes?
The printed money is given to the free shit army. The real money they keep for themselves.
Notice, all you get either way is the bill.
Ok let's see if I got it? If you owe lots of $$$ that's good ... and if you don't owe and lend that's bad! Good news!
But what did the CBO get from reading chicken entrails? I seem to have missed that chart here. Or do they employ the cow-plop-bingo model for GDP? It's complicated so I forget which it is.
Economics cannot maintain it's facade of not being a enrichment vehicle for the wealthy. It is not anything like normally distributed in helping the US populace...
The funniest/most depressing thing I've seen all day.
Intro screen to the 1987 movie The Running Man: https://www.flickr.com/photos/spagnoloacht/4950880662/
Oh, I see. Instead of reporting the ENTIRE federal debt, we just count the PUblic portion as to the percentage of GDP,after we of course, "adjusted" the GDP for Hookers and Blow and anything else!
In what Universe is 17.5 Trillion dollars in debt worth only 2% interest? (That's a cool 350 Mil per year or about 12% of the total revenue generated).
Heck at 4%, a quarter of our taxes go for nothing but Interest!~
And at the "normal" 6% (Long Term average), a third is interest!
We are so F***ed
Have to admit I was concerned DC was heading into a debt spiral or debt explosion or some other debt [bad thing]. Thankfully, this report by DC predicts aka "dictates" an avg 4.1% interest rate for next 25 years. #CrisisAverted
The Nobel prize people must be doing drugs. Greater the lunacy the greater the chance for a prize
Maybe I'm wrong but doesn't a growth figure of 4.3% mean fantastic growth in ANY developed economy. So an average of 4.3% growth over the next 25 years seems wildly unrealistic to me. Could the person who wrote that possibly be dependant on a rosy outlook for his / her income?
Krugman is right to say America's debt problem is not like Greece. Greece can't print money, so their budget problem leads to bankruptcy. Our debt problem can be paid by printing money, so our problem leads to inflation and possibly hyperinflation.
I can't help but think all or most of the people wanting high inflation are racists. I say that because high inflation often leads to ultra-nationalist political movements, racism, xenophobia, and sometimes genocide. The people calling for inflation know this. We can even see this starting to happen in Europe. Extreme right wing political parties are forming as rising food and energy prices are destroying people. People are demanding closed borders and tougher laws against immigration. As inflation gets worse, people will be a lot more eager to kill whomever gets blamed for the stagflation. If I were a dictator and I wanted to exterminate a large group of people, I would start by causing high inflation and blaming it on that group of people.
You may be correct about the confluence of the two events. That's something I'd never given any notice to until you mentioned it. Likewise deflation probably aids the Socialists in their bid for power.
But I don't think either group is in a position to foster these kinds of swings themselves, even if it helps them. After all they are fringe elements by definition, and neither extreme are the darlings of the oligarchs who clearly want to keep power to themselves. But yeah the fringe elements are right there ready to take advantage.
An interesting thought.
Well, shit. If Krugman likes it, says everything is OK, I'm good. Can't argue with a Nobel Economics Prize winner.
Krugman needs to have his head slammed on a mahogany desk a few times. Pull him up by the back of his hair, ask him to take a look at the chart again.
When he refuses to equate 2+2 = 4, another head slamming secession with wood desk to skull.
Mr. Krugman, what does 2+2 equal? Reply, 'It equals five.' More krugman head pounding ensues.
These projections seem to be based on the assumption that there will be no economic downturns between now and 2039 and that real interest rates will remain near zero the entire time. Right!
Compare the CBO's deficit projections made in 1999 and 2007 to what actually transpired.
The CBO is projecting unsustainable deficits even in the most optimistic case imaginable.
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I think the CBO is lowballin'!
Okay! Let's cut the debt. We're 17 trill + in the hole. The deficit is 500 billion according to recent news… I doubt it.
So! This should be easy! Let's chop another trillion from our budget, and put it towards the debt.
That way, about 18 years, if rates don't go up and we don't go into deficit spending, it'll be paid off.
Simple! Vote for SweetDoug!
Let'skedater!
•?•
V-V
Somebody should explain to Krugnuts that accidentally sitting on a calculator produces more accurate estimates than the Congressional Budget Office.
In 1999, the CBO predicted that Federal Debt held by the public would be $941 Billion in 2010 (it turned out to be $9.4 Trillion).
http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/18xx/doc1820/eb0...
(page xvi).
In 2000, the eggheads at MIT (where Krugnuts was spawned), ran this story in their campus newspaper:
Clinton Proposes Eliminating Debt by 2013 in Next BudgetPresident Clinton said Tuesday that the budget he will send Congress Feb. 7 will propose paying off the entire $3.6 trillion national debt by 2013 -- two years earlier than had been expected even a few months ago.
At a news conference, the president attributed the opportunity for a speedup to an economy that is even stronger than had been forecast, resulting in higher tax revenues and lower expenses, and to his own austere budget policies.
At the same time, the nonpartisan Congressional Budget Office issued revised estimates projecting that the federal budget surplus over the next 10 years is likely to top $1.9 trillion -- substantially larger than it had predicted as late as last December.
http://tech.mit.edu/V119/N69/clinton_budget.69w.html
The joke here of course is that there are still people out there stupid enough to believe anything the CBO says.
Here's a chart showing percentage growth of GDP vs. Federal debt held by the public:
http://research.stlouisfed.org/fred2/graph/?g=G62
Since 2008, these morons increased the debt 133% to produce 15.2% GDP growth. With Krugnuts waiving pom-poms the whole time.
Excellent! + 1000
The debt to GDP ratio should include all debt: its 74% when you don't figure in the $5 trillion or so the government has borrowed from Social Security. When you add that in the ratio is 104%, a more accurate measure of federal indebtedness.
and the worms ate into his brain.
Perhaps only China will cheer Krugman on to get this internal debt fossilized into a structural dead weight for the economy while awaiting for the Global Oligarchs out of their special love for US shall invest long term to grow the GDP to wipe out the debts soon.
China too has domestic debt to GDP of close to 200% and they are embracing K's cure ? Concurrently they have a large foreign reserves predominantly in US$. They also have a special love for US to even keep the US$ when their debtor is piling more debt, be they internal or external ?
So China (second largest economy) and other creditor nations do not matter in K's navel gazing model ? Is K betting that China goes down first b4 US ? The whole game change when EC beats both of them in the race.
Great analysis !
" ... Most of Krugman's readers wont see it " ... I would say that by now Most if not all of Krugman's followers don't know how to read ... those who do don't understand what they read or have a serious case of functional iliteracy ...
In both cases they are clearly financial iliterates.