Obama Revises CBO Deficit Forecast, Predicts 110% Debt-To-GDP By End Of 2013, Worse Deficit In 2012 Than 2011
While we have excoriated the unemployable, C-grade, goalseeking, manipulative excel hacks at the CBO on more than one occasion by now (see here, here and here), it appears this time it is the administration itself which has shown that when it comes to predicting the future, only "pledging" Greece is potentially worse than the CBO. WSJ reports that "President Barack Obama's budget request to Congress on Monday will forecast a deficit of $1.33 trillion in fiscal year 2012 and will include hundreds of billions of dollars of proposed infrastructure spending, according to draft documents viewed by Dow Jones Newswires and The Wall Street Journal. The projected deficit is higher than the $1.296 trillion deficit in 2011 and also slightly higher than a roughly $1.15 trillion projection released by the Congressional Budget Office last week. The budget, according to the documents, will forecast a $901 billion deficit for fiscal 2013, which would be equivalent to 5.5% of gross domestic product. That is up from the administration's September forecast of a deficit of $833 billion, or 5.1% of GDP." Where does the CBO see the 2013 budget (deficit of course): -$585 billion, or a 35% delta from the impartial CBO! In other words between 2012 and 2013 the difference between the CBO and Obama's own numbers will be a total of $542 billion. That's $542 billion more debt than the CBO, Treasury and TBAC predict will be needed. In other words while we already know that the total debt by the end of 2012 will be about $16.4 trillion (and likely more, we just use the next debt target, pardon debt ceiling as a referenece point), this means that by the end of 2013, total US debt will be at least $17.4 trillion. Assuming that US 2011 GDP of $15.1 trillion grows by the consensus forecast 2% in 2012 and 3% in 2013, it means that by the end of next year GDP will be $15.8 trillion, or a debt-to-GDP ratio of 110%. Half way from where we are now, to where Italy was yesterday. And of course, both the real final deficit and Debt to GDP will be far, far worse, but that's irrelevant.
More from WSJ:
"The Administration forecast is used to develop the Budget, and at that time we predicted the unemployment rate would average 8.9% in 2012 and 8.6% in 2013. These forecasts were close to the consensus of private forecasters at the time," White House Council of Economic Advisers Chairman Alan Krueger said in a statement earlier in the week.
The budget includes more than $350 billion in short-term measures for job growth; a six-year, $476 billion proposal for roads and other surface-transportation projects; and more than $360 billion in savings in health programs such as Medicare and Medicaid.
The draft documents don't include all the details of the president's budget but show similarities to the budget plan the White House laid out in September 2011. The budget proposal, for example, repeats a call for $1.5 trillion in new revenue, mostly from ending Bush-era tax cuts for families earning more than $250,000 a year.
The White House has said the budget will reflect the president's overall economic message of trying to ensure the economy maintains momentum while everyone is paying their "fair share" of deficit reduction. "The President's 2013 Budget is built around the idea that our country does best when everyone gets a fair shot, does their fair share, and plays by the same rules," one of the budget documents said.
The budget also calls for a 5% increase in nondefense research-and-development spending over the previous year and proposes $2.2 billion for advanced manufacturing research and development—a 19% increase over 2012.
Last but not least, it also means that the Treasury debt ceiling will now with almost absolutely certainty, be breached before the election, meaning as Obama is electioneering, the Treasury will be plunder government pension funds to stay under the ceiling for as long as possible.
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